Indiana Sales Tax Guide 2024: Compliance, Rates, and Regulations for Businesses

Sales Tax at a Glance

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Indiana Sales Tax Rates & Calculations

The Indiana sales tax rate in 2023 is 7% statewide. This comprises a base rate of 7% plus no additional local rates. The total tax rate across the state is 7% uniformly.

Recent Changes:

Not-for-profits with taxable retail sales over $100,000 in the current or prior year must collect and remit sales tax. 

FAQs

How do you calculate Indiana sales tax?

To calculate Indiana sales tax, multiply the 7% statewide rate by the purchase price. For example, if an item costs $100, the sales tax would be $7 ($100 x 7% = $7).

What are the penalties for not paying Indiana sales tax?

Indiana has a 10% penalty or $5 (whichever is higher) if you fail to pay your taxes. If you miss the filing due date, the penalty is 20%, and for fault payments like bad checks, there’s a fixed fee of $35.

Is Indiana a Streamlined Sales Tax state?

Yes, Indiana has been a full Streamlined Sales Tax States member since October 1, 2005. 

Sales Tax Nexus & Thresholds in Indiana

Indiana uses physical presence and economic nexus thresholds to determine if a business has established a substantial nexus and must collect and remit sales tax.

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FAQs

Do I need an Indiana seller's permit if I’m only a wholesaler?

Wholesalers must register for a sales tax permit, depending on their business activities in Indiana. Consult the Department of Revenue for guidance.

Do I need an Indiana seller's permit if I only sell temporarily in the state?

Even temporary selling trips into Indiana can require a seller's permit.

Exemptions from Indiana Sales Tax

There are various exemptions from Indiana sales tax, including:

• Sale of medical equipment 
• Food purchased off-premises (grocery stores)
• Prescription drugs and insulin
• Textbooks required for school courses
• Agricultural machinery, tools, and equipment

See the complete list in Indiana sales tax bulletins.

FAQs

Are groceries taxable in Indiana?

No. Most groceries purchased for off-premises consumption are exempt from Indiana sales tax. Prepared foods may be taxable.

Are digital products taxable in Indiana?

Yes, as of January 1, 2023, digital products like software, apps, ebooks, and streaming services are subject to Indiana sales tax.

Is software-as-a-service (SaaS) taxable in Indiana?

Yes, SaaS and cloud-based software are considered digital products subject to Indiana sales tax.

Are services taxable in Indiana?

No, most services are not subject to Indiana sales tax. Only specifically enumerated services like telecommunications are taxable.

Excise Taxes in Indiana

Indiana has various excise taxes on specific goods like motor fuel, alcohol, and tobacco. Some examples:

• Cigarette Tax: $0.995 per pack of 20
• Wine Excise Tax: $0.47 per gallon
• Gasoline Excise Tax: $0.34 per gallon

See excise tax rates here.

Remote (Out-of-state) sellers & marketplaces

Indiana requires remote sellers who meet economic nexus thresholds to register and collect Indiana sales tax on sales into the state. Remote sellers making over $100,000 in gross revenue or 200 individual sales must register.

Marketplaces that facilitate over $100,000 in Indiana sales for third-party sellers also have nexus. Both remote sellers and facilitators must collect Indiana sales tax.

Collecting sales tax in Indiana

Any business making retail sales of tangible goods in Indiana must register to collect and remit Indiana sales tax. Even if your business is located out-of-state, you still must collect Indiana sales tax if you have an economic or physical presence.

To legally conduct retail sales and collect sales tax in Indiana, businesses must complete the following steps:

1. Register for a retail merchant certificate

Register with the Indiana Department of Revenue's online business registration portal called INBiz. This will provide you with an Indiana Registered Retail Merchant Certificate (RRMC) that must be prominently displayed at each business location.

The RRMC registration costs a one-time $25 fee and automatically renews at no extra charge as long as tax filings and payments remain current.

2. Calculate and collect sales tax

Once registered, retailers must calculate Indiana's 7% statewide sales tax rate and collect this tax on all taxable retail sales at the point of purchase. For remote and online sales, sales tax should be calculated at checkout.

3. File returns & remit sales tax

Registered retail merchants must then file periodic Indiana sales and use tax returns to report total sales. The returns must show the amount of state sales tax collected.

Businesses must remit the sales tax they collected from customers to the Department of Revenue when filing each return. 

Shipping & handling charges

In Indiana, shipping and handling charges are taxable if they occur after the retail sale transaction. However, charges for delivery from the seller to the purchaser (before the sale) are not taxable.

For example:

• Delivery fees for pizza, furniture, appliances, etc. before the sale are exempt
• Shipping fees on online retail sales after checkout are taxable
• Handling fees charged by sellers are generally taxable

To sum up, the retail sale's shipping and handling charges are subject to Indiana sales tax. Charges covering delivery from the seller to the customer before the transaction are not taxable.

Sellers should carefully track which shipping fees apply pre-sale versus post-sale to apply sales tax at the correct time properly. Exempting shipping pre-sale while taxing it post-purchase is an essential distinction in Indiana.

