Sales Tax Guide for Indiana

What Is Taxable in Indiana?

In Indiana, most tangible personal property is subject to sales tax. However, certain items are exempt, including prescription drugs, specific medical devices, most groceries, water, seeds, and fertilizers used for agricultural purposes.

If your business sells taxable goods or services, collecting and remitting sales tax accurately is essential. Ensure you are aware of additional use taxes that might apply to products purchased from out of state.

Who Needs to Collect Sales Tax?

Businesses required to collect sales tax in Indiana include:

• Retailers with a physical presence in Indiana
• Online sellers meeting the state’s economic nexus criteria
• Service providers, depending on the specific services offered

Indiana enforces an economic nexus threshold, obligating sellers with over $100,000 in sales or 200 transactions per year to register for sales tax, regardless of a physical presence. Non-compliance can result in penalties and back taxes, making doola’s Bookkeeping service vital for staying compliant and avoiding potential legal issues. 

How to Register for a Sales Tax Permit in Indiana

Registering for a sales tax permit in Indiana involves these steps:

1. Prepare necessary documents: Employer Identification Number (EIN), business licenses, and other pertinent information.
2. Visit the Indiana Department of Revenue website.
3. Complete the online application process.
4. Receive your Retail Merchant Certificate and begin collecting sales tax.

Collecting sales tax without a permit is illegal. Ensure registration before making any taxable sales. Partnering with doola’s bookkeeping services can ease the process and let you focus on business growth. 

How to Calculate Sales Tax in Indiana

To accurately calculate sales tax in Indiana, follow these steps:

Step 1:
Identify the applicable sales tax rate based on the location of your business and the buyer’s location.

Step 2:
Collect the correct amount of tax at the point of sale.

Step 3:
Keep detailed records of all transactions.

Indiana requires businesses to file sales tax returns monthly, quarterly, or annually based on their sales volume. Always note the filing due dates to prevent late fees. Remember that some counties or cities may impose additional taxes that need inclusion in your calculations.

How to File and Pay Sales Tax in Indiana

The filing and payment of sales tax in Indiana necessitate understanding the state’s resale tax exemption rules. Some services and products might not qualify for exemptions; awareness of these distinctions is crucial.

Typically, the process involves accessing Indiana’s online tax portal, reporting total and taxable sales, calculating the taxes owed, and submitting payment through an accepted method.

While this can seem complex, doola’s specialized bookkeeping team can assist you in this process, ensuring you benefit from Indiana sales tax exemptions and remain compliant.

Common Sales Tax Exemptions in Indiana

Indiana provides sales tax exemptions for certain transactions, including:

• Purchases for resale with a valid resale certificate
• Sales to non-profit organizations
• Specific manufacturing and agricultural inputs

Businesses claiming exemptions must use the appropriate certificates and keep precise records. Misuse may result in audits or fines.

Remote Seller and Marketplace Sales Tax Rules in Indiana

Indiana has specific tax obligations for remote sellers and marketplaces like Amazon, eBay, Shopify, and Etsy:

The economic nexus standards, which apply to businesses with sales over $100,000 or 200 transactions, require compliance with Indiana’s remote seller tax policies.

Marketplace facilitators are responsible for collecting and remitting sales tax on behalf of their third-party sellers on sales made in Indiana.

What Triggers a Sales Tax Audit

The Indiana Department of Revenue could audit businesses for several reasons: incomplete or inaccurate tax filings, repeated late payments, mismatches between reported and actual sales, and incorrect use of exemption certificates.

Maintaining thorough records of sales, exemptions, and tax payments helps minimize audit risks. Regular internal checks can ensure correct tax filings.

FAQs About Sales Tax in Indiana

Frequently asked questions about Indiana sales tax include:

Does Indiana tax digital goods? 

Yes, some digital goods and services may be taxed; verify state guidelines to ensure compliance.

Do out-of-state businesses need to collect Indiana sales tax? 

If you cross the $100,000 sales or 200-transaction threshold annually, then yes.

What happens if I overcharge or undercharge sales tax? 

You may need to refund the customer or pay the state the difference. Accurate record-keeping helps prevent such issues.

Are any services taxable in Indiana? 

Specific services, like telecommunications and utility services, are taxable in Indiana.

Stay Compliant With doola

Staying compliant with sales tax regulations in Indiana doesn’t need to be stressful. With the right knowledge and tools, you can avoid penalties and keep your business running smoothly.

doola provides expert guidance and the tools necessary for compliance, supporting businesses with financial services, tax advice, and bookkeeping.