If you sell taxable goods or services in Indiana, understanding sales tax isn’t optional. It’s a core part of staying compliant. Indiana is actually one of the more straightforward states when it comes to sales tax, but that simplicity doesn’t mean businesses can afford to overlook the rules.
Whether you’re a brick-and-mortar retailer, restaurant, or an out-of-state seller with economic nexus, collecting and remitting Indiana sales tax correctly is essential. Below, we’ll break down the state sales tax rate and what it means for your business.
What is the Indiana sales tax rate?
Indiana has a statewide sales tax rate of 7%. While Indiana has a flat statewide sales tax, certain transactions may also be subject to separate excise taxes or fees, depending on the type of product or service you offer.
For example, Indiana imposes additional, industry-specific taxes and fees such as the Food and Beverage Tax, County Innkeeper’s Tax, Vehicle Rental Tax, Tire Fee, and the Fireworks Public Safety Fee. These charges are assessed independently of the state sales tax and, in a few cases, vary by municipality.
For additional information on industry-specific tax, visit the Sales Tax page on the Indiana Department of Revenue’s website.
How to calculate Indiana sales tax?
Calculating sales tax in Indiana is relatively straightforward thanks to the state’s flat 7% sales tax rate and the absence of local sales tax add-ons. This means the calculation is generally the same regardless of where your customer is located within the state. However, keep in mind industry-specific taxes or fees that need to be included as well.
To determine the amount of sales tax due, multiply the total taxable sales price by 7%. Here’s the basic formula:
Sales Price × 0.07 = Sales Tax Due
The sales tax is calculated before any after-the-sale discounts and generally applies to the full selling price of taxable goods or services. For example, a taxable sale of $10 results in $0.70 in sales tax, bringing the total charged to the customer to $10.70.
Calculating the pretax amount
In some situations, businesses already know the total price charged to the customer and need to determine the pre-tax sales amount. This is where a reverse sales tax calculator becomes especially useful.
Because Indiana has a flat 7% sales tax rate, backing into the pre-tax amount is straightforward. Simply enter your desired total amount, apply the 7% Indiana sales tax, and include any additional applicable taxes or fees tied to the product or service. The calculator will then generate the correct pre-tax sales amount and clearly separate the sales tax portion.
This method is particularly useful for retailers such as restaurants that prefer to display clean, whole-number prices on menus rather than prices with cents. By working backward from a target total price, businesses can maintain consistent pricing while still accurately collecting and reporting sales tax.
What is subject to Indiana sales tax?
In Indiana, sales tax generally applies to the retail sale of tangible personal property and certain services, unless a specific exemption applies. If a business is selling taxable goods or services to an end consumer, sales tax is typically required to be collected at the time of sale.
Most physical goods sold at retail are subject to Indiana sales tax. This includes items such as clothing, electronics, furniture, appliances, and prepared food. For restaurants and food service businesses, sales tax usually applies to prepared meals, beverages, and catering sales, regardless of whether the food is consumed on-site or taken to go.
In addition to physical goods, Indiana also taxes certain services and transactions. This commonly includes charges tied to taxable sales, such as delivery, shipping, or handling fees when they are part of a taxable transaction. Rentals of tangible personal property, including equipment or vehicles, are also generally subject to sales tax.
Indiana sales tax on services
Unlike some states, most services in Indiana are not subject to sales tax unless the law specifically lists them as taxable. That’s because Indiana’s sales tax statute focuses primarily on tangible goods. Most pure services, such as consulting, professional services, software as a service, and maintenance not tied to taxable goods, are not taxed.
However, some services are explicitly taxable when they fall under enumerated categories, such as:
- Telecommunications and certain communication services
- Rental of tangible personal property
- Some delivery or installation charges when inseparable from the sale of tangible goods
- Lodging or short-term accommodations (e.g., hotels/inns)
Indiana sales tax on food
In Indiana, how food is taxed depends largely on how it’s sold and consumed. Most grocery items are exempt from sales tax in Indiana, as long as they are unprepared foods intended for home consumption. However, this exemption does not apply to prepared foods, candy, soft drinks, or dietary supplements, which remain taxable.
For food retailers and restaurants, understanding these distinctions is essential to ensure sales tax is applied correctly at the point of sale. Food is typically taxable when it is:
- Prepared for immediate consumption
- Sold heated or intended to be eaten right away
- Sold with eating utensils provided by the seller
- Sold by restaurants, cafés, food trucks, bars, or catering businesses
This means most restaurant meals, alcoholic beverages, fountain drinks, and ready-to-eat foods are subject to Indiana’s 7% sales tax. In addition to state sales tax, many local counties also impose a Food and Beverage (F&B) tax on prepared food transactions.
The Food and Beverage tax is a local-level tax that applies specifically to prepared food and beverages sold for immediate consumption. Rates typically range from 1% to 2%, depending on the county. The majority of counties or municipalities impose a 1% Food and Beverage tax, while only a limited number apply the higher 2% rate, including Marion County and Orange County (Historic Hotel district).
