Indiana Sales Tax: 7% Rate, What Is Taxable and What Is Exempt
Indiana Sales Tax: 7% Rate, What Is Taxable and What Is Exempt
The Indiana sales tax rate is 7%. That number is the easy part. The harder questions are which of your sales are taxable, whether a service carries tax, when a food or lodging sale picks up an extra local tax, and what to do about purchases where no Indiana sales tax was charged. This guide walks through each question using the Indiana Department of Revenue (DOR) as the reference point, and it flags where you need to confirm the answer directly with the agency.
Informational content only. This article is not legal or tax advice. Sales tax treatment depends on what you sell, where you sell it, and how the buyer will use it. If your situation is more than a simple retail sale, talk to a qualified CPA or attorney before you rely on any of this.
The Indiana Sales Tax Rate
The state sales tax rate is 7%. The DOR states that businesses selling goods or tangible personal property must register to collect it. Tangible personal property means physical items you can see, touch, and move, such as furniture, clothing, equipment, and printed products.
The DOR sales tax page does not describe any general local sales tax. That does not confirm that none exists, because we could not verify the point on an official page. Before you quote a final price to a customer, confirm with the Indiana Department of Revenue whether any local general sales tax applies at your address. The DOR home page is https://www.in.gov/dor/.
Who Must Register to Collect Sales Tax
If you sell taxable goods in Indiana, you need a Registered Retail Merchant Certificate from the Department of Revenue. The registration fee is $25, as shown on the INBiz fee calculator. You can start the process through INBiz at https://inbiz.in.gov/, and the DOR's business registration page is at https://www.in.gov/dor/i-am-a/business-corp/business-education/register-business/.
Registration matters even if you are a small seller. Collecting tax without a registration, or failing to collect it once you are required to, creates a liability that is yours to answer for. Register before your first taxable sale, not after.
What Is Taxable in Indiana
Indiana taxes retail sales of tangible goods. It also taxes certain items specifically, such as prepared meals. If a customer buys a physical product from you for their own use, expect the 7% state rate to apply unless a specific exemption covers the sale.
Taxable does not mean you charge tax on your costs. Items you buy to resell, or to use as parts of something you sell, follow the exemption rules covered below.
Services and Indiana Sales Tax
This is where many owners get it wrong. The DOR sales tax page does not publish a general list of taxable services, and this guide will not give you one. Do not assume a service is taxable or exempt because of how it sounds. Check the DOR guidance for your specific service before you invoice.
The DOR's own example shows how the line gets drawn. Repair labor is not taxed, but the components you sell as part of the repair are. A mechanic who charges for an hour of labor and a replacement part is taxed on the part and not on the labor. Apply the same logic to your own services: separate the labor from the goods on the invoice, and confirm the treatment with the DOR before you assume it.
What Is Exempt
The most common exemption is a sale for resale. If you buy goods to resell to your own customers, you generally do not pay sales tax on that purchase, because the tax will be collected when the item reaches the final buyer. To use that exemption, you give your supplier a valid exemption document tied to your registration. Keep those documents on file. A supplier who cannot produce a valid exemption record can leave you owing the tax.
Other exemptions exist for specific buyers and purposes. Because the DOR's guidance on each one changes the paperwork you need, confirm the exact exemption form and process with the Department of Revenue before you rely on it.
Local Food and Beverage Taxes
Indiana sales tax is not the only tax on a restaurant bill in some places. The DOR lists local food and beverage taxes that apply on top of the state sales tax. If you sell food or drink, you must register for the local food and beverage tax and file returns, even in a month when you had no sales. Late returns carry a penalty of up to 20% with a $5 minimum, according to the DOR.
The rate depends on the address, not the business name. The DOR's food and beverage table shows the following examples:
| Area | Local rate | Effective date listed |
|---|---|---|
| Marion County | 2% | 7/1/2005 |
| Vanderburgh County | 1% | 8/1/1985 |
| Hamilton, Hancock, Hendricks, Boone, and Johnson counties (each) | 1% | 8/1/2005 |
| Most other listed areas | 1% | See DOR table |
| Shipshewana, and a historic hotel area of Orange County | 2% | See DOR table |
Do not quote a statewide food tax figure to a customer. Look up the exact rate for your location in the DOR Food and Beverage Tax rate table, and confirm it before you set your menu prices or point-of-sale settings.
County Innkeeper's Taxes on Lodging
The DOR also lists county innkeeper's taxes on lodging. If you rent rooms or short-term lodging, check whether your county levies one and what the rate is. The rates are set locally and this guide does not publish them, so confirm the figure with the DOR and your county before you finalize room rates or guest invoices.
Indiana Use Tax
Use tax is the companion to sales tax. It applies when you buy taxable goods without paying Indiana sales tax, and then use those goods in Indiana. Common examples include equipment or supplies bought from an out-of-state seller that did not charge Indiana tax, and items you take from inventory for your own business use rather than for resale.
Many small businesses miss use tax entirely, because no one at the register asks for it. The tax still applies to the purchase. Confirm the current rate, how to calculate it, and where to report it with the Department of Revenue before you file your first return that includes use tax.
How to Calculate Indiana Sales Tax
We did not find an official DOR sales tax calculator in the materials verified for this guide, so the arithmetic below is the reliable method. Multiply the taxable sale price by the rate that applies to that sale.
- Taxable furniture sale of $250: 7% state tax is $17.50, for a total of $267.50.
- Prepared meal of $40 in Marion County: 7% state tax is $2.80, and the 2% local food and beverage tax is $0.80, for a total of $43.60, assuming both taxes apply to the full sale price. Confirm that base with the DOR for your situation.
- Restaurant meal of $40 in Vanderburgh County: 7% state tax is $2.80, and the 1% local food and beverage tax is $0.40, for a total of $43.20 under the same assumption.
Round each tax to the nearest cent according to the DOR's rounding guidance, and check your point-of-sale software against a few sample transactions before you go live.
Indiana Sales Tax Online and Filing
Sales tax registration for taxable goods starts online through INBiz for the $25 fee. The DOR site at https://www.in.gov/dor/ covers the tax returns and filing requirements. Confirm your filing frequency and filing method with the DOR after you register, because your schedule can depend on your sales volume.
If you sell into Indiana from another state, do not assume you are outside the rules. Whether you must register and collect depends on your connections to Indiana. Confirm your obligation with the DOR before you make your first Indiana sale. Online sellers who are unsure should not guess.
Common Mistakes to Avoid
- Quoting a service price with sales tax included or excluded without checking the DOR's guidance for that service.
- Applying the 2% Marion County food rate to a sale in a county that is listed at 1%, or the reverse.
- Skipping a return in a slow month. Food and beverage businesses must file even with no activity.
- Accepting resale exemptions from customers or suppliers without a valid document on file.
- Ignoring use tax on equipment and supplies bought without Indiana tax.
Where to Confirm Your Numbers
The Indiana Department of Revenue is the authority for every figure in this guide. Use its pages as the final word, and confirm anything this article marks for confirmation before you act on it. The state's general business guidance is at the Indiana Secretary of State's Business Services page, https://www.in.gov/sos/business/. If you need help with a structure decision or a complicated multistate sales picture, ask a CPA or attorney who works with Indiana businesses. The Indiana Small Business Development Center at https://isbdc.org/ can also point you to free counseling.
Reminder: This article is informational, not legal or tax advice. Confirm your obligations with the Indiana Department of Revenue and a qualified professional before you register, collect, or file.