What is Nexus?You'll need to collect sales tax in Indiana if you have nexus there. There are two main ways that sellers can be tied to a state when it comes to nexus: physical, or economic.
Physical nexus means having enough tangible presence, or activity in a state to merit paying sales tax in that state.
Economic nexus means passing a states' economic threshold, for total revenue, or the number of transactions in that state.
Calculating Nexus in Indiana
This is the most straightforward way to establish nexus. If your business has a physical presence in Indiana, like an office, store, or warehouse, you’ve got a physical nexus. It also includes having employees or sales reps in the state, or even temporarily having someone there for business activities like installations or training.
This concept gained traction following the South Dakota v. Wayfair, Inc. decision in 2018. In Indiana, economic nexus is established if your business hits more than $100,000 in sales or conducts 200 separate transactions in Indiana within a year. This applies even if you don’t have a physical presence in the state.
This type of nexus occurs when you have a close relationship with another business or affiliate in Indiana. It could be a subsidiary, a company with shared branding, or one that contributes to your sales process.
Although not explicitly recognized in Indiana, click-through nexus generally happens when you have an affiliate in Indiana who refers customers to your business through a digital platform, like a website.
If you're selling through online marketplaces like Amazon or Etsy, marketplace nexus rules apply. These platforms may take on the responsibility for collecting and remitting sales tax on your behalf.
Rent a campsite in Indiana, and it’s taxable. It’s like paying a little extra to enjoy nature.
Sales Tax Registration in Indiana
How to Get Your Indiana Sales Tax Permit
Getting your Indiana sales tax registration sorted is like prepping for a big fishing trip. It's a crucial step, but with the right guidance, it's a breeze. Let's get into what you need to do.
- Visit INTIME: Start your journey at Indiana’s INTIME site (intime.dor.in.gov).
- Gather Your Info: Before you start, make sure you have your Federal Employer Identification Number (EIN), business entity details, personal info, NAICS code, and bank details ready.
- Begin the Registration: On INTIME, click on “Register New Business” to start.
- Fill Out the Application: The site will guide you through entering all the necessary details about your business.
- Specify Sales Tax Collection: Make sure to indicate that you’ll be collecting sales tax and provide your estimated start date for making sales in Indiana.
- Review and Submit: Double-check your application and submit it.
- Await Your Sales Tax License: Once approved, the Indiana Department of Revenue will send you a Registered Retail Merchant's Certificate. This is your ticket to legally collect sales tax in Indiana.
Cost of Registering for a Indiana Sales Tax License
There’s a $25 registration fee for a sales tax permit in Indiana. If you’re applying online, there’s an additional $1 charge for credit card processing.
You can register online at the Indiana Department of Revenue’s website or by mail. If you choose to mail your application, download and complete the Sales Tax Registration Application form from the Department’s website and mail it with your fee.
Your Registered Retail Merchant Certificate (RRMC) is valid for one year and needs annual renewal.
Federal Tax ID for Indiana Sales Tax License
Absolutely, an EIN is a must for registering for sales tax in Indiana. It’s your business’s unique identifier for the IRS. If you don’t have one, you can easily get it from the IRS website for free.
Other Indiana Registrations to Consider
Beyond sales tax, you might need to register with other Indiana agencies:
- Indiana Secretary of State: For new business entities like LLCs or Corporations.
- Indiana Department of Workforce Development: If you're hiring employees, for unemployment insurance tax.
- Indiana Professional Licensing Agency: For specific professional or occupational licenses.
- Indiana Alcoholic Beverage Commission: If you’re in the business of selling or manufacturing alcohol.
Guide to collecting sales tax in Indiana
Is Indiana an Origin or Destination Sales Tax State?
Indiana operates on a destination-based sales tax system. This means you collect sales tax based on the buyer's location, not where your business is. If you sell to a customer in Indiana, apply the sales tax rate that applies to the customer's address.
What Sales are Subject to Sales Tax in Indiana?
Indiana's sales tax rate is 7% statewide, so you'll collect the same rate regardless of your location within the state. Always good to double-check the current rate with the Indiana Department of Revenue or use a reliable sales tax tool to stay updated. In Indiana, you'll generally collect sales tax on:
- Tangible Personal Property: Items like furniture, appliances, or clothing.
- Certain Services: Such as utility services, hotel accommodations, and some professional services.
- Prepared Food and Beverages: Mostly taxable in Indiana.
