Managing sales tax can be challenging for US businesses, as rates vary across states and counties. If you’re operating in Indiana, our Indiana US Sales Tax Rate Calculator helps businesses determine their sales tax liability quickly.
This comprehensive guide is designed to help businesses in Indiana navigate this complex tax environment.
From understanding taxability and rates to exemptions, penalties, and challenges, this guide provides essential insights for staying compliant.
What Is the Current Sales Tax Rate in Indiana?
The state-level sales tax rate in Indiana is 7%. While some states authorize counties to impose local sales taxes, Indiana counties do not (as of February 2025). However, counties collect other taxes, such as County Innkeeper’s Tax (CIT), Food and Beverage Tax (FAB), and Local Income Tax (LIT).
Indiana Sales Tax and Use Tax
Sales tax is collected by the seller on sale of goods. In Indiana, the sales tax rate is 7%. However, at times, the seller may not collect sales tax from customers for certain reasons (ex: lack of sales tax nexus, exemptions). In those cases, the buyer of goods must pay use tax to the Indiana Department of Revenue, instead of the seller. The buyer must pay 7% of the purchase price of the product as use tax.
Let us take an example to understand use tax. Jane, a resident of Indiana, purchases a dress for $200 from an online store. The online store does not have a sales tax nexus in Indiana and does not collect sales tax from Jane. In this case, Jane owes a use tax of $14 (7% x $200) to Indiana DOR.
For a detailed breakdown of how sales and use tax work across states, check out this ultimate guide to sales tax.
When Do Businesses Need To Collect Indiana Sales Tax?
Businesses are required to collect and remit sales tax when a sales tax nexus is established. This can occur through:
- Physical nexus
If your business has a physical presence in Indiana, then a physical nexus is established. Read our complete guide on sales tax nexus to know when businesses are required to collect tax.
Physical presence can be defined as:
- Maintaining offices, distribution centers, warehouses, etc. in Indiana. This can be on a permanent or temporary basis, directly by the seller or indirectly through a representative or agent.
- Having a representative, salesman or agent who operates in Indiana with the authority or on behalf of the seller. Activities performed by these representatives include delivery, sales, installation, receiving orders, and repair services.
- Economic nexus
Economic nexus applies when your business does not have a physical presence in Indiana.
Your business will have an economic nexus when you have a gross revenue exceeding $100,000 in the current or previous calendar year from:
- Sale of tangible property that is delivered into Indiana, or
- Product transferred electronically into Indiana, or
- Service delivered in Indiana
Earlier, there was another threshold to determine economic nexus. Sellers had economic nexus when they made 200 or more separate transactions in Indiana in the current or previous calendar year. This threshold was removed by Indiana DOR in 2024.
Understand the latest sales tax thresholds and how they affect online sellers.
Consequences of Failing To Collect Sales Tax
Understanding why sales tax is important for businesses can help you avoid legal and financial penalties. Failing to collect and remit sales tax may result in:
- Monetary penalty of up to 20% and a minimum penalty of $5 for late filing of sales tax returns.
- Expiration of the seller’s Registered Retail Merchant Certificate (RRMC) when tax dues are not paid.
Sales Tax Obligations For Marketplace Facilitators
Marketplace facilitators are businesses that operate a marketplace and facilitate retail transactions between buyers and sellers. They can be either online (like Amazon) or physical.
In Indiana, marketplace facilitators must collect and remit sales tax on behalf of their sellers’ transactions into Indiana. A marketplace facilitator that has a physical or economic nexus in Indiana would be required to collect and remit sales tax even when the seller (for whom they facilitate transactions) does not collect sales tax.
Registration Requirements For Sales Tax In Indiana
To collect and remit sales tax in Indiana, sellers must hold a Registered Retail Merchant Certificate. There are two ways to register and obtain this certificate.
- Registration With Indiana Department of Revenue
- A seller can register with Indiana DOR to collect tax by filling out the Form BT-1 offline or online through their business registration portal, InBiz.
- $25 non-refundable application fee must be paid.
- After filling the form and paying the application fee, the retail merchant receives a tax identification number and Registered Retail Merchant Certificate (RRMC).
- The certificate is valid for two years and updates automatically.
- A separate application is required for each new business location.
- Registration Under Streamlined Sales Tax Registration System (SSTRS)
To collect sales tax, businesses must register. Learn how to obtain a sales tax permit for compliance.
