Sales Tax in Indiana: A Comprehensive Update

Indiana's sales tax system is a complex and ever-evolving landscape. As of 2023, the average statewide sales tax rate is 7%, with local jurisdictions adding an additional 0-4% on top of that. This article will provide you with all the information you need to know about sales tax in Indiana, including current rates, exemptions, and common pitfalls to avoid.

Current Sales Tax Rates

The following table provides a breakdown of the current sales tax rates in Indiana:

Sales Tax Exemptions

There are a number of items that are exempt from sales tax in Indiana, including:

• Food (excluding prepared food)
• Prescription drugs
• Medical devices
• Clothing and footwear under $75
• Utilities
• Educational materials
• Religious materials
• Charitable donations

Common Mistakes to Avoid

When dealing with sales tax in Indiana, there are a few common pitfalls to avoid:

• Not registering with the Indiana Department of Revenue (IDR) if you are required to collect sales tax.
• Not collecting sales tax on all taxable items.
• Not remitting sales tax to the IDR on time.
• Not filing sales tax returns accurately.

How to File a Sales Tax Return

Sales tax returns in Indiana are due on the 20th day of the month following the end of the reporting period. You can file your return online, by mail, or by phone. For more information on filing a sales tax return, visit the IDR website.

Tax Reportable Examples

Examples of taxable transactions in Indiana include:

1. The purchase of a car: Indiana's sales tax rate for the purchase of a car is 7%. If you buy a car for $20,000, you will owe $1,400 in sales tax.
2. The purchase of clothing: Clothing and footwear under $75 are exempt from sales tax in Indiana. However, if you buy a pair of shoes for $100, you will owe $7 in sales tax.
3. The purchase of food: Food is exempt from sales tax in Indiana, but prepared food is not. If you buy a pizza for $15, you will owe $1.05 in sales tax.
4. The purchase of a car wash: Car washes are taxable in Indiana. If you get a car wash for $10, you will owe 70 cents in sales tax.

Tax-Exempt Examples

Here are examples of tax-exempt transactions in Indiana:

1. The purchase of groceries: Groceries are exempt from sales tax in Indiana. This includes food, beverages, and other items that are used to prepare meals.
2. The purchase of prescription drugs: Prescription drugs are exempt from sales tax in Indiana. This includes both prescription medications and over-the-counter medications that require a prescription.
3. The purchase of medical devices: Medical devices are exempt from sales tax in Indiana. This includes items such as wheelchairs, crutches, and hearing aids.
4. The purchase of educational materials: Educational materials are exempt from sales tax in Indiana. This includes books, school supplies, and other items that are used for educational purposes.

Sales Tax Holidays

Indiana has two sales tax holidays each year:

• Back-to-school sales tax holiday: This holiday is typically held in August and exempts clothing and footwear under $75 from sales tax.
• Energy Star sales tax holiday: This holiday is typically held in October and exempts energy-efficient appliances from sales tax.

Sales Tax Amnesty Program

The Indiana Department of Revenue offers a sales tax amnesty program from time to time. This program allows businesses to come forward and pay back taxes they owe without penalty. The next amnesty program is expected to be held in 2024.

Contact the Indiana Department of Revenue

If you have any questions about sales tax in Indiana, you can contact the Indiana Department of Revenue at (317) 232-2240.