Sales Tax in Indiana: Complete Guide 2026
Data Notice: Figures, rates, and statistics cited in this article are based on the most recent available data at time of writing and may reflect projections or prior-year figures. Always verify current numbers with official sources before making financial, medical, or educational decisions.
Sales Tax in Indiana: Complete Guide 2026
Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.
Indiana levies a statewide sales tax of ~7.00%, which is among the highest state-level rates in the nation. Unlike many states, Indiana does not allow local governments to add their own sales taxes on top of the state rate. This means the rate is uniform across the entire state — from Indianapolis to rural counties. The simplicity of a single statewide rate makes Indiana one of the more straightforward states for sales tax compliance, but the high rate itself means consumers and businesses pay a significant amount on taxable purchases.
Indiana Sales Tax Rates (2026)
| Component | Rate |
|---|---|
| State sales tax | ~7.00% |
| Local sales tax | None (not permitted) |
| Combined rate (statewide) | ~7.00% |
How Indiana Compares to Neighboring States
| State | State Rate | Avg. Combined Rate |
|---|---|---|
| Indiana | ~7.00% | ~7.00% |
| Illinois | ~6.25% | ~8.81% |
| Michigan | ~6.00% | ~6.00% |
| Ohio | ~5.75% | ~7.25% |
| Kentucky | ~6.00% | ~6.00% |
While Indiana’s state rate is higher than all its neighbors, the absence of local add-ons means the total rate is actually lower than Illinois’s average combined rate of ~8.81%.
What Is Taxable in Indiana
Taxable Items
Indiana taxes most tangible personal property and certain services:
- General merchandise (electronics, furniture, appliances)
- Clothing and footwear (no exemption)
- Prepared food and restaurant meals
- Soft drinks
- Vehicles (subject to sales tax or excise tax)
- Digital goods (downloaded music, movies, software, e-books)
- SaaS and certain digital services
- Hotel and lodging (plus additional innkeeper’s tax)
- Utilities (residential electricity and natural gas)
Exempt Items
Several categories are exempt from Indiana sales tax:
- Unprepared grocery food: Food sold for home consumption is exempt (but prepared food, candy, and soft drinks are taxable)
- Prescription medications: Fully exempt
- Medical devices and equipment: Exempt when prescribed by a health care provider
- Agricultural supplies: Feed, seed, fertilizer, and agricultural machinery used in farming
- Manufacturing equipment: Machinery directly used in manufacturing
- Motor vehicles: Subject to a separate ~7.00% excise tax collected at registration
How Indiana Sales Tax Works
Collection and Remittance
Indiana businesses that sell taxable goods or services must register with the Indiana Department of Revenue (DOR) for a Registered Retail Merchant Certificate. Sales tax collected from customers must be remitted to the state based on the business’s filing frequency:
| Annual Sales Tax Collected | Filing Frequency |
|---|---|
| Under ~$1,000 | Annual |
| ~$1,000 — ~$10,000 | Monthly |
| Over ~$10,000 | Monthly (semi-monthly deposits may be required) |
Use Tax
Indiana imposes a use tax of ~7.00% on purchases made out of state or online where sales tax was not collected. This applies to both consumers and businesses. The use tax ensures that out-of-state purchases are taxed at the same rate as in-state purchases.
Marketplace Facilitator Rules
Online marketplace facilitators (such as Amazon, eBay, and Etsy) are required to collect and remit Indiana sales tax on behalf of third-party sellers. This relieves individual sellers from the obligation to collect tax on sales made through qualifying platforms.
Economic Nexus
Following the South Dakota v. Wayfair decision, Indiana requires remote sellers to collect sales tax if they exceed:
- ~$100,000 in gross revenue from Indiana sales, or
- ~200 or more separate transactions with Indiana customers
in the current or previous calendar year.
Special Sales Tax Situations
Food and Beverages
Indiana’s treatment of food creates common confusion:
| Item Type | Taxable? |
|---|---|
| Unprepared grocery food | Exempt |
| Prepared food (heated, served with utensils) | Taxable (~7.00%) |
| Candy | Taxable (~7.00%) |
| Soft drinks | Taxable (~7.00%) |
| Dietary supplements | Taxable (~7.00%) |
Vehicles and Watercraft
Motor vehicles are subject to a ~7.00% excise tax at registration rather than traditional sales tax at the point of sale. Trade-in allowances reduce the taxable amount. For example:
| Component | Amount |
|---|---|
| Vehicle purchase price | ~$35,000 |
| Trade-in value | ~$10,000 |
| Taxable amount | ~$25,000 |
| Excise tax (~7.00%) | ~$1,750 |
Comparison to National Average
| Metric | Indiana | National Average |
|---|---|---|
| State rate | ~7.00% | ~5.09% |
| Average combined rate | ~7.00% | ~7.12% |
| Groceries taxed | No (exempt) | Varies |
| Clothing taxed | Yes | Varies |
Indiana’s state rate is above the national average, but the combined rate is actually slightly below the national combined average because there are no local add-ons.
Tips for Managing Indiana Sales Tax
-
Register before collecting. You must have a Registered Retail Merchant Certificate before collecting sales tax. Operating without one is a violation.
-
Know the food exemption. Unprepared grocery food is exempt, but prepared food, candy, and soft drinks are taxable. Properly categorizing food items is critical for compliance.
-
File on time. Late filings incur penalties of ~10% of the tax due plus interest. Indiana offers online filing through INTIME (Indiana Taxpayer Information Management Engine).
-
Claim the trade-in credit. When purchasing a vehicle, the trade-in value reduces the taxable amount, saving ~7.00% on the trade-in.
-
Track use tax obligations. If you purchase taxable items from out of state without paying sales tax, report and pay Indiana use tax on your sales tax return or income tax return.
-
Leverage manufacturing exemptions. If your business manufactures goods, ensure qualifying equipment and materials are purchased exempt using Form ST-105 (General Sales Tax Exemption Certificate).
-
Monitor marketplace facilitator compliance. If you sell through online marketplaces, verify that the platform is collecting and remitting Indiana sales tax on your behalf.
Key Takeaways
- Indiana’s statewide sales tax rate is ~7.00% with no local add-ons, creating a uniform rate across the state.
- Unprepared grocery food is exempt, but prepared food, candy, and soft drinks are taxable.
- Clothing is fully taxable in Indiana (no clothing exemption).
- Motor vehicles are subject to a ~7.00% excise tax at registration, with trade-in credits available.
- Remote sellers must collect Indiana sales tax if they exceed ~$100,000 in revenue or ~200 transactions.
- Indiana’s combined rate of ~7.00% is slightly below the national average combined rate of ~7.12%.
Next Steps
- Federal Income Tax Guide 2026 — How sales tax deductions work on your federal return.
- State Income Tax Rates Comparison 2026 — Indiana’s overall tax burden.
- Tax Bracket Calculator — Estimate your combined tax liability.
- Self-Employment Tax Guide — Sales tax obligations for Indiana small businesses.
- Find a CPA Near You — Get help with Indiana sales tax compliance.