Indiana Sales Tax Basics

Indiana's sales tax is a tax on the purchase of goods and some services. When you buy something at a store or online, the seller adds this tax to your bill at checkout. The state sales tax rate in Indiana is 7 percent, though some counties add a local sales tax on top of that, bringing the total to between 7 and 7.5 percent depending on where you live.

The seller collects the tax from you and sends it to the Indiana Department of Revenue. You do not send in sales tax yourself unless you own a business. The tax applies to most physical items you can hold—groceries at some stores, clothing, electronics, furniture—but not to all purchases. Understanding what is and is not taxed helps you predict what you will actually pay at the register.

Key Takeaways

  • Indiana's state sales tax is 7 percent, and most counties add a local tax of 0.25 to 0.5 percent, making your total between 7 and 7.5 percent.
  • Groceries and prescription medications are not taxed in Indiana, but prepared food, candy, and soft drinks are.
  • Clothing and shoes under $100 per item are not taxed, but items $100 or more are taxed on the full price.
  • Services like haircuts, car repairs, and plumbing are generally not subject to sales tax unless they include taxable materials.
  • Online purchases from out-of-state sellers follow the same tax rules as in-store purchases if the seller has a physical presence in Indiana.

What Gets Taxed and What Does Not

Food you cook at home—raw meat, vegetables, bread, milk, eggs—is not taxed in Indiana. However, prepared food is. If you buy a rotisserie chicken from the grocery store deli, a sandwich from a restaurant, or a frozen dinner, you pay sales tax. The line is whether the food is ready to eat or requires cooking.

Clothing and shoes have a special rule. Items priced under $100 each are not taxed. If you buy a $75 shirt, you pay no sales tax. If you buy a $120 winter coat, you pay 7 to 7.5 percent tax on the full $120. This applies per item, so buying five $99 shirts means no tax on any of them, but one $101 shirt is fully taxed.

Prescription medications are not taxed, but over-the-counter medicines, vitamins, and health supplements are. Candy and soft drinks are taxed, even though they are food items. Services like haircuts, dental work, car repairs, and plumbing are generally not taxed unless the service includes selling you a taxable product—for example, a plumber charges no tax for labor but does charge tax on the pipe fittings they sell you.

County and Local Sales Tax Rates

On top of Indiana's 7 percent state rate, most counties add their own local sales tax. This ranges from 0.25 percent to 0.5 percent depending on the county. Marion County (Indianapolis) adds 0.5 percent, bringing the total to 7.5 percent. Lake County adds 0.5 percent as well. Many other counties add 0.25 percent, keeping the total at 7.25 percent.

A few counties have no additional local tax, so you pay exactly 7 percent. To find your county's rate, look up your county name on the Indiana Department of Revenue website or ask a cashier. The rate matters most when you are comparing prices across county lines or budgeting for a large purchase.

How Sales Tax Is Calculated at Checkout

The seller multiplies the taxable price by your local tax rate and adds the result to your bill. If you buy a $50 item in Marion County, the math is $50 × 0.075 = $3.75 in tax, for a total of $53.75. The register does this automatically, so you see the final price.

Rounding rules explore when the tax amount includes fractions of a cent. Indiana rounds to the nearest cent, so a tax of $3.754 rounds to $3.75, and $3.755 rounds to $3.76. This happens at the item level, not the whole receipt, so each taxable item is rounded separately before the total is added up.

Sales Tax on Online and Out-of-State Purchases

If you order from an online retailer that has a warehouse, office, or other physical location in Indiana, you pay Indiana sales tax on the purchase. This includes major retailers like Amazon (which has fulfillment centers in Indiana), Walmart, and Target. The tax rate depends on the address where the item ships.

If you order from a seller with no physical presence in Indiana, the rules are more complex. Many out-of-state sellers now collect Indiana sales tax anyway because federal law changed in 2018. However, some smaller sellers do not. If you do not pay sales tax at checkout on an out-of-state purchase, you may owe use tax to Indiana when you file your state income tax return. Use tax is the same rate as sales tax and applies to items you bought out of state but use in Indiana. Most people do not report use tax, but it is technically owed.

Who Collects and Pays Sales Tax

The business selling you the item collects sales tax and holds it until they send it to the Indiana Department of Revenue. This happens monthly or quarterly depending on the business size. You never write a check for sales tax yourself as a buyer—it comes out of the purchase price.

If you own a business and sell taxable goods or services, you must register for a sales tax permit with the Indiana Department of Revenue, collect tax from customers, and file returns. The state provides forms and instructions on its website. Businesses that fail to collect or remit sales tax can face penalties and interest.

Sales Tax Exemptions and Special Cases

Certain organizations do not pay sales tax on their purchases. Nonprofits, schools, and government agencies can get a sales tax exemption by providing a resale certificate or exemption certificate to the seller. This means they buy items without paying tax, as long as the items are used for the organization's mission.

Resellers—people who buy items to resell them—can also avoid paying sales tax on their purchases by providing a resale certificate. They collect tax from their customers instead. For example, a thrift store buys used clothing without paying tax, then charges tax when you buy it from them.

Frequently Asked Questions

Do I pay sales tax on groceries in Indiana?

Most groceries are not taxed—milk, bread, meat, vegetables, and canned goods are all tax-free. However, prepared foods like deli items, hot foods, and restaurant meals are taxed. Candy, soda, and energy drinks are also taxed even though they are food.

What is the difference between sales tax and use tax?

Sales tax is collected when you buy something. Use tax is a tax on items you buy out of state and bring into Indiana. If you did not pay sales tax at the time of purchase, you owe use tax to Indiana. The rates are the same, and you report it on your state income tax return.

Why is my total different when I shop in different counties?

Each county in Indiana sets its own local sales tax rate on top of the 7 percent state rate. Marion County charges 7.5 percent total, while some counties charge only 7.25 percent. The difference adds up on large purchases.

Do I pay sales tax on services like haircuts or car repairs?

No, services themselves are not taxed in Indiana. However, if the service includes selling you a taxable product—like a haircut plus hair products, or a car repair that includes new parts—you pay tax on the products only, not the labor.

Is clothing always tax-free in Indiana?

Clothing and shoes under $100 per item are tax-free. Items priced at $100 or more are fully taxed at your local rate. This applies to each individual item, so a $99 pair of jeans is free of tax, but a $105 pair is taxed on the full price.