- The Streamlined Sales Tax Registration System (SSTRS) provides a simple way for a business to register for sales tax in full member states of the Streamlined Sales Tax group, which Indiana is a part of.
- Businesses that register under SSTRS must collect and remit sales tax to all selected states even if they don’t have a nexus.
- This choice is suitable for businesses that have multi-state operations.
- You can check the official website for more details on SSTRS registration.
Collecting Sales Tax In Indiana
There are three steps involved in collecting sales tax. A retailer needs to collect sales tax only when there is a sales tax nexus (physical or economic) in the state of Indiana.
- Determine Taxability Of Items Sold
In Indiana, only sale of goods and tangible personal property is taxable. As a retailer, you must identify if the product you sell is taxable or not. We have provided a list of common exceptions later in this guide. You must also keep an eye on updates through the sales tax information bulletin of Indiana.
- Calculate Sales Tax Amount
Once you have determined that a product is taxable, you need to estimate the amount of sales tax to be collected.
Sales Tax Amount = Purchase Price Of Taxable Item x Indiana Sales Tax Rate
Sales Tax Amount = Purchase Price Of Taxable Item x 0.07
Example: Calculating Sales Tax for a Car in Indiana
Indiana imposes a state sales tax rate of 7% on most goods and services.
Formula:
Sales Tax Amount = Purchase Price × Indiana Sales Tax Rate
Example Calculation:
- Product: Sedan
- Purchase Price: $30,000
- Sales Tax Rate: 7% (or 0.07)
Sales Tax Amount = $30,000 × 0.07 = $2,100
Total Cost:
Total Cost = Purchase Price + Sales Tax Amount
= $30,000 + $2,100
= $32,100
So, if you purchase a $30,000 sedan in Indiana, the sales tax would be $2,100, and the total cost of the car would be $32,100.
For a step-by-step guide, check out how to calculate US sales tax manually.
- Collect Calculated Sales Tax
You must collect the calculated sales tax amount from the buyer at the time of purchase.
Tax-Exempt Entities
There are certain entities that are exempt from paying sales tax. These include:
- Indiana State And Local Government Entities
Any purchase or sale by Indiana state and local government agencies are exempt from sales tax. That is unless they engage in commercial activity that does not directly serve the public welfare.
- US Government Entities
Any purchase made by the United States government agencies is exempt from sales tax.
- Non-Profit Organizations
Purchases made by non-profit organizations are exempt from sales tax, provided the product purchased is used for non-profit purposes and the buyer is a qualified non-profit organization. Purchases made by non-Indiana non-profit organizations may also be exempt from sales tax. Learn more about the taxability of purchases and sales by non-profit organizations in Indiana here.
As a seller, when making sales to tax-exempt entities, you must maintain valid exemption certificates for such transactions. These exemption certificates are required at the time of sales tax returns filing.
To understand how exemption certificates work, read our guide on sales tax exemption certificates.
Filing Sales Tax Returns In Indiana
Understanding sales tax compliance best practices can help businesses avoid errors while filing returns. Once sales tax is collected, you must file sales tax returns and remit the sales tax collected to the Indiana Department of Revenue.
- Sales Tax Return Forms
Forms to be filed for sales tax returns are ST-103, ST-103MP, and ST-103CAR.
- Mode of Filing
There is a mandate for electronic filing of sales tax returns through Indiana’s e-service portal, INTIME.
- Deadlines
The deadline for sales tax filing varies with the average monthly tax liability.
- Early filers: Businesses having average monthly tax liability greater than or equal to $1,000 for the prior fiscal year ending on June 30 of the previous calendar year. They have to file the monthly sales tax return of the previous month by the 20th day of the current month.
- Monthly filers: Businesses with an average monthly tax liability of $1,000 or less. They have to file the monthly sales tax return of the previous month by the 30th day of the current month.
- Annual filers: Returns must be filed on January 31 every year.
You can find filing deadlines month-wise here.
- Late Filing Penalty
Late filing of sales tax returns are subject to a penalty of up to 20% and a minimum penalty of $5. You must file a $0 return even if there was no taxable revenue in a period. Avoid costly fines by understanding sales tax penalties for late filings.
What Are the Unique Challenges Faced by Different Industries in Indiana?
Businesses in certain industries in Indiana may require additional tax registration and compliance. These include:
Food and Beverage
If you operate a business in the food and beverage industry, you need to register and collect food and beverage (FAB) tax. Counties in Indiana have a 1% food and beverage tax rate.
