Indiana Sales Tax Rates

Total Range for 2024

7%

department of revenue indiana

Why do you need to collect sales tax in Indiana?

If you’re selling goods and services in Indiana then sales tax might apply! To determine your obligation, you need to understand “nexus,” which ties businesses to states for tax purposes.

Two types of nexus exist:

  1. Physical Nexus: Having a physical presence, like an office, warehouse, or employees in Indiana, triggers this type. If you do, you likely need to collect sales tax.
  2. Economic Nexus: This kicks in when your sales within Indiana exceed a certain economic threshold. Even without a physical presence, surpassing this threshold requires collecting sales tax.

In Indiana, there is also a transaction threshold of 200, which means that even if your sales aren’t over $100,000 if you’ve sold more than 200 items then you still need to pay sales tax.

Is what you’re selling taxable in Indiana?

Now that you’ve grasped the basics of Indiana’s sales tax and nexus thresholds, let’s delve into whether your specific products or services are taxable.

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How to register for sales tax in Indiana

There are two ways to register for a sales tax permit in Indiana:

  • Online: This is the fastest and most recommended method. You can register through the Indiana’s INBiz program at https://inbiz.in.gov/.
  • Paper application: You can download the BT-1 application form from the Indiana Department of Revenue’s website and mail it in.

Here’s what you’ll generally need to have on hand to register online:

  • Business name, address, and contact information
  • Federal Employer Identification Number (EIN)
  • Date business activities began or will begin
  • Projected monthly sales
  • Projected monthly taxable sales
  • Products or services to be sold

Once you’ve registered, you’ll receive a Registered Retail Merchant’s Certificate (RRMC), which is your sales tax permit.

How to collect sales tax in Indiana

Here’s how to collect sales tax in Indiana:

  1. Calculate the Tax: Determine the appropriate sales tax rate. The base rate in Indiana is 7%, but some localities add additional county or local option income taxes. You can find the specific rate for your area on the Indiana Department of Revenue (DOR) website or by using a sales tax calculator.
  2. Charge the Tax:  Unless you have a valid exemption certificate from the buyer, you must add the sales tax to the sales price of taxable goods and services. Most point-of-sale systems can automatically calculate and add the tax.
  3. Keep Records: Maintain accurate records of your sales and the amount of sales tax collected for each transaction. This includes the date, customer information, itemized sales, and the total tax collected.
  4. File and Pay Sales Tax:  The Indiana DOR will assign you a filing frequency (monthly, quarterly, or annually) based on your sales volume. You must file your sales tax return and submit the collected tax by the due date.
Example:
  • You buy a shirt for $20 in Indiana (7% base rate). 
  • The total tax is $20 x 7% = $1.40 (rounded). 
  • Including tax, you pay $20 + $1.40 = $21.40.

FAQs

Do you have a physical nexus in Indiana?

A business has a physical nexus in Indiana if it has enough of a physical presence in the state to trigger sales tax collection obligations. Here’s what establishes physical nexus in Indiana:

  • Owning or leasing tangible personal property: This includes things like a store, warehouse, or office in Indiana.
  • Having employees or independent sales representatives in Indiana: Even if they don’t work full-time, regular visits by salespeople can create nexus.
  • Storing inventory in Indiana: This applies even if you use a fulfillment service like Amazon FBA.
  • Having third-party installers, repairers, or servicers in Indiana: If they handle products you sell to Indiana customers, it might create nexus.
Do you have an economic nexus in Indiana?

Indiana has economic nexus thresholds that determine if an out-of-state seller needs to register and collect sales tax. Here’s how to know if you have economic nexus in Indiana:

  • Sales Threshold:  Indiana’s current economic nexus threshold is $100,000 in gross sales from the previous or current calendar year. This includes all sales into Indiana, regardless of whether they are taxable or exempt.
What is use tax in Indiana?

In Indiana, use tax applies to purchases you make on which you weren’t charged sales tax at the time of purchase. It’s essentially a self-reported tax that ensures the state collects revenue on things bought outside Indiana or from private sellers who aren’t required to collect sales tax.

