Indiana Sales and Use Tax: Rates, Exemptions, and Remote Sellers

Indiana’s sales and use tax is a flat 7% charged on most retail purchases of tangible goods and a defined list of services, with a matching 7% use tax owed on items bought out of state and used in Indiana when no Indiana sales tax was collected at the point of sale. The Indiana Department of Revenue administers both, and unlike many states, Indiana has no local sales tax rates stacked on top — 7% is the rate everywhere in the state.¹

What the 7% Rate Applies To

The gross retail tax hits sales of tangible personal property — anything you can touch, weigh, or measure. It’s calculated on the total price the seller receives. Legally, the merchant is a collection agent: the tax belongs to the state, and collected amounts are held in trust until remitted. An owner, officer, or employee who knowingly fails to collect or remit sales tax can be charged with a Level 6 felony and held personally liable for the unpaid amount plus penalties and interest.²

Taxable Services and Digital Products

Services in Indiana are generally not taxable unless the code specifically lists them. The listed categories include telecommunications (local, long-distance, and mobile phone service, though internet access is exempt under federal law), cable and satellite TV and satellite radio subscriptions, utilities like electricity, natural gas, and water (with some industrial and agricultural exemptions), and short-term lodging of fewer than 30 days.

Digital products are taxable only when the buyer receives a right of permanent use. A downloaded album or e-book you keep is taxable; a streaming subscription is not, because you don’t get a permanent copy.³ Prewritten software you download and install is taxable; cloud-based software you access by subscription without a permanent download is not.

Repair transactions follow a common pattern: separately stated labor charges are not taxable, but the replacement parts are.

Common Exemptions

Indiana’s exemption chapter runs long, but four exemptions cover most of what businesses and buyers encounter.

Resale

Property bought for resale, rental, or leasing in the ordinary course of business is not taxed at the wholesale level, so the same item isn’t taxed twice as it moves through the supply chain.⁴ The buyer gives the seller a completed Form ST-105, Indiana’s General Sales Tax Exemption Certificate. Every section must be filled in. An incomplete form is invalid, and the seller becomes responsible for the uncollected tax.⁵

Manufacturing Equipment

Machinery, tools, and equipment used directly in producing goods for sale are exempt — extraction, processing, assembly, refining, and similar steps on the production line.⁶ Office furniture, delivery trucks, and equipment used outside direct production don’t qualify, and neither does distribution or transmission equipment bought by electric utilities.

Agricultural Inputs

Farmers occupationally engaged in producing food or commodities for sale can buy animals, feed, seed, plants, fertilizer, and pesticides tax-free.⁷ The buyer must actually be in the business of production. A homeowner buying fertilizer for the lawn doesn’t qualify.

Nonprofits

Qualifying nonprofits organized exclusively for religious, charitable, educational, scientific, or civic purposes can buy tax-free when the purchase is used to carry out the mission. Hospitals, churches, public schools, and labor unions are specifically included. Organizations operated predominantly for social purposes don’t qualify.⁸ Nonprofits must apply for the exemption with the Department of Revenue within 120 days of formation and renew it every five years.

For any exemption, the seller should keep the completed ST-105 on file. It’s the proof that supports not collecting the tax if an audit comes up later.

Use Tax on Out-of-State Purchases

The use tax applies at 7% on tangible personal property stored, used, or consumed in Indiana when Indiana sales tax wasn’t collected at purchase. The classic case is an online order from a retailer that didn’t charge Indiana tax. Consumers are legally responsible for self-reporting and paying, and most people handle it on their annual Indiana income tax return by reporting untaxed out-of-state purchases.

In practice, the individual use tax burden has shrunk since the Supreme Court’s 2018 decision in South Dakota v. Wayfair, which let states require remote sellers to collect. Most major online retailers now collect Indiana’s 7% automatically.

Remote Sellers and Marketplace Facilitators

A business with no physical presence in Indiana must register and collect once its gross revenue from sales into Indiana exceeds $100,000 in either the current or previous calendar year. All sales count toward that threshold, including exempt and nontaxable ones.⁹

Marketplace facilitators like Amazon or Etsy collect and remit for sales made through their platforms. The facilitator is treated as the retail merchant for each transaction, even if the underlying seller has no merchant certificate.¹⁰ If you sell only through a marketplace that’s already collecting, you generally don’t collect again. If you also sell through your own website, you’re responsible for collecting on those direct sales once you hit the threshold.

Facilitators file monthly through INTIME, including a $0 return for any month with no sales activity.⁹

Registering as a Retail Merchant

Any business making retail sales in Indiana needs a Registered Retail Merchant Certificate before its first taxable transaction. Registration costs $25 per business location, and you can apply online through INBiz or on paper using Form BT-1.¹¹ You’ll need a Federal Employer Identification Number and details on each location, including the township.

The Department issues a separate certificate for each location, and each must be displayed where customers can see it.¹² A new location during the year requires a supplemental application and another $25.

