Do you need to collect and remit sales tax in Indiana?
Businesses operating in Indiana or exceeding an amount of gross revenue into the state are subject to Indiana’s tax laws. These requirements apply to tangible personal property, which includes any physical item that can be seen, touched, or felt. Most services are exempt from sales tax in Indiana, as well as unprepared food items such as groceries.
Do you have sales tax nexus in Indiana?
In Indiana, physical and economic nexus are two distinct concepts that determine a business’s sales tax liability. Physical nexus refers to a business’s physical presence in the state, such as having an office or inventory in Indiana, which triggers sales tax liability. Economic nexus, on the other hand, refers to a business’s economic activity in the state, such as making sales over a certain dollar amount or number of transactions, which also triggers sales tax liability.
The key difference between physical and economic nexus is the trigger that creates tax liability. Physical nexus requires a business to have a physical presence in Indiana, while economic nexus does not require a physical presence but a certain level of economic activity. We will give more examples on which businesses might have physical or economic nexus below.
Physical sales tax nexus in Indiana
A business may have physical nexus in Indiana if they:
- Make sales of goods or services from a storefront or physical Indiana location
- Provide some servicess or labor in Indiana
- Perform construction work in Indiana
- Have employees working in the state
- Own or rent real property
- Own warehouses in Indiana
Economic sales tax nexus in Indiana
Either of these activities made by businesses that are located outside of Indiana, (and have no physical presence there), will trigger economic nexus:
- Gross revenue of over $100,000 in the current or previous calendar year
- 200 or more separate transactions in the current or previous calendar year
Note that the gross revenue includes any sales that may also be non-taxable.
Determining nexus for your business can be a complex and daunting task. With many factors to consider, many businesses struggle to navigate the intricacies of nexus determination, and even end up paying thousands of dollars to accounting firms to get answers. That’s why we offer nexus determination as an a-la-carte or package deal for businesses at affordable prices. With over 20 years of experience in federal and state tax and accounting laws, we’re a trusted partner for many businesses in need of nexus review services. Contact us now for a consultation!
Are marketplace facilitators required to collect and remit sales tax in Indiana?
Yes. As of July 1, 2019, marketplace facilitators must register and collect Indiana sales tax on behalf of their sellers for transactions into Indiana. Marketplace facilitators may also need to collect County Innkeepers Tax (CIT) and Food and Beverage (FAB) taxes in some cases. The nexus requirements for registration by a marketplace facilitator are the same as for remote sellers, i.e., over $100,000 in gross Indiana sales and over 200 transactions. Since marketplace facilitators are responsible for the Indiana sales made on their platform, third-party sellers should not use those sales when determining their economic responsibility or when reporting gross profit.
What platforms are marketplace facilitators?
Not sure what defines a marketplace facilitator? In short, marketplace facilitators are companies that provide a platform or service for third-party sellers (you) to sell their products or services to customers. The facilitator collects payment from the customer, processes the transaction, and may also manage shipping and returns.
Filing Indiana Sales Tax
Before you can file Indiana sales tax returns, you will need to register your business with the Indiana Department of Revenue. There are a few ways of doing this that we list in the table below.
|Online Registration||Businesses can register for Indiana sales tax through the INBiz portal. To use INBiz, businesses must also have an Access Indiana Account. This is the state’s one-stop shop for online business registration and management. The registration process requires basic information about a business, including business name, address, and federal tax ID number.|
|Mail-In Registration||Businesses can also register by completing and submitting Form BT-1, which is Indiana’s Business Tax registration form. Once completed, the form can be mailed to the Indiana Department of Revenue at the address listed on the form.|
|Streamlined Sales Tax||Indiana is one of many states that are members of Streamlined Sales Tax, which is an online resource for businesses that need to register for sales tax in multiple states. Using one application, businesses can register for any or all the member states to streamline their registration process.|
|Third-Party Registration||The fourth option is to hire a third-party service, (like us!), to handle the Indiana sales tax registration process. Services typically charge a fee but can make the process easier for businesses that are unfamiliar with sales tax registrations or have the budget to outsource.|
Once your registration has been processed, you will be issued a Registered Retail Merchant Certificate (RRMC). This certificate updates automatically with no renewal fee. However, if you do not pay your tax liabilities, the certificate will expire.
Once you have your RRMC, you can begin to collect and remit sales tax to Indiana according to your filing frequency and due date. Note that Indiana is one of a few states that has switched entirely to online filing via the Indiana taxpayer Information Management Engine.
When are sales tax returns due in Indiana?
Indiana has three filing frequencies for sales taxpayers: Annual, Monthly and Early Monthly Filer. These frequencies are assigned upon registration and based on monthly tax liability. See the graphic below for a breakdown of these frequencies, their liabilities, and deadlines.
Note: Even if you have no tax revenue or activity for your filing period, you must file a $0 return. Late filed returns, regardless of there being any tax liability, are subject to penalties.