The Bloomington, Indiana sales tax is 7%, the flat state rate that applies everywhere in Indiana. There is no separate city or county general sales tax layered on top. Two local taxes do show up in specific situations: Monroe County adds 1% to prepared food and drinks, bringing restaurant bills to 8%, and short-term lodging carries a 5% innkeeper’s tax that pushes hotel stays to 12%.
The 7% State Rate
Indiana’s gross retail tax is set at 7% by state statute and charged uniformly across every county and city.1Indiana General Assembly. Indiana Code 6-2.5-2-2 – State Gross Retail Tax Indiana does not allow cities or counties to impose their own general sales tax, which is why the rate at a Kirkwood Avenue shop matches the rate anywhere else in the state. The merchant collects the tax at the register and remits it to the Indiana Department of Revenue. Online orders shipped to a Bloomington address are taxed at the same 7%.
What You Actually Pay Tax On
The 7% applies to retail sales of tangible personal property: clothing, electronics, furniture, appliances, household goods, and the like.2Indiana General Assembly. Indiana Code 6-2.5-4-1 – Selling at Retail Services that build, alter, or finish a physical product are also taxable, because the end result is still a transfer of tangible property.3Cornell Law Institute. Indiana Administrative Code 45 IAC 2.2-4-1 – Selling at Retail Application
Shipping and Delivery
Delivery charges the seller incurs on your behalf are part of the taxable sale price in Indiana, even when they appear as a separate line on the receipt.4Indiana Department of Revenue. Sales Tax Information Bulletin 92 If a third party bills and handles the delivery independently of the seller, that’s the main exception. When the underlying item is exempt, the shipping charge is also exempt.
Digital Products and Software
How you access a digital product changes whether it’s taxed. A permanent download of software, music, an e-book, or video is taxable at 7%.5Indiana Department of Revenue. Sales Tax Information Bulletin 93 Cloud-based software you use through a browser or app, without downloading it, is not taxable. For businesses running on subscription tools that live on a remote server, Indiana treats that access as a nontaxable service.
What Is Not Taxed
Several everyday categories escape the 7% entirely:
- Groceries: unprepared food and food ingredients sold without heating and without eating utensils. Fresh produce, milk, bread, canned goods, and raw meat qualify. Once a store heats the food, assembles it into a ready-to-eat item, or hands you a utensil, the exemption ends.6Indiana Department of Revenue. Sales Tax Information Bulletin 29 – Sales of Food
- Prescription drugs, insulin, oxygen, and blood products dispensed by a licensed practitioner or health care facility for patient treatment.7Indiana General Assembly. Indiana Code 6-2.5-5-19 – Drugs, Insulin, Oxygen, Blood, or Blood Plasma
- Inventory purchased for resale, when the buyer presents an exemption certificate to the supplier. Tax gets collected later when the item sells to the end customer.8Indiana General Assembly. Indiana Code 6-2.5-8-8 – Exemption Certificates
- Purchases by registered nonprofits operated exclusively for religious, charitable, educational, or similar purposes, when the items directly support the organization’s mission and are invoiced to and paid by the organization.9Indiana Department of Revenue. Sales Tax Information Bulletin 10
Durable medical equipment such as wheelchairs and prosthetic devices is generally exempt as well, with the specifics depending on whether the item is prescribed and the buyer’s circumstances.
Eating Out: 8% in Monroe County
Monroe County imposes a 1% food and beverage tax countywide under Indiana Code 6-9-41.10Indiana General Assembly. Indiana Code 6-9-41-7 – Rate of Tax It applies to prepared food and drinks served for immediate consumption, so restaurant meals, bar tabs, and coffee shop orders all land at 8% once the 7% state tax is added.
The tax isn’t limited to sit-down restaurants. Catering, heated food from a grocery store deli counter, and any food sold with eating utensils provided by the merchant are all covered.11Indiana Department of Revenue. Commissioner’s Directive 30 Groceries you take home and cook yourself are not. Revenue from the tax supports tourism promotion and economic development in Monroe County.
Hotels and Short-Term Rentals: 12% Total
Stays at hotels, motels, bed-and-breakfasts, vacation rentals, and other short-term accommodations in Monroe County carry a 5% innkeeper’s tax on top of the 7% state sales tax, for a combined 12%.12Indiana Department of Revenue. County Innkeeper’s Tax The tax only applies to stays shorter than 30 days. Renting an apartment or house for a month or longer puts you outside its reach, which can matter if you’re in town for an Indiana University stretch or house-hunting and comparing a short-term rental against a longer lease.
Buying From Out-of-State Sellers
Indiana’s use tax is the companion to its sales tax. It’s charged at the same 7% on tangible personal property you bring into the state or have shipped here when the out-of-state seller didn’t collect Indiana sales tax. If you already paid sales tax to another state, Indiana credits that amount, so you only owe the difference.
Most major online retailers now collect Indiana sales tax at checkout under the state’s economic nexus rules. Purchases from smaller out-of-state vendors, private sales across state lines, and items bought while traveling can still trigger use tax, which individuals report on their Indiana income tax return.
If You’re a Bloomington Business Collecting Tax
Any business making taxable sales in Indiana needs a Registered Retail Merchant Certificate before its first transaction.13Indiana General Assembly. Indiana Code 6-2.5-8-1 – Registered Retail Merchant Certificate You apply through INBiz, Indiana’s online business portal, or by submitting the Business Tax Application (BT-1). The fee is $25 per physical location.14Indiana Department of Revenue. Indiana Business Tax Application The certificate must be displayed at the business and stays valid as long as the business remains active and in good standing.
Returns and payments run through INTIME, the state’s online tax portal.15Indiana Department of Revenue. INTIME Guide for Business Tax Customers Filing frequency depends on your average monthly sales tax liability during the prior state fiscal year ending June 30. Businesses averaging $1,000 or more a month are “early filers” with returns due by the 20th of the following month; smaller businesses file monthly with a deadline of the 30th.16Indiana Department of Revenue. Filing Deadlines A return is required every period, even when no sales were made.
Timely filers earn a small collection allowance, ranging from 0.73% of annual liability for businesses at or below $60,000 down to 0.26% for those above $600,000.17Indiana General Assembly. Indiana Code 6-2.5-6-10 – Merchant Collection Allowance The allowance is forfeited for any period filed late. Penalties for falling behind are steep: 10% of the unpaid tax (minimum $5), a separate 20% penalty for failing to file at all, plus interest on the balance.18Indiana Department of Revenue. Rates Fees and Penalties Keep records for at least three years in case of audit.