Filing sales tax returns in Indiana

Like most states, Indiana requires monthly, quarterly, or annual sales tax return filings depending on the taxpayer's sales volume and tax liability.

The filing frequency typically depends on the average monthly state sales tax collected. You can find the complete list of filing due dates for different product categories and industries.

Registered retail merchants must file a return even for periods without taxable sales. All returns must report total gross retail sales.

Indiana sales tax due dates

Indiana sales tax returns are due on the 30th day after the end of the filing period:

Monthly returns

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Quarterly returns for Q1 are due on April 30

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Annual returns are due on January 30 of the following year

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Returns are due the next business day if the due date falls on a weekend or holiday.

Filing penalties

Late-filed returns in Indiana incur a penalty of up to 20% of the tax required to be shown on the return. All late returns also have a minimum $5 penalty.

Sales tax return extensions

Indiana allows 30-day return filing extensions for taxpayers who have received a federal extension. However, an extension of time to file does NOT extend the due date to pay taxes owed. Any payments made after the original due date will still incur penalties and interest.

The Indiana sales tax audit & appeals process

Suppose the Indiana Department of Revenue (DOR) selects a business for a sales tax audit. In that case, the company will go through a detailed multi-step process, including a review of its tax records and filings, potential tax assessments, and opportunities to appeal the audit findings.

Receiving an audit notice

Businesses selected for a DOR sales tax audit will first receive a written Initial Contact Letter informing them that their business has been chosen for review. This letter provides preliminary information about the audit and requests that the business respond to schedule an opening conference. Failure to respond could result in subpoenas or other actions by the DOR.

The opening conference

The opening conference initiates the audit process. This meeting is between the business's owners, managers, accountants, bookkeepers, and the DOR auditor(s). The conference allows both parties to discuss the timeline and confirm the scope and documents to be reviewed.

The business should prepare by gathering at least three years of tax records, including sales invoices, bank deposit records, exemption certificates, tax returns, and accounting system reports. If documents are unavailable, the auditor may expand the audit's scope to estimate unreported taxes using external data and complex statistical sampling techniques.

Conducting the sales tax audit

The in-depth sales tax audit examines a business's level of sales tax compliance over multiple years. DOR auditor(s) will thoroughly review the business's:

• Tax returns, records, and books
• Accounting systems and internal controls
• Supporting documentation like exemption certificates
• Bank records, assets, and expenditures

Auditors carefully compare tax returns to sales records to identify discrepancies suggesting unreported tax liabilities. Complex audits can take months, depending on the depth of records inspected and issues identified.

Receiving audit findings

Once the inspection concludes, auditors summarize their findings in a preliminary written report provided to the business. This details any non-compliance found, including calculations of taxes owed plus interest and penalties assessed under the Indiana Code.

The business then has 60 days to formally protest the audit results if they disagree with any assessments before they become finalized. This protest triggers the appeals phase.

The audit appeals process

The appeals process allows businesses to contest a proposed sales tax assessment through a DOR conference or Administrative Law hearing. Grounds for appeals include

• Mathematical or factual errors in audit calculations
• Disagreements over the interpretation of tax statutes
• Having additional records that impact findings
• Challenging that nexus was incorrectly established

If the first appeal is unsuccessful, businesses can continue appealing to the Indiana Tax Court and higher courts. However, all disputed tax assessments and interest must still be paid unless the court decides to overturn them, in which case, any paid charges will be refunded or adjusted.

Having thorough records and working cooperatively with auditors from the start is critical to minimizing appeal findings.

Sales tax registration in Indiana

Registering for an Indiana Retail Merchant Certificate (RRMC) to Collect Sales Tax

Obtain an Indiana Taxpayer Identification Number (TID)

• Called a "TID," this number identifies each business within DOR's systems
• You can register online via the INBiz portal to instantly obtain a TID

Complete the Business Tax Application

• Uses the TID assigned from the prior registration step
• Submitted electronically via DOR's INBiz online registration system
• Requires providing critical details about business structure, activities, ownership

Receive your Registered Retail Merchant Certificate (RRMC)

• After submitting the application and paying the $25 fee, DOR issues an RRMC
• Legal certificate permitting the business to conduct retail sales in Indiana
• Must be prominently displayed at all business locations in the state
• Automatically renewed every two years if tax accounts remain in good standing

Registering an out-of-state seller

The online application process via INBiz applies to out-of-state retail sellers meeting Indiana's economic nexus thresholds. Out-of-state sellers must complete the full tax registration and comply with all requirements to legally collect Indiana sales tax.

The registration costs a one-time $25 fee. Once registered, your RRMC will be automatically renewed every two years as long as all tax filing and payment obligations stay current.

Contact Information

• Authority Name: Indiana Department of Revenue
• Phone: 317-232-3330
• Website: https://www.in.gov/dor/

There you have it—an extensive guide into Indiana's sales tax laws. Need help filing taxes for your ecommerce store? Get a demo with Numeral now.