For food retailers, this means prepared food sales may be subject to both the 7% state sales tax and the applicable county Food and Beverage tax, which must be calculated, collected, and reported separately. Because these local taxes vary by location, it’s critical for restaurants to confirm which Food and Beverage tax rate applies to their business.
For a full list of counties imposing the Food and Beverage tax, businesses should reference the Food and Beverage tax page on the Indiana Department of Revenue website.
Keeping up with state sales tax and local Food and Beverage taxes can quickly add complexity for restaurant owners, especially when transaction volume is high and margins are tight. DAVO integrates with your POS system to track the sales tax you collect, including applicable food and beverage taxes, sets those funds aside daily, and then files and pays your Indiana taxes on time. Instead of juggling multiple tax rates and deadlines, restaurant owners get peace of mind knowing their tax obligations are handled accurately and consistently.
How to manage tax-exempt sales in Indiana?
In Indiana, certain transactions may qualify as sales tax-exempt, but businesses cannot simply choose not to collect tax. To treat a sale as exempt, the seller must have proper documentation on file at the time of the transaction.
The most common tax-exempt sales in Indiana include:
- Sales for resale (such as wholesalers selling to retailers)
- Sales to exempt organizations, like qualifying nonprofits or government entities
- Certain statutorily exempt items, such as prescription drugs or exempt groceries
For most exempt transactions, the buyer must provide a valid Indiana exemption certificate (Form ST-105) or an approved multistate exemption certificate. This certificate confirms the buyer’s eligibility for exemption and explains why sales tax should not be charged.
As the seller, you are responsible for:
- Collecting the exemption certificate from the buyer
- Ensuring the certificate is properly completed
- Retaining the certificate in your records
If an exemption certificate is missing, incomplete, or invalid, the Indiana Department of Revenue may hold the seller responsible for the uncollected sales tax, even if the buyer was technically exempt.
How to register for an Indiana retail merchant certificate
Before you can collect sales tax in Indiana, your business must register with the state and obtain a Registered Retail Merchant Certificate (RRMC), commonly known as an Indiana sales tax license. Keep in mind that an RRMC is not the same as a vendor’s license, which you will need to register for as well through the county clerk’s office.
You’re generally required to register for an Indiana sales tax license if your business sells goods or tangible personal property in Indiana.
To collect sales tax, businesses will need to register for an RRMC through the state’s online portal, InBiz. Registration is completed entirely online and typically takes only a short time if you have the required information ready. When registering, you’ll be asked to provide details such as:
- Your legal business name and any trade names (DBAs)
- Federal Employer Identification Number (FEIN) or Social Security number
- Business address and contact information
- Type of business activity (retail, restaurant, service, etc.)
- Estimated monthly sales and start date for taxable activity
Indiana charges a one-time $25 registration fee for a sales tax license. Once approved, the state will issue your Registered Retail Merchant Certificate, which authorizes you to collect sales tax. This certificate should be displayed at your business location, if applicable.
There is no annual renewal fee, but your registration remains active as long as your business continues to make taxable sales in Indiana.
If you prefer to mail in your registration, you will need to complete form BT-1. Please note that a separate application will be needed for each location if you’re operating more than one. You should register before making taxable sales in Indiana. Collecting sales tax without a valid license, or failing to collect when required, can lead to penalties, interest, and compliance issues.
How to file Indiana sales tax?
Once your business is registered and actively collecting sales tax in Indiana, you’re required to file sales tax returns and remit the tax collected to the state on a regular basis. Indiana expects sales tax returns to be filed electronically, even if no tax is due for a given filing period.
Filing Your Sales Tax Return
Indiana sales tax returns are filed through INTIME, the online tax portal managed by the Indiana Department of Revenue. Once you log in, the system is designed to make filing straightforward.
After signing in, you’ll land on the Summary tab by default. This page displays all tax accounts the business has access to view, such as sales tax, withholding, or other registered tax types. For each account where you’re authorized to file a return, INTIME will display a “File Now” link next to the account.
Clicking “File Now” takes you directly to the most upcoming return due for that account. This allows business owners to go straight from logging in to filing their return without needing to navigate menus or search for the correct filing option, a helpful time-saver, especially for businesses managing multiple tax accounts.
Once inside the return, you’ll enter your gross sales, taxable sales, exempt sales, and the sales tax collected for the period, along with any applicable local taxes such as the Food and Beverage tax. After reviewing the information, you can submit the return and schedule payment through INTIME.
Your filing frequency (monthly, quarterly, or annually) is assigned by the Department of Revenue based on your estimated or actual sales tax liability. Most restaurants and high-volume retailers are required to file monthly, while smaller businesses may qualify for less frequent filing.
The state may adjust your filing frequency over time based on your payment history, so it’s important to stay alert to notices from the Department.
How to pay Indiana sales tax?