- Rentals and Leases: Of tangible personal property.
Is Software as a Service (SaaS) Taxed in Indiana?
Nope, Software as a Service (SaaS) is not taxed in Indiana. Thanks to a law change in 2018, SaaS transactions are exempt from Indiana's 7% sales tax. This applies to all SaaS transactions, whether for business or personal use. However, SaaS used for gaming or gambling, or in the sale of tangible personal property, might still be taxable.
What is Exempt from Indianane Sales Tax?
Indiana offers exemptions for:
- Prescription Drugs and Insulin
- Certain Foods and Food Ingredients
- Specific Medical Equipment
- Manufacturing Equipment
- Certain Agricultural Items
- Newspapers and Magazines
It's a good idea to stay current with these exemptions, as they can change over time.
Who is Eligible for Indiana Sales Tax Exemptions?
Certain groups in Indiana may not have to pay sales tax:
- Nonprofit Organizations
- Government Agencies
- Resale Businesses
- Farmers and Agricultural Producers
What To Do If Your Customer is Exempt from Sales Tax in Indiana?
If a customer is exempt from sales tax (like a nonprofit), they should provide you with a valid exemption certificate. Keep these certificates on file; they're your proof if the state comes calling.
What if You Lose a Indiana Sales Tax Exemption Certificate?
If you lose a certificate, try to get a new one from the customer. If you're audited and don't have the certificate, you might be liable for the uncollected sales tax, so it's crucial to keep these records straight.
Marshmallows are taxable unless they’re bought for baking. Indiana takes its s’mores seriously.
Steps for Filing a Indiana Sales Tax Return
In Indiana, when you file and pay your sales taxes depends on your business activity. It’s like checking the weather before you plan a hike - you've got to know what's ahead.
- Monthly Filing: If your average monthly sales tax liability is $1,000 or more, you're on the monthly filing schedule.
- Quarterly Filing: If it's less than $1,000, you might be filing quarterly.
- Annual Filing: If you’ve got a really low sales tax liability and a good track record with the state, you might even qualify for annual filing.
Remember, the Indiana Department of Revenue assigns your filing frequency, so keep an eye on their notifications. They might change your schedule based on your sales tax liability.
What If a Filing Date Falls on a Weekend or Holiday?
No problem! If a sales tax filing deadline lands on a weekend or state holiday, Indiana kindly extends it to the next business day. It’s like getting an extra day to enjoy your hike.
How to File a Indiana Sales Tax Return
Filing your Indiana sales tax return is straightforward:
- Collect Your Data: Before you start, gather all your sales and tax info for the period.
- Access INTIME: Go to Indiana’s online portal, INTIME (intime.dor.in.gov).
- Login or Register: If you’re new, create an account. If not, just log in.
- File Your Return: Follow the prompts to file your sales tax return, entering your sales and tax info.
- Submit and Pay: After checking your data, submit your return. If you owe tax, pay it through INTIME using their available options.
Penalties for Late Filing in Indiana
If you file or pay late, you might face some penalties:
- Late Filing Penalty: If you miss the filing deadline, there’s a 5% penalty of the unpaid tax, maxing out at $250.
- Failure to Pay Penalty: Miss the payment deadline and it’s a 10% penalty of the unpaid tax, up to $500.
Interest on Unpaid Taxes
If you’re late paying your sales tax, there’s also interest charged on the unpaid amount. The rate is currently 5%.
Sales Tax Incentives in Indiana
Indiana does have a few incentives to keep you on track:
- Late Payment Penalty Waiver: File within 60 days of the due date and pay in full, and you might get the late payment penalty waived.
- Early Payment Discount: Pay in full by the due date for a potential 2% discount.
- Payment Plan: Can’t pay in full? You might be able to arrange a payment plan with the Department of Revenue.
Sales Tax Holidays in Neighboring States
While Indiana doesn’t have a sales tax holiday, some nearby states do. Ohio, Kentucky, and Illinois have tax-free weekends for certain items at specific times of the year. It’s like a mini financial vacation for shoppers.
The Kintsugi White-Glove Promise
Companies love Kintsugi for its fast responses and quick resolution of your most time-sensitive sales tax issues.
EFFICIENCY & TIME SAVINGS
Kintsugi’s in-house sales tax experts use over 300,000 business rules to stay up-to-date on regulatory changes.
Kintsugi has your back in case of audits and will fully cover all penalties due to filing inaccuracies.