Certificates are valid for two years. If you’ve filed all required returns and paid what you owe, the Department renews automatically at no cost within 30 days of expiration. If you’re behind, the Department sends notice at least 60 days before expiration that renewal will be denied. Clearing the balance before the expiration date restores automatic renewal, though paying late means the renewed certificate is valid for one year instead of two.¹¹

Filing and Paying

Returns and payments go through INTIME, the state’s online tax portal. The Department assigns filing frequency based on average monthly tax liability:

Annual filers, for very low monthly averages.
Monthly filers, with returns due 30 days after month-end.
Accelerated filers, averaging over $1,000 in sales tax per month, with returns due 20 days after month-end.

Businesses with average monthly tax over $5,000 must pay by electronic funds transfer. The largest sellers — annual liability above roughly $120,000 — make three prepayments each month, due on the 7th, 15th, and 23rd.

Even with no sales in a period, file a $0 return. Skipping returns because you owe nothing is one of the most common compliance mistakes and can lead to penalties and problems at renewal time.

Penalties and Interest

Late filing or late payment carries a penalty of 10% of the tax due, whether you missed the return entirely, filed short, or failed to timely remit the trust taxes.¹³ Filing on paper when electronic filing is mandatory can also trigger the 10%. A late zero-liability return is penalized at $10 per day overdue, capped at $250.

Interest runs on unpaid balances on top of penalties. For calendar year 2026, the rate on delinquent tax is 7%.¹⁴ Indiana recalculates the rate every year based on the state’s investment yield, so it moves.

Protesting an Assessment

You have 60 days from the date of an assessment to file a written protest. The deadline is set by statute and cannot be extended, so missing it makes the assessment final.¹⁵ A protest needs a written explanation of the disagreement, the Department’s Protest Submission Form, and any supporting documentation. The appeals process is informal, and you can request a hearing before the Department issues a final determination.

If the determination goes against you, you can request a rehearing within 30 days, or appeal to the Indiana Tax Court within 90 days. If a rehearing is denied, the 90-day clock for Tax Court restarts from the denial date. The Department will grant a 90-day extension to file a Tax Court appeal if you ask for one.¹⁵

Local Add-On Taxes

Indiana has no general local sales tax, but two supplemental local taxes apply to specific transactions on top of the 7%. The county innkeeper’s tax applies to short-term room rentals (under 30 days) in participating counties, with rates set by each county.¹⁶ Many municipalities also impose a food and beverage tax on restaurant meals and prepared food.

Businesses registered for these local taxes file separate returns for each adopting jurisdiction, including zero returns for inactive months. Late local returns carry a penalty of up to 20%, with a $5 minimum.¹⁶

Buying a Business: Successor Liability

If you’re buying more than 50% of a business’s physical assets, you can inherit the seller’s unpaid sales and use tax obligations up to the purchase price of the assets transferred. File a Notice of Transfer in Bulk with the Department at least 45 days before closing. The Department reviews the seller’s account, and if everything is current, issues a tax clearance letter to both parties within 20 days. The clearance is valid for 60 days. The seller has to consent to the release of tax information, so build that consent into the purchase agreement early.¹⁷

1
Indiana General Assembly. Indiana Code Title 6 Taxation 6-2.5-2-2
2
Indiana General Assembly. Indiana Code 6-2.5-9-3 – Personal Liability of Holder of Taxes in Trust
3
Indiana Department of Revenue. Sales Tax Information Bulletin 93 – Specified Digital Products
4
Indiana General Assembly. Indiana Code Title 6 Taxation 6-2.5-5-8 – Tangible Personal Property Resale Exemption
5
Indiana Department of Revenue. General Sales Tax Exemption Certificate ST-105
6
Indiana General Assembly. Indiana Code Title 6 Taxation 6-2.5-5-3 – Exemption for Direct Use in Direct Production
7
Indiana General Assembly. Indiana Code Title 6 Taxation 6-2.5-5-1 – Exemption for Agricultural Production
8
Indiana General Assembly. Indiana Code 6-2.5-5-25 – Exemption for Nonprofit Organizations
9
Indiana Department of Revenue. Marketplace Facilitators
10
Indiana General Assembly. Indiana Code 6-2.5-4-18 – Marketplace Facilitator Considered the Retail Merchant
11
Indiana General Assembly. Indiana Code 6-2.5-8-1 – Registered Retail Merchants Certificate
12
Indiana Department of Revenue. Sales Tax
13
Indiana General Assembly. Indiana Code Title 6 Taxation 6-8.1-10-2.1 – Penalty for Failure to File or Pay
14
Indiana Department of Revenue. Departmental Notice 3 – Interest Rates for Calendar Year 2026
15
Indiana Department of Revenue. Appeals
16
Indiana Department of Revenue. County Innkeepers Tax
17
Indiana Department of Revenue. Successor Liability