After filing your sales tax return, businesses must submit payment for the tax collected by the return’s due date. Sales tax payments can be made electronically through INTIME.
Indiana allows sales tax payments through bank account transfer or card payments, with fees applying to card-based transactions.
Bank Account (ACH) Payments
Paying directly from a bank account is the most common option and does not include additional processing fees. When selecting this method, you’ll be prompted to enter:
- Your financial institution
- Bank routing number
- Bank account number
- Account type (checking or savings)
Bank account information can be saved in INTIME for future payments, making it easier to pay upcoming returns without re-entering details each time.
Credit and Debit Card Payments
Indiana also accepts credit and debit cards; however, processing fees apply and vary by card type:
- Credit card fees differ depending on whether the card is a personal card or a corporate card
- Debit card fees are charged at a flat rate:
- $2.75 for payments under $100
- $3.75 for payments of $100 or more
Because fees can add up, many businesses prefer using ACH bank payments when possible.
For restaurant retailers and high-volume businesses, keeping track of payment methods, fees, and deadlines can be stressful. DAVO integrates with your POS system to track the sales tax you collect, sets those funds aside daily, and then files and pays your Indiana sales tax on time, without surprise fees or last-minute scrambling.
Indiana sales tax due dates
Sales tax returns and payments in Indiana are due based on the filing frequency assigned to your business by the state. This filing frequency is determined by your estimated or actual sales tax liability and may change over time.
Indiana sales tax returns are generally due on the 20th day of the month following the reporting period:
- Monthly filers: Returns and payments are due on the 20th of the following month
- Quarterly filers: Returns and payments are due on the 20th of the month following the end of the quarter
- Annual filers: Returns and payments are due on January 20 for the prior calendar year
If the due date falls on a weekend or state-recognized holiday, the deadline is typically extended to the next business day.
Even if no sales tax is due for a filing period, Indiana still requires businesses to file a return on time. Failing to file a zero-dollar return can result in penalties or compliance notices.
For a full list of deadlines, visit the Indiana Department of Revenue’s website.
Indiana sales tax allowance
Indiana offers a sales tax collection allowance to businesses that file and pay their sales tax on time. This allowance lets retailers keep a small percentage of the tax collected as compensation for timely compliance.
In Indiana, eligible businesses may retain 0.83% of the sales tax due when their return and payment are submitted by the deadline. The allowance is applied automatically when filing on time and can help offset the administrative cost of collecting and remitting sales tax.
To qualify, businesses must:
- File their sales tax return on time
- Pay the full amount due by the deadline
- Submit their return and payment through the mandated method (specifically electronically)
Late filings or payments, as well as submitting outside of the mandated method, generally disqualify the return from receiving the allowance.
Sales tax allowances and vendor discounts vary widely by state. Some states offer similar on-time filing incentives, while others do not. If your business operates in multiple states, it’s worth reviewing which states provide a discount for timely filing and payment.
For a full breakdown, check out our sales tax discount guide, which outlines where these allowances are available and how they work across different states. In many cases, the allowance can cover the full DAVO subscription.
Indiana sales tax penalty and interest
Failing to file or pay sales tax on time in Indiana can result in penalties and interest, even if the amount owed is relatively small. The state treats filing and payment as separate requirements, and missing either can trigger consequences.
If a business files a sales tax return late or pays sales tax after the due date, Indiana may assess:
- A penalty of up to 10% of the tax due, or a minimum penalty amount, whichever is greater
- Interest on the unpaid tax, accruing from the original due date until the balance is paid in full
These penalties can apply even if the return is eventually filed or the tax is eventually paid. Filing a return without payment, or submitting payment without filing, may still result in penalties.
When sales tax remains unpaid or returns are not filed, the Indiana Department of Revenue may take additional enforcement actions. This can include issuing tax notices, assessing additional penalties, or pursuing collection efforts. Continued noncompliance can escalate quickly and become costly for businesses.
How DAVO can help with Indiana sales tax
Running a business in Indiana means wearing a lot of hats, and sales tax compliance shouldn’t be the one that keeps you up at night. Between the 7% state sales tax, county Food and Beverage taxes, exemption rules, filing deadlines, and payment requirements, even a “simple” tax state can become complicated fast. That’s where DAVO comes in.
DAVO integrates directly with your point-of-sale system to track the sales tax you collect. The solution sets those funds aside daily, then files and pays your Indiana sales tax on time, every time, guaranteed. For restaurant retailers especially, this means no scrambling to cover a large tax bill at the end of the month and no second-guessing whether the right amount was collected.
Instead of logging into INTIME, worrying about due dates, or risking penalties and interest, Indiana business owners can focus on what matters most, serving customers and growing their business, knowing their sales tax is being handled accurately and consistently.
Whether you operate a single location or multiple locations across the state, DAVO helps simplify Indiana sales tax compliance with less stress and more peace of mind.
Choose your POS system to get started with DAVO.
Indiana Department of Revenue Information:
1-800-457-8283
