The 2016 Indiana State Sales Tax
What is the 2016 Indiana Sales Tax Rate?
The Indiana state sales tax rate is 7%, and the average IN sales tax after local surtaxes is 7%.
- Groceries and prescription drugs are exempt from the Indiana sales tax
- Counties and cities are not allowed to collect local sales taxes
- Indiana has no special sales tax jurisdictions with local sales taxes in addition to the state sales tax
- Indiana has a lower state sales tax than 59.6% of states
Indiana's sales tax was recently raised to 7% from 6% in 2008 to make up for lower property taxes. There are several specific exemptions to the sales tax in Indiana, including medication, water and ice, and all raw foods and juices (groceries).
Counties and cities are allowed to add local sales taxes, and many also collect surtaxes on the sale of prepared food and beverages. Most localities use this sales tax revenue to fund tourism and economic development projects.
If you have questions about the Indiana sales tax, contact the Indiana Department of Revenue's Sales Tax Hotline at (317) 233-4015.
If you are a Indiana business owner, you can learn more about how to collect and file your Indiana sales tax return at the 2016 Indiana Sales Tax Handbook .
Indiana Sales Tax Exemptions
Indiana doesn't collect sales tax on purchases of most prescription drugs and groceries. Prepared Food is subject to special sales tax rates under Indiana law. In most states, necessities such as groceries, clothes, and drugs are exempted from the sales tax or charged at a lower sales tax rate.
Some items may not be eligible for these reduced sales tax rates, such as expensive clothing, unhealthy food or drinks like soda, and certain non-essential pharmaceuticals. Indiana does not treat candy or soda as groceries, which means they are not subject to reduced grocery sales tax rates. Other items including gasoline, alcohol, and cigarettes are subject to various Indiana excise taxes in addition to the sales tax.
In some states, items like alcohol and prepared food (including restaurant meals and some premade supermarket items) are charged at a higher sales tax rate. Prepared Food is subject to a higher state sales tax then other items. The IN sales tax applicable to the sale of cars, boats, and real estate sales may also vary by jurisdiction. Indiana's sales tax rates for commonly exempted items are as follows:
$100 Restaurant Dinner
$100 of groceries
$100 in clothes
$100 of consumer products
$9.00 sales tax
$0.00 sales tax
$7.00 sales tax
$7.00 sales tax
Indiana Sales Tax Exemption Certificate
Unlike a Value Added Tax (VAT), the Indiana sales tax only applies to end consumers of the product. Individuals and companies who are purchasing goods for resale, improvement, or as raw materials can use a Indiana Sales Tax Exemption Form to buy these goods tax-free.
Companies or individuals who wish to make a qualifying purchase tax-free must have a Indiana state sales tax exemption certificate, which can be obtained from the Indiana Department of Revenue . On making an exempt purchase, Exemption Certificate holders may submit a completed Indiana Sales Tax Exemption Form to the vendor instead of paying sales tax.
Sales tax exemption forms (as well as business sales tax id applications, sales tax returns, and the full Indiana sales tax code) can be downloaded from the Indiana Department of Revenue here .
Indiana Sales Tax Calculator
Whenever you make a purchase at a licensed Indiana retailer, your sales tax will be automatically calculated and added to your bill. To lookup the sales tax due on any purchase, use our Indiana sales tax calculator.
Indiana Use Tax
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If you buy goods and are not charged the Indiana Sales Tax by the retailer, such as with online and out-of-state purchases, you are supposed to pay the 7% sales tax (less any foreign sales tax paid) for these items yourself as the Indiana Use Tax.
Your are expected to voluntarily list your liable purchases on a Indiana Use Tax Return, which should be attached with payment to your Indiana Income Tax Return. Historically, compliance rates with with the Indiana Use Tax have been low.
Indiana Local Sales Taxes
Indiana does not allow local jurisdictions like cities or counties to collect a local sales tax. The Indiana state sales tax of 7% is applicable statewide. You can view the sales tax rates for various cities in Indiana here.
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