Indiana sales tax is a flat 7% charged statewide, with no additional city or county sales tax layered on top. The rate applies to most tangible goods, certain digital products, and a short list of services, while groceries, prescription drugs, and several other categories are fully exempt. Whether you shop in Indianapolis or a small town on the state line, the rate is the same.
The 7% Rate and the Matching Use Tax
The statewide sales tax rate is 7%, imposed on the gross retail income a merchant receives from a retail transaction.1Indiana General Assembly. Indiana Code 6-2.5-2-2 – Tax Rate; Rounding Rules Indiana does not allow cities or counties to add a general sales tax on top of the state rate, which puts it among the more straightforward states for calculating what you owe at the register.
Indiana also imposes a use tax at the same 7% rate. Use tax applies when you buy something in a retail transaction and store, use, or consume it in Indiana without having paid sales tax on it.2Indiana General Assembly. Indiana Code 6-2.5-3-2 – Use Tax The most common trigger is an online purchase from a seller that doesn’t collect Indiana tax. You owe the 7% and are supposed to report it on your state return.
What Gets Taxed
The tax covers tangible personal property: anything physical you can see, touch, or weigh. Clothing, furniture, electronics, building materials, and vehicles all fall in. A few categories beyond physical goods also get pulled in.
Delivery and Installation Charges
Shipping, handling, crating, and delivery charges are part of the taxable price, even when listed as a separate line item on the invoice. The Department of Revenue treats delivery charges incurred on behalf of the seller as part of gross retail income, so the 7% applies to the full amount.3Indiana Department of Revenue. Sales Tax Information Bulletin 92 – Delivery Charges, Installation Charges, and Other Elements of Gross Retail Income Installation fees follow the same logic when they’re part of the total transaction.
Digital Products
Indiana taxes “specified digital products” transferred electronically to an end user who receives permanent use rights, including digital audio, digital video, and e-books.4Indiana General Assembly. Indiana Code 6-2.5-4-16.4 – Specified Digital Products Digital codes redeemable for those products are taxed the same way as the underlying product.
Services
Most professional services are not subject to Indiana sales tax. Legal fees, accounting, and consulting fall outside the tax base. Only specifically listed services, such as telecommunications, are taxable.
Groceries Versus Prepared Food
Unprepared food and food ingredients for home consumption are exempt.5Indiana Department of Revenue. Sales Tax Information Bulletin 29 A bag of rice, a carton of eggs, or a package of chicken from the grocery store won’t be taxed. The line between grocery food and prepared food is where most consumer confusion lives.
Food becomes taxable if it meets any of these criteria:
- It is sold in a heated state or heated by the seller.
- Two or more ingredients are mixed or combined by the seller for sale as a single item, with exceptions for items only cut, repackaged, or pasteurized.
- The seller provides eating utensils, including plates, forks, cups, napkins, or straws.
That last one catches people off guard. A bakery item that would normally be exempt becomes taxable the moment the seller provides a plate or fork with it.
Several other food-related items are always taxable, no matter how they’re sold:
- Candy, meaning sugar-based confections combined with chocolate, fruit, or nuts. Items containing flour or requiring refrigeration escape the “candy” label and stay exempt.
- Soft drinks, meaning non-alcoholic beverages with natural or artificial sweeteners. Beverages with more than 50% fruit or vegetable juice, or those containing milk, are exempt.
- Dietary supplements, meaning anything with a “Supplement Facts” label.
- Alcoholic beverages and tobacco.
One boundary worth flagging: while Indiana has no local general sales tax, dozens of counties and municipalities impose a separate food and beverage tax on prepared food and drinks. The rate is typically 1%, and a few jurisdictions charge 2%.6Indiana Department of Revenue. Food and Beverage Tax Over 40 jurisdictions collect it. It only applies to prepared food and beverages, not to exempt grocery items.
Common Exemptions
Prescription Drugs and Medical Equipment
Legend drugs and nonlegend drugs dispensed by a registered pharmacist upon a prescription are exempt. So are prosthetic devices, durable medical equipment, mobility-enhancing equipment, and supplies used exclusively for medical treatment of a diagnosed condition.7Indiana General Assembly. Indiana Code 6-2.5-5-18 – Drugs, Medical Equipment, Supplies Some items, including prosthetic devices and colostomy supplies, qualify even without a prescription, as long as they’re fitted or dispensed by a licensed professional.
Manufacturing and Agriculture
Tangible personal property consumed as a material in the direct production of other tangible personal property is exempt when purchased by a business engaged in manufacturing, mining, processing, or similar activities.8Indiana General Assembly. Indiana Code 6-2.5-5-5.1 – Exemption; Acquisition for Direct Consumption in Direct Production The property must be directly used in direct production, meaning it has an immediate effect on the product being manufactured. Equipment that only supports the production environment typically doesn’t qualify.
Farmers can purchase feed, seed, fertilizer, pesticides, and production equipment exempt from sales tax if the items are used directly in producing food or commodities for commercial sale.9Indiana Department of Revenue. Sales Tax Information Bulletin 9 – Agricultural Production Exemptions Hobby farming doesn’t qualify. The Department of Revenue generally looks for a federal Schedule F filed with the purchaser’s 1040 as evidence of occupational farming.