Hospitality and Lodging
If you operate a business of rental rooms and accommodations for less than 30 days, you need to collect County Innkeeper’s Tax (CIT) in addition to sales tax. The CIT tax rates vary with counties in Indiana.
Other Industries
Tire, fireworks, and motor vehicles are examples of other industries that need to collect an additional fee over and above the sales tax.
Deadlines for filing additional tax returns are different from that of sales tax returns. This increases the compliance burden for businesses operating in these industries. We discuss how tax automation can help such businesses navigate the complex tax landscape later in this guide.
Tax-Exempt Products
The products that are generally tax-exempt in Indiana include:
1. Food And Food Ingredients
The sale of food and food ingredients, commonly referred to as “groceries”, is exempt from sales tax. However, food items exempt from sales tax do not include candy, soft drinks, dietary supplements, tobacco, and alcoholic beverages. Tax exemption is not applicable to prepared food items
You can refer to Sales Tax Information Bulletin #29 by Indiana DOR for more details.
2. Medical Supplies And Equipment
There is a sales tax exemption in Indiana when a patient purchases medical equipment, devices, or supplies against a prescription. These include purchase of prosthetic devices, hearing aid devices, mobility-enhancing equipment, etc. Items such as syringes, insulin, oxygen, colostomy and ileostomy bags are exempt from sales tax even when not prescribed.
There is a sales tax exemption on sale of certain items to licensed practitioners. These items include blood glucose monitoring supplies, insulin, drugs, oxygen, and blood plasma.
You can refer to Sales Tax Information Bulletin # 48 by Indiana DOR for more details.
Services Taxability
In Indiana, services are not subject to sales tax. The sale of goods or tangible personal property only are subject to sales tax.
For example, Jane runs a computer store in Indiana, where she sells computer components and offers repair services. The sale of computer components will be subject to sales tax, while the repair services are not taxable. Jane has to collect sales tax only on the sale of computer components (through a physical nexus).
Not sure about the difference between VAT and sales tax? Here’s a detailed comparison.
Tax Rates By County
Indiana’s sales tax rate is 7%, but you can check US sales tax rates by state to compare different states and localities.
However, the food and beverage (FAB) and county Innkeeper’s tax (CIT) rates vary across counties in Indiana. You can find an interactive map to find county-wise rates here.
Preparing For Sales Tax Audits And Appeals
Sales Tax Audits
Proper documentation is key to surviving an audit. Read this guide on sales tax audits for preparation tips.
Sales tax audits are conducted to determine compliance with Indiana’s sales tax laws. The best way to prepare for a sales tax audit is by maintaining proper documentation. We present a list of common audit areas which might serve as a compliance checklist for you.
- Maintaining valid exemption certificates
- Maintaining records for sales done through marketplace facilitator
- Collecting sales tax on taxable items at correct tax rate
You can find more information on documents and preparation for sales tax audit in the official Indiana audit manual.
Sales Tax Appeals
Businesses in Indiana can appeal to the DOR for two reasons to protest a tax assessment or to protest a denial of refund.
A business must file a written protest (in the prescribed Protest Submission Form) with the DOR within 60 days following the date of assessment.
If unsatisfied, you can further appeal for final determination with the department, and then Indiana Tax Court.
If you disagree with an audit, check out the statute of limitations for sales tax audits.
Benefits Of Using Tax Automation Software for Indiana
As discussed earlier, deadlines vary for different taxes a business in Indiana may face, such as sales tax, food and beverage tax, and county innkeeper’s tax. A tax automation software helps automate the process of calculating, collecting, and remitting sales and other taxes. Benefits of a tax automation software include:
- Timely compliance by meeting multiple deadlines
- Error-free sales tax filing
- Time saving from automation of sales tax and remittance
- Scalability of multi-state operations
- Seamless-integration with existing Enterprise Resource Planning (ERP) systems
Businesses can ensure tax compliance by using a tax automation software, like Commenda. Book a free consultation with our team to learn how tax automation can simplify your compliance.
FAQs
Are there any special taxes, excise charges, or local add-ons I need to consider?
Yes, there are some additional taxes besides sales tax that you must consider. These include food and beverage tax and county innkeeper’s tax.
Do I need an Indiana seller’s permit if I’m only a wholesaler?
Yes, a person engaged in wholesale sales in Indiana must register for a Registered Retail Merchant Certificate (seller permit equivalent) to collect and remit sales tax.
Is software-as-a-service (SaaS) taxable in Indiana?
No, services are not taxable in Indiana.
