Should you collect sales tax in Indiana?
Sales tax is levied on retail selling tangible personal property to your customers, including leasing or renting tangible property. A physical nexus is typically created when your business has a store, warehouse, or office location in Indiana. An economic nexus is intertwined when you cross paths with threshold limits as already stipulated by the state. These thresholds are based on revenue.
Let’s explore if your business has a Physical nexus in Indiana.
A physical nexus is integrated when your business is engaged in the following in Indiana:
- Selling tangible personal property in Indiana.
- Maintaining, occupying, or using a place of business or an office in Indiana.
- Employing or retaining any contractor, including an agent, representative, or salesman, by whatever name called, engaged in activities relating to selling, delivering, installing, or taking business orders.
- We have a stock of goods in Indiana.
Is it constituting an Economic nexus in Indiana?
You must register and comply with the sales tax rules if you are a remote seller (i.e., don’t have a physical presence in the state) or a marketplace seller where business sales in Indiana exceed $100,000 during the current or previous calendar year. The state abolished the transaction limit of 200 w.e.f. January 1, 2024.
You may also refer to the Indiana Revenue Department advisory to learn more about business activities that may create an economic nexus within the state.
How can you Register for Sales tax in Indiana?
To obtain a sales tax permit in Indiana, you must apply online using the Indiana INBiz system. If you are running an established business and need to add a tax type or a location, you can do so in INTIME.
Additionally, before applying for a new tax account number, make sure you have the following information handy:
- FEIN and Social Security numbers of all officers, partners, or owners.
- Address details (physical and mailing).
- Business incorporation dates in Indiana.
- Contact information.
- Nature of business.
Once you apply for the sales tax permit in Indiana, you will receive a confirmation number and other registration details. A one-time fee of $25 is levied for every application.
Is your product or services liable to Sales tax in Indiana?
Tangible Property: Sales tax in Indiana is imposed primarily on the retail sale of tangible personal property, such as Furniture and toys.
Services : Services are generally exempt from sales tax in Indiana. However, exceptions include communication services, fabrication, etc. Click here for more information.
Digital Product : Indiana charges sales tax on digital products. So, if you sell digital products such as software, streaming services, e-books, etc., you must collect sales tax.
SAAS: Software as a service (SaaS) enables consumers to use cloud services over an internet connection. In Indiana, it is not taxable. Click on this link to read more about the taxability of digital products and SAAS.
The state provide certain exemptions from the sales tax levy, such as food for home consumption, prescription drugs, newspapers/ magazines, postage stamps, etc. Click here to see what exemptions are covered (pg. 20).
How should you collect and calculate state taxes in Indiana?
It might take enormous effort to calculate and collect proper sales tax that needs to be remitted, mainly if you are outside of Indiana. In Indiana, sales taxes are destination-based, which implies that you must collect taxes from the buyers based in Indiana on the tangible property sold.
However, sales tax calculation is easy in Indiana as they don’t charge local rates. However, complexities are involved when you have a business nexus, even outside the state. Any default may lead to severe concerns, penalties, or fines by the state. That is what TaxDo is here for you! Our specialized sales tax calculator and professional services will simplify your job and lighten your compliance burden..
Indiana has a base sales tax rate of 7%.
Below is the simple formula you can use to calculate your sales tax collection on each merchandise sold:
Sales Tax collectible = Sale value * (7%)
Do you need to collect sales tax on Shipping Charges?
If non-taxable items are sold, shipping charges associated with such sale are not liable to sales tax. However, when a sale includes both taxable and non-taxable items, shipping charges need to be apportioned relatively between the taxable and non-taxable parts of the sale. Accordingly, sales tax is applicable on the taxable portion of the sale. Furthermore, delivery charges exclude the postage charges that are separately stated on the invoice. This link will take you to the official guidance issued by the state on shipping charges.
How should you file sales tax in Indiana?
E-file: You can e-file your return using INTIME. You also use a third-party vendor to transmit and file the form ST-103 electronically.
Sales tax must also be paid when filing. The state allows people to pay taxes via ACH, credit cards, and EFT.
Filing frequencies and due dates
The Indiana Department of Revenue assigns a filing frequency, which can be Monthly, Quarterly, or Yearly, based on your reported sales tax or expected taxable sales. The 20th day of the month after the relevant reporting period would be the deadline for filing sales tax, based on your filing frequency.
However, if your sales tax liability during the previous fiscal year was less than $1,000, the respect due dates would change to the 30th of the following month. See the Indiana sales tax calendar for all the due dates.
Note: If the due date is a holiday or weekend, the next business day would be considered the final due date.
Are there any fines or penalties for default in filing or paying sales tax?
The state levies a penalty of up to 20% of sales tax if you fail to file the return by the due date. The penalty for late payment is the higher of $5 or 10% of the tax due. Fault payments are liable to a flat penalty of $35.
However, assigning your tax burden to TaxDo would not result in you paying any penalty or interest. We will adhere to the due dates. This link will take you to the official website of the Indiana Revenue Department, where you can see what the state has to say about fines and penalties.