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In addition to Indiana’s state sales tax rate of 7 percent for retail sales, the state charges several additional taxes and fees. Some of these are statewide, such as the tire fee, and some apply to certain counties, such as the food and beverage tax.
Types of taxes
Indiana levies several taxes and fees in addition to its sales tax of 7 percent, including a complimentary use tax. Purchasers do not pay both sales and use taxes, but one or the other. Both types of taxes are reported on the sales tax return.
Sales and use tax
Businesses that sell tangible personal property need to register for a sales tax account. After registering, the filer receives a Registered Retail Merchant Certificate that it must display at every location the business owns. The state updates the certificate automatically and does not charge to update it. However, if the business does not pay the tax obligation, the certificate expires. A business must complete the REG-1 form, which the state mails to the business, to reinstate the certificate.
A use tax is due if a business owner purchases items for use or storage and does not resell them. The use tax is in lieu of the sales tax and is 7 percent. For example, a Business Taxpayer bought a case of Product X to clean walls. Business Taxpayer sold all but two bottles. The Business Taxpayer decides he likes the product and will use it in his business. He must pay a use tax on the bottles he kept.
Food and beverage tax
Certain counties in Indiana charge a food and beverage tax on top of the state sales tax rate.
The following jurisdictions charge a 1 percent food and beverage tax rate:
- Allen County
- Boone County
- Delaware County
- Hamilton County
- Hancock County
- Hendricks County
- Henry County
- Johnson County
- Madison County
- Monroe County
- Shelby County
- Vanderburgh County
- Vigo County
The following jurisdictions charge a 2 percent tax:
- Marion County
- Orange County (Historic Hotel)
Businesses that sell food and beverages charge a tax rate of 7 percent plus 1 or 2 percent, for a total of 8 or 9 percent, depending on the jurisdiction.
Remote sellers and marketplace sellers must collect Indiana sales tax for sales made out of state if the business meets Indiana’s threshold requirement. If a business makes 200 or more separate transactions or earns gross revenue of more than $100,000 in the calendar year, it must register for a sales tax account and pay Indiana sales tax.
Businesses in Indiana that sell out of state should not collect Indiana sales tax on those sales. Instead, they should collect sales tax for the state where the merchandise is delivered.
Transient rental tax (Innkeeper’s tax)
In certain counties, businesses that rent rooms for less than 30 days must collect an additional tax. The tax varies based on jurisdiction. Marketplace facilitators must also charge the additional innkeeper’s tax. The innkeeper’s tax applies to:
- Hotels and motels.
- Vacation homes and resorts.
- Bed and breakfast establishments.
- Banquet halls.
- Cottages and cabins.
- Fixed trailers.
- Houseboats and other watercraft with overnight facilities.
- Camper parks.
- Trailer parks.
Jurisdictions and their tax rates are as follows:
- Orange (Historical Hotels Supp.)
- St. Joseph
Indiana motor vehicle rental excise tax
Indiana imposes a tax on short-term motor vehicle rentals of less than 30 days. Additionally, Marion County imposes a supplemental auto rental excise tax for rentals less than 30 days. These taxes also apply to peer-to-peer rentals, such as Uber or Lyft.
Businesses file the motor vehicle rental tax through INTIME. The state tax is 4 percent of the gross retail income. Businesses must list the tax separately on the customer’s invoice.
Trucks with a declared gross weight of over 11,000 pounds are exempt. Additionally, if the rental by a funeral director is part of the services provided by the funeral director, it is exempt.
Trailer rentals are not subject to the Indiana Motor Vehicle Rental Excise Tax.
Finally, vehicles that are rented by sales tax-exempt entities are not exempt.
Marion County has a supplemental auto rental excise tax of 6 percent of the gross retail income. Trucks weighing over 11,000 pounds are exempt from the Marion County supplemental tax.
