Overview of Sales Tax in the United States
Thirty-eight states collect sales tax at both state and local levels, while some states like Indiana, Maine, Kentucky, and Oregon do not permit local sales taxes. Montana, New Hampshire, and Oregon do not impose any sales taxes.
Sales Tax Calculation and Collection in Indiana
- To calculate Indiana state sales tax, dealerships collect sales tax on behalf of the state for car sales. Gifted cars are exempt from sales tax.
- Indiana imposes a 7% state sales tax on retail transactions. Businesses must collect applicable sales tax on sales shipped to Indiana customers. The state also charges additional taxes and fees on specific items like tires and gasoline.
- Indiana firms need a Registered Retail Merchant Certificate to collect sales tax.
Sales Tax Obligations on Out-of-State Transactions
- Businesses making taxable sales to Indiana customers must collect sales tax. The statewide rate of 7% applies to all applicable sales.
- Indiana firms only owe sales tax on out-of-state sales when they have nexus outside Indiana, such as physical presence in other states like offices, warehouses, and inventory locations. Non-resident buyers may be exempt from sales tax if the vehicle isn’t used in Indiana over a certain period.
Vehicle Purchases and Sales Tax in Indiana
- For vehicle purchases in Indiana, sales tax is paid when applying for the title. Indiana residents receive credit for sales tax paid in other states. Most states are reciprocal, but some are not. Non-resident buyers may qualify for exemption if certain conditions are met.
- Indiana does not require state registration for a resale certificate. Businesses can get a resale certificate to avoid paying sales tax on inventory purchased for resale in Florida. Sales tax is calculated by multiplying the vehicle price by 0.07.