Indiana Sales Tax
Indiana Sales Tax At a Glance
State rate: 7%
Maximum combined rate: 7%
Sourcing: Destination
Tax Holidays: None
Governing Body: Indiana Department of Revenue
The State of Indiana has taken steps in recent years to streamline their sales tax rates and collection, including adoption as a Streamlined Sales Tax State. Because of the process required for determination of sales tax nexus, it is important, if you do business in Indiana, to research what will be required of you.
Indiana Sales Tax Rates
Indiana does not have any local or county sales taxes, so the state-wide rate of 7.00% applies to all applicable purchases to which sales tax must apply. This makes calculation for out-of-state sellers much easier.
Determining Sales Tax Nexus in Indiana
For any merchant operating within the State of Indiana, you must collect sales tax on purchases made by your customers. This is standard and will be done at the state level because there are no local Indiana taxes to collect.
If you are an out-of-state seller, then you must determine if you have sales tax nexus in the State of Indiana. There are several situations in which the state considers you to have nexus in the state. These include:
- Ownership or leasing of tangible personal property in the state related to your business.
- Employees or independent sales representatives operating in the state.
- Inventory of goods housed in a physical warehouse in Indiana.
- Any third parties working on your behalf that install, repair, or service property sold to customers in Indiana.
- Economic nexus is established if sales made into Indiana result in $100,000 or more in gross revenue in the previous calendar year or there are 200 or more transactions in that time.
Indiana has also joined the Streamlined Sales Tax initiative as a full member, acting with a seat on the Governing Board. The state is currently in the process of implementing all of the measures involved in the Agreement’s requirements, though has not yet fully adopted everything.
Because the process of determining nexus in Indiana has changed slightly and because of the impact of the streamlined process, it is recommended you review the most current requirements on the Indiana Department of Revenue website.
What Is Eligible for Sales Tax in Indiana?
Indiana has a number of specific instances in which sales tax is not charged for otherwise standard goods. Most retail goods are subject to the 7% state sales tax, but there are others that are not, including the following tax exemptions:
- Services – The majority of services in Indiana are not subject to sales tax. There are some, however, that may be subject to sales tax including alteration, preparation, or fabrication of a product that will be sold at retail. Another factor to keep in mind is that Indiana is ranked close to last in the country in terms of the services they levy a tax against and has looked at this as a potential growth opportunity for revenue in recent years.
- Groceries – Certain types of groceries are not subject to sales or business tax in the state. These largely include unprepared foods that are not yet ready for consumption, but there are some specific situations you should be aware of. It is recommended that you review the Department of Revenue’s full list.
- Items Sold to Farmers – Some items sold to farmers as part of their routine operations are not subject to sales tax as well.
- Items Sold to Contractors in Construction – Those who work in construction may not pay sales tax on most of the goods used in the construction process. This again is subject to specific restrictions on certain items, so it is best to review the full list.
For the most part, all retail goods purchased by a consumer are subject to sales tax with the few exceptions listed above.
Sales Tax Registration
The State of Indiana has an all-purpose business registration process that includes Sales Tax and Out of State Sales Tax registration on its official website. The form BT-1 is only available online and requires a valid email address. You can download a checklist for what you will need depending on what parts of this application you are completing from the website here as well.
There is a $25 fee to register for a sales or business tax permit in the state. You must also provide an estimated monthly taxable sales volume, what type of business you are, whether you will sell food, beverages, alcoholic beverages, gasoline, cars or trucks, or tobacco, and what location you will be billing from.
Sales Tax Filing
To ensure sales and use tax compliance, do the following:
- For Those in State – You can file your Indiana States sales tax collected with Form ST-103 or do it online through the INTax website. When doing this you will need to have all the information related to the taxes collected from your customers in that time period.
- Out of State – Because everyone in the state has the same 7.00% sales tax rate, the method of taxation doesn’t matter as much as tracking those sales and collecting sales tax. For this reason, you must be registered and able to track your eligible Indiana sales and then remit payment accordingly.
- Shipping and Handling – Sales tax rules on shipping vary depending on the method used. For instance, shipping via the USPS is not taxable, but via UPS or FedEx, it is. Also, if you don’t separate the charges on your invoices, then you must charge sales tax on the full total.
How often you are required to file your sales tax returns will depend on the volume of remittance you have each period. When you first receive your permit, the state will assign a filing frequency to you based on your estimated annual taxable sales. The following frequencies will apply depending on the totals you provide to the state on your application:
- Annual – Less than $10 due per month
- Net 30 Days – Less Than $1,000 per month
- Net 20 Days – More than $1,000 per month
For those who meet their sales tax compliance deadlines, Indiana will offer a discount as well. The discount varies depending on the size of what was collected. For those collecting less than $60,000 per year, the discount is 0.083%. For those that collect between $60,000 and $600,000 per year, the discount is 0.6%. For those collecting more than $600,000 per year, the discount is 0.3%. It’s important to check with the state before assuming there will be a discount as it is applied based on your specific filing situation.
Deadlines
Monthly Due Dates: The following deadlines apply to those whose sales tax liability in Indiana is more than $1,000 per month. If your liability is less than $1,000 per month, your due date will be the end of the month listed, so payment for January would be due by March 1st of the same year.
| Period | Due Date |
|---|---|
| January | February 20 |
| February | March 20 |
| March | April 20 |
| April | May 20 |
| May | June 20 |
| June | July 20 |
| July | August 20 |
| August | September 20 |
| September | October 20 |
| October | November 20 |
| November | December 20 |
| December | January 20 |
Annual: For those businesses with liability less than $10 per month, you will file annually by the end of either January or July depending on your accounting method.
Penalties and Interest for Late Payments
The State of Indiana has a flat penalty charged to anyone who fails to pay or file on time. There will be a 10% fee of total tax due for those who do not pay according to the dates listed above. There are other penalties and potential fines as well if it is determined you are committing fraud or if you have repeatedly been late in paying your amount due.
Resources:
- Indiana Department of Revenue Sales Tax Resources
- Indiana Department of Revenue FAQs
- INtax Payment Portal for Sales Tax
- New and Small Business Education Center
Indiana Sales Tax Software
Indiana has a relatively straightforward tax system. Thanks to their adoption of many of the Streamlined Sales Tax State agreement components and because of their flat 7.00% sales tax rate and no local taxes, even out of state sellers don’t have to jump through too many hoops. That said, any time you must include a new state in your taxation, it’s a big new step. That’s why a tax calculator and tool like TaxTools, that can help you record, collect and pay the sales tax due on a regular basis by state is such a useful resource. With eCommerce integration and a single interface to manage everything, it is faster and easier than trying to do this manually using state website portals. To learn more about TaxTools, contact us today or sign up on our website to receive a free trial.
Last updated March 2024