Are Repairs Taxable In Indiana

May 21, 2014
Author: Teresa L. Worthington, JD, LLM
Organization: BKD, LLP

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Indiana Sales Revenue enhancement

Indiana imposes an excise tax, known every bit the state gross retail tax on retail transactions made in Indiana. The seller, called a retail merchant, is a person who engages in selling at retail. "Selling at retail" is when an individual acquires tangible personal property for the purpose of resale and transfers that property to a third person for consideration in the ordinary course of his or her business. (Ind. Code § 6-two.5-4-ane(a); Ind. Code § 6-2.5-four- 1(b)). Employ is the practice of any correct or power of ownership over tangible personal property. (Ind. Code § half-dozen-2.5-three-1(a)). Storage is the keeping or retention of tangible personal property in Indiana for whatsoever purpose except the subsequent use of the property solely exterior of Indiana. (Ind. Code § six-2.v-3-one(b))

The seller is responsible for collecting and remitting the tax on behalf of the State. Unless specifically designated exempt, sales of tangible personal property for storage, use, or consumption past a retail merchant for commitment in Indiana are generally presumed taxable. (Ind. Code § 6-two.five-iii-7). However, sales of services are more often than not exempt unless specifically designated taxable. The current sales tax charge per unit in Indiana is 7%.

Employ Revenue enhancement
Use tax is a compensatory tax considering it compensates for the sales taxation. Use revenue enhancement is imposed on tangible personal holding which is used, stored, or consumed in Indiana. If Indiana sales tax has already been paid, then Indiana use tax is non due. Items Generally Subject to Sales and Use Tax Examples of items generally subject to sales and use tax are:

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• Function supplies
• Telecommunications;
• Cable/Satellite Television Services
• Public utilities;
• Structure materials;
• Rental of rooms, lodging and accommodations;
• Estimator equipment;
• Motor vehicles;
• Aircraft;
• Booze;
• Tobacco products;
• Watercraft;
• Software license or subscriptions

Services
As a full general rule, services are exempt from sales/use tax unless specifically taxed. Indiana taxes telecommunications, cable television services, public utilities, lawn care services, and room or accommodations rentals for less than thirty days.

Items Generally Not Bailiwick to Sales and Utilize Taxation

• Professional services;
• Credit and Collection services;
• Employment and temporary employee supply services;
• Furniture moving;
• Investment counseling services;
• Management consulting;
• Market inquiry services;
• Payroll Services;
• Safe deposit services;
• Security services;
• Janitorial cleaning;
• Parking/Car storage
• Locksmith services
• Mini Warehouse and self-storage rental
• Waste removal services

Unitary Transactions
A Unitary transaction is defined as all items of belongings and/or services for which a total combined selling cost is computed for payment. In a unitary transaction services that would be exempt if separately stated are otherwise taxable because the services are included in a single charge of selling price.

Specific Transactions
Warranty/Maintenance Contracts
Original manufacturer or dealer warranties are included in the selling price of the product sold. Sales tax is collected on the entire selling price of the product. Whatsoever parts transferred to a heir-apparent nether the terms of the original warranty are not subject to sales revenue enhancement since sales tax was nerveless on the retail transaction.

Optional Maintenance Contracts are subject to tax. Maintenance contracts mostly encounter the definition of a unitary transaction. A contract that explicitly guarantees that tangible personal property volition exist provided nether the contract is not require. If in that location is a reasonable expectation that consumable items will be provided under the contract, the contract is subject to sales/use revenue enhancement.

Optional Warranty Contract means a contract that acts like insurance against hereafter potential repair costs, including extended service contracts. Optional warranty contracts are not subject to sales/utilise taxation as long as there is no substantive provision or certainty that tangible personal property will be provided under the contract.

Software
Custom software specifically designed for purchasers is not field of study to sales/utilize taxation. However prewritten programs, adult by the seller for sale, lease, license, subscription on the general market place are discipline to sales/apply revenue enhancement. Prewritten software delivered electronically through the Internet is subject field to sales/utilise revenue enhancement. Prewritten computer software accessed electronically via the Internet for use in Indiana is bailiwick to sales/use revenue enhancement also.

Digital Products
Currently, the sale digital audio works (eastward.g. songs, recordings, ringtones, etc.), digital audiovisual works (eastward.1000. movies, goggle box shows, etc.), or digital books (e.yard. books, magazines, ect.) are subject to sales/use revenue enhancement.

Rental Services
The lease or rental of tangible personal belongings is subject area to sales/use tax. This includes equipment, vehicles, linens, towels, uniforms, or floor mats.

Local Taxes
Indiana does not impose sales and use at the local level. Even so, a number of counties levy a lodging tax, several counties and towns impose a local food and drinkable tax, and two counties have a tax on admissions.

General Exclusions/Exemptions

If an particular/service is non specifically enumerated as taxable or included with the statutory definition of a retail sale, it is an exclusion from tax. Separately stated labor and installation charges are not discipline to sales/use taxation since they are not included in the definition of price or other bona fide charges under IC 6-2.five-4-ane. Also, occasional/casual sales are not subject to sales revenue enhancement. Run across, IC six-2.v-three-two(b)(1) and 45 IAC two.2-1-ane(d) IC half dozen-ii.v-5 contains many exemptions from sales taxation. The sales or rental of tangible personal property can be classified equally exempt from taxation in three main ways:

1. The mode in which the tangible personal property is to be used may brand the transaction exempt.
2. The item itself may brand the transaction exempt.
3. The type of "person" making the purchase may make the transaction exempt.

Exemptions based on Employ

1. Resale Exemption
Sales intended for resale in the regular course of a purchaser'south business organization in the same course equally acquired are exempt from sales/employ tax if the purchaser is occupationally engaged in reselling, renting or leasing. Meet IC6-2.v-5-viii(b)

2. Interstate Commerce
The United Country Constitution prohibits revenue enhancement of sales made in interstate commerce. IC vi-2.5-5-24(b)(2)

3. Agricultural Exemptions
Machinery, tools, and equipment are exempt from sales/utilize tax if acquired for use directly in the product, extraction, harvesting, or processing of agricultural commodities. IC six-two.5-5-2 Additionally animals, feed, see, and other farm products caused past a farmer who is occupationally engaged to produce food or commodities sold for homo or animal consumption. IC half dozen-ii.5-5-1

iv. Manufacturing Exemptions
Machinery and equipment used in the direct production, manufacturing, fabrication, assembly, extraction, mining, process, refining or finishing of other tangible personal holding is exempt from sales/use taxation. IC 6-2.five-v-iii Property incorporated equally a fabric component of an item being produced is exempt from sales/utilise taxation. IC half dozen-ii.five-5-half dozen

five. Enquiry and Development
Laboratory equipment, computers, software, telecommunication equipment and testing equipment that is used in Indiana for the first time and is acquired for the purpose of research and development is exempt from sales/use. IC 6-2.five-40

6. Pollution Control Exemption
Machinery, equipment, and devices used to comply with governmental environmental quality laws, regulations or standards by manufacturers, processors, refiners, miners, farmers are exempt from sales/use tax. IC 6-ii.5-5-30

vii. Packaging Exemption
Non-returnable material and containers are exempt if the materials are used to sell the contents that the person sales. IC 6-two.5-v-9

8. Public Transportation Exemption
Tangible personal property used in providing public transportation for persons or property is exempt from sales/use tax. IC 6-2.5-v-27 Indiana's public transportation exemption volition exempt trucks, trailers, communication equipment; replacement parts, tools and equipment used to repair rolling stock; machine shop, and items used for production of financial matters, routes and rates.

Exemptions based on Item

1. Paper

Sales of newspapers are exempt from sales/use tax. IC six-2.5-5-17 In order to be considered a newspaper information technology must meet the following five requirements:

i. Commonly understood to be a newspaper;
ii. Circulated amongst the general public;
3. Published at stated short intervals;
iv. Entered or are qualified to be admitted and entered equally 2nd class mail; and
v. Printed for resale and are sold. 45 IAC 2.two-v-2

2. Medical Equipment
Sales or rentals of durable medical equipment, mobility enhancing equipment, prosthetic devices, artificial limbs, orthopedic devices, dental prosthetic devices, eyeglasses, and contact lenses are exempt from sales/utilize revenue enhancement if prescribed and dispensed by licensed practitioners. IC 6-5.5-v-18

3. Drugs
Sales of drugs, insulin, oxygen, blood, and blood plasma are exempt from sales/employ revenue enhancement if prescribe and dispensed by licensed practitioners. IC6-two.five-v-nineteen

4. Food
Food and food ingredients sold for human consumption are exempt from sales/employ tax. IC6-ii.five-5-20 The exemption does not include candy, alcoholic beverages, soft drinks, food sold through vending machines, prepared food, tobacco or dietary supplements.

v. Lottery Tickets

Sales of lottery tickets authorized by IC 4-30 are exempt from sales/use taxation. IC 6- two.5-5-34

half-dozen. Manufactured Domicile
The sale of a preowned mobile domicile is exempt from sales/employ tax. IC half-dozen-two.5-v-29 Thirty-5 percent of the income derived from the sale of a mobile domicile or industrialized residential structure is not subject to sales/use taxation. 45 IAC 2.two-5-67

Exemptions based on Person Nomenclature

1. Government

Under the Supremacy Clause of the United States Constitution and Indiana law, sales to the federal government are exempt. IC vi-two.5-five-24 Generally purchases made by Indiana state and local governments and their agencies of tangible personal property, utilities, and taxable services are exempt from sales revenue enhancement provided that the items/services are used by the government to perform its governmental functions. IC six-2.5-5-sixteen

2. Nonprofit Organizations

Purchases of tangible personal property or taxable services are exempt from sales/utilize taxation if the entity is organized and operated exclusively for religious, charitable, scientific, literary, educational, or civic purposes if no function of its income is used for the individual benefit or gain to any member or associate, the property is used to carry on or to raise money to behave on the system'due south not for profit purpose, the transaction is invoiced directly to the organization and paid direct by the organization's funds and is non an organization operated predominantly for social purposes. IC 6-2.5-5-25

3. Professional Racing Team

Purchases by a racing team that comprises any part of a professional person motor racing vehicle except tires and accessories are exempt from sales/use tax. IC vi-2.5-v-37

Source: https://www.lorman.com/resources/overview-of-sales-and-use-taxes-in-indiana-17142

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