Of the 6 percent, the original supplemental tax of 2 percent expires on December 31, 2027, unless the capital improvement board of managers owes additional obligations to the Indiana stadium and convention building authority or other state agencies. If the board owes an obligation, the tax expires on January 1, 2041.
The additional 4 percent of the tax expires on January 1, 2041.
Gasoline use tax
Indiana has a gasoline use tax that might change monthly. The Indiana Department of Revenue calculated the rolling, monthly, statewide average retail price per gallon multiplied by 7 percent. The DOR publishes the gas tax rate monthly.
Businesses that sell tires must add a tire fee of $0.25 per tire to their invoices. This fee is in addition to the state sales tax. Farm tractors, semi-trailers, agriculture equipment, construction equipment, and mining equipment are not exempt.
Tires for lawn mowers with less than 25 horsepower are exempt.
Fireworks public safety fee
Businesses that sell fireworks must charge a 5 percent public safety fee on all sales of firecrackers, roman candles, wire sparklers, missile-type rockets, and other fireworks.
Prepaid wireless service charge
Businesses that sell prepaid wireless must collect a $1.00 fee on each transaction. This fee is due on the same day that sales tax obligations are due. The business must also notify the customer that it is charging this fee, whether it is on a receipt, invoice, or another sales document.
Registering for and filing Indiana’s taxes
Indiana is in the process of updating several methods, including paying taxes. You can now file sales and use tax using INTIME. You can also register a new business sales tax account online.
Tax Forms are still available to register for a sales tax account (Form BT-1).
Whether you file electronically or manually, you will need the following information to complete the process:
- A federal tax ID number (EIN) from the Internal Revenue Service (IRS).
- Indiana Taxpayer Identification Number (TID) if you are registering an existing location for different tax types or adding a location to an existing business.
- Contact name and phone number for the business.
- Legal name (individual or entity). Sole proprietorships register using the person’s name plus a d/b/a. For example, Joe Smith starts a business and is a sole proprietor. He would register his business as Joe Smith d/b/a [business name].
- Incorporation information.
- NAICS code as listed in the registration form.
- Business phone number and mailing address.
- A list of any outstanding tax liabilities, if any.
If you file electronically, you can also pay your sales tax obligation through the portal. Filing electronically allows you full-time access to your tax records, securely communicate with the Department of Revenue, and view correspondence with the DOR. You can also pay your tax obligation through the portal.
Filing frequency and due dates
The Indiana Department of Revenue will let you know how often you must remit sales tax reports and payments. Most businesses must remit reports and payments monthly.
Businesses that have over $5,000 in taxes due per month are required to pay by electronic funds transfer.
Sales taxes are due on or before the 20th of the month following the collection period. For example, sales and use tax collected in January is due on or before February 20.
Indiana tax exemptions
Indiana taxes most tangible personal property. However, it does exempt groceries and ingredients. Prepared foods, including candy and soft drinks, are taxable.
Calculating Indiana’s sales and use tax rates
Because Indiana does not have a discretionary tax (local sales tax) on most goods, simply multiply each dollar by 7 percent. For example, Widget A costs $10. 10 times .07 equals .70. The total cost of Widget A is $10.70.
For areas that have special taxes, figure the sales tax, then figure the added tax. For example, renting a hotel room in Marion: The hotel room is $100 per night. Add the state sales tax (100 times .07 equals 7. Then figure the innkeeper’s tax of 10 percent: 100 times .10 equals 10.
The total cost of the hotel room is $100 plus $7 plus $10 or $117 per night.
Calculate the use tax in the same manner. Use tax does not have a separate use tax return — claim both on the same report.
Indiana’s sales tax is 7 percent.
You can complete Form ST-105 and send it to the Indiana Department of Revenue.
Yes. Do not collect Indiana sales tax. Instead, collect the sales tax for the buyer’s jurisdiction.
Yes, you must still file a tax return even if you did not have any taxable sales of tangible personal property or services.