WHICH GOODS AND SERVICES ARE TAXABLE?
Determining whether or not the products or services your company sells are taxable in Indiana is the first step in sales tax compliance.
Traditional Goods or Services
Goods that are subject to sales tax in Indiana include physical property, like furniture, home appliances, and motor vehicles.
The purchase of groceries and prescription medicine are tax-exempt.
Digital Goods or Services
A digital good or service is anything electronically delivered, such as an album downloaded from iTunes or a film purchased from Amazon.
Indiana requires businesses to collect sales tax on the sale of digital goods or services.
HOW TO REGISTER FOR INDIANA SALES TAX
If you determined that you need to charge sales tax on some or all of the goods and services your business sells, your next step is to register for a seller's permit. This allows your business to collect sales tax on behalf of your local and state governments.
In order to register, you will need the following information:
- Your estimated monthly taxable sales, if left blank you will be a monthly filer.
- If you are a seasonal business.
- If you provide lodging for less than 30 days.
- If you will sell food and beverage.
- If you will sell alcoholic beverages and your ABC Permit number with an expiration date.
- If gasoline will be sold through a metered pump.
- If cars or trucks less than 11,000 lbs. will be rented from this location for less than 30 days.
- If income is derived from the sale of tobacco products.
- If yes, from vending machines only.
- If you report sales tax on a consolidated basis is this location included.
- If you want your sales tax returns sent to a different address.
Save Money with a Resale Certificate
With a resale certificate, also known as a reseller's permit, your business does not have to pay sales tax when purchasing goods for resale.
COLLECTING SALES TAX
After getting your seller's permit and launching your business, you will need to determine how much sales tax you need to charge different customers. To avoid fines and the risk of costly audits, it's important for business owners to collect the correct rate of sales tax.
When calculating sales tax, you'll need to consider the following kinds of sales:
- Store Sales
- Shipping In-State
- Out-of-State Sales
Calculating sales tax on goods sold in Indiana is easy. Simply charge the 7.000% flat sales tax rate on all items whether selling in store or shipping across the state.
Indiana businesses only need to pay sales tax on out-of-state sales if they have nexus in other states. Nexus means that the business has a physical presence in another state.
Common types of nexus include:
- A physical location, such as an office, store, or warehouse
- An employee who works remotely or who is a traveling sales representative
- A marketing affiliate
- Drop-shipping from a third party seller.
- A temporary physical location, including festival and fair booths.
FILE YOUR SALES TAX RETURN
Now that you’ve registered for your Indiana seller's permit and know how to charge the right amount of sales tax to all of your customers, you are all set to file your sales tax return. Just be sure to keep up with all filing deadlines to avoid penalties and fines.
Recommended: Hiring a business accountant can help your business file tax returns as well as issue payroll and manage bookkeeping. Schedule a consultation with a business accountant today to save thousands of dollars on your taxes.
How to File
Indiana requires businesses to file sales tax returns and submit sales tax payments online.
How Often Should You File?
How often you need to file depends upon the total amount of sales tax your business collects.
- Annual filing: If your business collects less than $25 in sales tax per month then your business should elect to file returns on an annual basis.
- Monthly filing: If your business collects $1000 or less in sales tax per month then your business should file returns on a monthly basis.
- Early Filing: If your business collects more than $1000 in sales tax per month then your business should file returns on an early filer basis. An early filer’s obligation is to file their tax return 10 days sooner than a monthly filer:
- 20 days after the due date versus 30 days after the due date
Note: Indiana requires you to file a sales tax return even if you have no sales tax to report.
All Indiana sales tax return deadlines fall on the 20th day of the month, unless it is a weekend or federal holiday, in which case the deadline is moved back to the next business day. Below is a list of this year’s filing deadlines:
Annual filing: January 31st, 2020
Monthly filing: The 20th of the following month, or the next business day, e.g. April 20 for the month of March, or May 22 for the month of April.
Penalties for Late Filing
Indiana charges a late filing/payment penalty of 10% of the tax that is owed on the tax return if the business fails to file their return or underpays the amount specified by the tax return.
Indiana Charges a Non-Filing Penalty that is equal to 20% of the unpaid tax if the business does not file their tax return 30 days after the state sends them a notice to file the return. Once this penalty takes place, it becomes the only applied penalty for the business.
The state assesses the unpaid tax with an interest rate of 3.0% per year or 0.25% per month or partial month for any unpaid tax or penalty.
Indiana Helpful Resources
Indiana Sales Tax Help Number: