Taxation

What Is the Current Sales Tax Rate in Indiana?

The state-level sales tax rate in Indiana is 7%. While some states authorize counties to impose local sales taxes, Indiana counties do not (as of February 2025). However, counties collect other taxes, such as County Innkeeper’s Tax (CIT), Food and Beverage Tax (FAB), and Local Income Tax (LIT).

Indiana Sales Tax and Use Tax

Sales tax is collected by the seller on sale of goods. In Indiana, the sales tax rate is 7%. However, at times, the seller may not collect sales tax from customers for certain reasons (ex: lack of sales tax nexus, exemptions). In those cases, the buyer of goods must pay use tax to the Indiana Department of Revenue, instead of the seller. The buyer must pay 7% of the purchase price of the product as use tax.

Let us take an example to understand use tax. Jane, a resident of Indiana, purchases a dress for $200 from an online store. The online store does not have a sales tax nexus in Indiana and does not collect sales tax from Jane. In this case, Jane owes a use tax of $14 (7% x $200) to Indiana DOR.

For a detailed breakdown of how sales and use tax work across states, check out this ultimate guide to sales tax.

When Do Businesses Need To Collect Indiana Sales Tax?

Businesses are required to collect and remit sales tax when a sales tax nexus is established. This can occur through:

1. Physical nexus

If your business has a physical presence in Indiana, then a physical nexus is established. Read our complete guide on sales tax nexus to know when businesses are required to collect tax.

Physical presence can be defined as:

• Maintaining offices, distribution centers, warehouses, etc. in Indiana. This can be on a permanent or temporary basis, directly by the seller or indirectly through a representative or agent.
• Having a representative, salesman or agent who operates in Indiana with the authority or on behalf of the seller. Activities performed by these representatives include delivery, sales, installation, receiving orders, and repair services.

2. Economic nexus

Economic nexus applies when your business does not have a physical presence in Indiana.

Your business will have an economic nexus when you have a gross revenue exceeding $100,000 in the current or previous calendar year from:

• Sale of tangible property that is delivered into Indiana, or
• Product transferred electronically into Indiana, or
• Service delivered in Indiana

Earlier, there was another threshold to determine economic nexus. Sellers had economic nexus when they made 200 or more separate transactions in Indiana in the current or previous calendar year. This threshold was removed by Indiana DOR in 2024.

Understand the latest sales tax thresholds and how they affect online sellers.

Consequences of Failing To Collect Sales Tax

Understanding why sales tax is important for businesses can help you avoid legal and financial penalties. Failing to collect and remit sales tax may result in:

1. Monetary penalty of up to 20% and a minimum penalty of $5 for late filing of sales tax returns.
2. Expiration of the seller’s Registered Retail Merchant Certificate (RRMC) when tax dues are not paid.

Sales Tax Obligations for Marketplace Facilitators

Marketplace facilitators are businesses that operate a marketplace and facilitate retail transactions between buyers and sellers. They can be either online (like Amazon) or physical.

In Indiana, marketplace facilitators must collect and remit sales tax on behalf of their sellers’ transactions into Indiana. A marketplace facilitator that has a physical or economic nexus in Indiana would be required to collect and remit sales tax even when the seller (for whom they facilitate transactions) does not collect sales tax.

Registration Requirements for Sales Tax in Indiana

To collect and remit sales tax in Indiana, sellers must hold a Registered Retail Merchant Certificate. There are two ways to register and obtain this certificate:

1. Registration With Indiana Department of Revenue

• A seller can register with Indiana DOR to collect tax by filling out the Form BT-1 offline or online through their business registration portal, InBiz.
• $25 non-refundable application fee must be paid.
• After filling the form and paying the application fee, the retail merchant receives a tax identification number and Registered Retail Merchant Certificate (RRMC).
• The certificate is valid for two years and updates automatically.
• A separate application is required for each new business location.

2. Registration Under Streamlined Sales Tax Registration System (SSTRS) To collect sales tax, businesses must register. Learn how to obtain a sales tax permit for compliance.

• The Streamlined Sales Tax Registration System (SSTRS) provides a simple way for a business to register for sales tax in full member states of the Streamlined Sales Tax group, which Indiana is a part of.
• Businesses that register under SSTRS must collect and remit sales tax to all selected states even if they don’t have a nexus.
• This choice is suitable for businesses that have multi-state operations.
• You can check the official website for more details on SSTRS registration.

Collecting Sales Tax In Indiana

There are three steps involved in collecting sales tax. A retailer needs to collect sales tax only when there is a sales tax nexus (physical or economic) in the state of Indiana.

1. Determine Taxability of Items Sold

In Indiana, only sale of goods and tangible personal property is taxable. As a retailer, you must identify if the product you sell is taxable or not. We have provided a list of common exceptions later in this guide. You must also keep an eye on updates through the sales tax information bulletin of Indiana.

2. Calculate Sales Tax Amount