Nonprofits
A qualifying 501(c)(3) organization must hold a federal determination letter and file a Nonprofit Application for Sales Tax Exemption (Form NP-20A) through INTIME. Once approved, the organization receives Form NP-1 and must file a renewal report (Form NP-20R) by May 15 every five years to stay registered.10Indiana Department of Revenue. Nonprofit Tax Forms Nonprofits cannot use the standard ST-105 certificate.
Claiming a Business Exemption With Form ST-105
For business-related exemptions such as resale, manufacturing, agriculture, and government purchases, the buyer gives the seller a completed Indiana General Sales Tax Exemption Certificate (Form ST-105).11Indiana Department of Revenue. General Sales Tax Exemption Certificate – Form ST-105 The form requires the purchaser’s name, business address, state registration number, and a specific explanation of the exemption. Every section must be complete; if any required information is missing, the seller must charge tax, and the buyer’s recourse is to file a refund claim (Form GA-110L) directly with the Department of Revenue.
The ST-105 cannot be used for utilities, vehicles, watercraft, aircraft, or gasoline. Those have separate exemption processes.
If You Sell Into Indiana From Out of State
Out-of-state sellers must register for an Indiana Retail Merchant Certificate and collect the 7% tax once their gross revenue from sales into Indiana exceeds $100,000 in the current or prior calendar year.12Indiana Department of Revenue. Remote Seller The threshold applies to tangible personal property, digital products, and services delivered into the state. Indiana eliminated a separate 200-transaction threshold effective January 1, 2024, so the sole trigger is the $100,000 revenue number.
Marketplace facilitators such as Amazon or Etsy that meet the threshold collect and remit tax for their third-party sellers. If you sell through a marketplace that already handles Indiana tax, you generally don’t need to collect it a second time on those transactions, though you may still need to register.
Registering as a Retail Merchant
Any business making taxable retail sales in Indiana must hold a Registered Retail Merchant Certificate before making those sales.13Indiana General Assembly. Indiana Code 6-2.5-8-1 – Registered Retail Merchant’s Certificate; Application; Filing Fee Registration runs through the INBiz portal.14Indiana Department of Revenue. Sales Tax The application lists the location, including the township, of each place of business. Merchants without a fixed location list their residence.
The fee is $25 per business location and is non-refundable. The certificate is valid for two years, and renewal is automatic if the business has no outstanding tax liabilities or missing returns. If balances are unresolved, the merchant must pay in full or set up a payment plan before renewal. A separate certificate must be displayed at each retail location.
Filing Frequency and the Collection Allowance
Merchants file returns and remit collected tax through INTIME, the Indiana Taxpayer Information Management Engine.15Indiana Department of Revenue. INTIME The Department of Revenue assigns filing frequency based on average monthly tax liability:
- Annual filing for average monthly liability of $83.33 or less, due 30 days after the end of the tax period.
- Monthly filing for average monthly liability of $1,000 or less, due by the 30th of the following month.
- Early monthly filing for average monthly liability over $1,000, due by the 20th of the following month.
Businesses whose average monthly tax liability exceeds $5,000 must remit payments by electronic funds transfer.16Indiana Department of Revenue. Business FAQ
Indiana gives merchants a small discount for collecting and remitting on time. The allowance scales down as total tax collected increases: 0.73% for businesses collecting less than $60,000 in total sales tax, 0.53% for those collecting between $60,000 and $600,000, and 0.26% for those collecting more than $600,000.17Indiana General Assembly. Indiana Code 6-2.5-6-10 – Tax Liability; Merchant’s Collection Allowance It’s factored into the return automatically.
Penalties and Personal Liability
A merchant who fails to file a return, files it in the wrong format, or doesn’t pay the full amount shown on the return faces a penalty of 10% of the unpaid or unreported amount.18Indiana General Assembly. Indiana Code 6-8.1-10-2.1 Interest accrues on top. For calendar year 2026, the underpayment interest rate is 7%.19Indiana Department of Revenue. Departmental Notice 3 – Interest Rates for Calendar Year 2026
Collected sales tax is treated as funds held in trust for the state, and the Department of Revenue can pursue the individuals responsible for remitting it, not just the business entity. A “responsible officer” is anyone who has a duty to remit the tax, whether they’re a sole proprietor, corporate officer, partner, or employee with that authority.20Legal Information Institute (Cornell Law School). 45 IAC 2.2-9-4 – Responsible Officer Liability Knowingly failing to remit collected sales tax is a Level 6 felony carrying six months to two and a half years of imprisonment and a fine of up to $10,000.21Indiana General Assembly. Indiana Code 35-50-2-7 – Level 6 Felony The court has discretion to enter a conviction as a Class A misdemeanor instead, but that still leaves a criminal record. Small-business owners get blindsided here most often by using collected tax to cover payroll or other expenses and planning to catch up later. The state does not treat that as a bookkeeping oversight.