Here’s a breakdown of use tax in Indiana:

  • Rate: Same as sales tax (currently 7%).
  • Who Owes It: Indiana residents for untaxed purchases:
    • Out-of-state stores
    • Private sellers (garage sales, online marketplaces)
  • Exceptions: Similar to sales tax exemptions (groceries, medicine, farm equipment).
  • Filing: Reported on your Indiana income tax return.
Do you need a seller/reseller permit?

In Indiana, the seller’s permit is actually called a Registered Retail Merchant’s Certificate (RRMC).  Most businesses selling taxable goods or services in Indiana need an RRMC.

Here’s a quick breakdown:

  • Need it if: You sell taxable goods or services in Indiana (generally anything besides groceries, medicine, and farm equipment).
  • Benefits: Allows you to collect sales tax from customers and avoid paying sales tax on your own purchases for resale (with a resale certificate).
How to get a sales tax permit/license in Indiana?

To get a sales tax permit/license in Indiana, you have two options:

  1. Online Registration (Recommended): This is the faster and preferred method. Here’s what you’ll do:
    • Visit the Indiana INBiz program website: https://inbiz.in.gov/ 
    • Click on “Tax Registration Register Now”
    • If you don’t have an account, choose “Don’t have an account, Sign Up Now” and follow the prompts.
    • During registration, you’ll need information like your business name, address, Federal Employer Identification Number (EIN), and projected sales.
  2. Paper Application: This method takes longer.
    • Download the BT-1 application form from the Indiana Department of Revenue’s website.
    • Fill out the form and mail it to the address provided.

Here are some additional things to keep in mind:

  • There’s a $25 registration fee for obtaining an RRMC.
  • The processing time for online applications is generally faster than paper applications.
  • You’ll receive a confirmation email after submitting your application online.
  • Your RRMC will be mailed to your business address within 7-10 business days.
  • The RRMC will include your filing frequency (how often you need to file sales tax returns) and a unique authorization code.
When are Indiana's Returns Due?

Indiana sales tax returns are due on the 20th day of the month following the reporting period for most filers.  However, the exact due date can vary depending on your filing frequency:

  • Earlier filers (high volume): Businesses that averaged more than $1,000 per month in sales tax liability during the previous calendar year must file and pay by the 20th of the following month.
  • Standard monthly filers (lower volume): Businesses averaging less than $1,000 per month in sales tax liability typically file by the end of the month following the reporting period (30th day).
  • Annual filers (very low volume): Businesses with a liability of less than $10 per month can file annually by the end of January or July, depending on their accounting method.

If the due date falls on a weekend or holiday, the sales tax is due on the next business day.

How to file sales tax in Indiana

Filing a Sales Tax Return:

  • Method: You can file your Indiana sales tax return electronically through the Indiana INtax portal.
  • Form: The Indiana DOR uses form ST-103 for sales tax return filing.
  • Information Required: The form typically requires details like your RRMC number, filing period, total sales, taxable sales, sales tax collected, and any deductions or credits.

Paying the Sales Tax:

  • Payment Options: You can pay your sales tax electronically through the INtax portal using various methods like ACH transfer, credit card (convenience fee applies), or debit card. You can also mail a check or money order to the address provided by the DOR.
Is anyone exempt from sales tax in Indiana?

In Indiana, there are certain categories of purchases and customers that are exempt from paying sales tax. Here’s a breakdown:

Exempt Purchases:

  • Groceries (exceptions): Most non-prepared food items like fruits, vegetables, and grains are exempt. However, prepared foods, restaurant meals, and alcoholic beverages are taxable.
  • Prescription drugs and medical supplies: These are generally exempt, but some durable medical equipment might be taxable.
  • Farm equipment: This includes machinery and tools used for agricultural production.
  • Certain services: Generally, services aren’t taxable in Indiana. Exceptions include installation or repair services related to tangible personal property (e.g., installing flooring).

Exempt Customers:

  • Government agencies: Federal, state, and local government purchases are typically exempt.
  • Certain non-profit organizations: Qualified non-profits may be exempt if the purchase is used for their exempt purpose and they have a sales tax exemption certificate.
  • Merchants purchasing for resale: Businesses with a valid resale certificate can purchase goods without paying sales tax, as they will collect it when they sell the item.

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