Indiana Taxable Jursdictions

Source: Indiana Taxing Authority

Property Taxes
There are two types of property tax in Indiana, real property tax and personal property tax. Real property is defined as land and improvements considered permanent fixtures. Personal property is considered tangible property not permanently affixed to and a part of real estate.

Method of Assessment
Property in Indiana is assessed for taxes based on 100% of "market value in use", also known as true tax value. Indiana offers liberal depreciation schedules for personal property but freezes depreciation at 30% of value. Most manufacturing equipment will be fully depreciated (30%) in five years.

Real Property Tax
This tax is valid for all real property and for certain types of personal property. The taxable amount is the market value of the property. For estimating purposes, market value is approximately 80% of cost.

Business Personal Property Tax
This tax is assessed on all types of personal property, with the exception of personal property subject to the real property tax. The inventory pools used to assess the value of personal property are derived from the schedule of class lives and recovery periods determined by the Internal Revenue Service (IRS). Beginning in 2006, all inventory must be reported, but will be exempt from personal property tax.
Indiana Corporate Income Tax
All companies doing business in Indiana except businesses subject to the Financial Institutions Tax, international banking facilities, subchapter S corporations, and federally tax-exempt not-for-profit organizations are subject to the corporate income tax.

•  The tax rate is 8.5% of Indiana adjusted gross income.
•  Single Sale Tax Apportionment - Indiana will transition from a "property, payroll & double sales" apportionment formula to a "single sales" only system by January 1, 2011.

Indiana adjusted gross income is federal taxable income with 5 modifications:
•  Deduct any income that the federal law or Constitution prohibits Indiana from taxing
•  Add deductions allowed for charitable contributions under federal law
•  Add deductions allowed under federal law for state income taxes
•  Apportion income to Indiana based on the average percentage of property owned in Indiana, average of payroll paid in Indiana, and average sales volume attributable to Indiana
•  Adjustment to disallow the federal bonus depreciation

For companies that conduct business in other states, Indiana corporate tax liability is determined by the amount of a company's adjusted taxable income.

Financial, insurance, and utilities companies are subject to different tax laws as the nature of these businesses distinguishes them from other corporations in the State of Indiana. Please see the Indiana Department of Revenue Handbook for applicable information.

A variety of tax credits apply to corporate income taxes. These include credits for alternative energy sources, historic rehabilitation, and for venture capital investments.

Deductions and Exemptions
•  Corporate income from public transportation fares.
•  Income of insurance companies who pay the Insurance Premium Tax.
•  Foreign income of foreign corporations
•  A percentage of a domestic corporation's foreign source dividends (depends on company's stock ownership).

Sales and Use Tax
State sales tax in Indiana is 6%. There is no local sales tax.

Use tax in Indiana is 6%. Any purchase of tangible personal property is subject to use tax unless sales tax of at least 6% was paid on purchase. Use tax is common in the following instances:
•  Catalog purchases by phone or mail from out-of-state vendors.
•  Internet purchases from out-of-state vendors.
•  Items withdrawn from inventory for personal use or to give away.

Exemptions:
•  Wholesale sales.
•  Purchases of things used directly in the production process, including raw materials, machinery, tools and equipment directly used in direct production.
•  Sale of goods for resale.
•  Public transportation.
•  State and federal taxes on gasoline.
•  Property consumed in commercial printing.
•  Commercial printing shipped out of state.
•  Items consumed and rendered unusable after its first usage for food services.
•  Items used in the preparation of food for immediate consumption.
•  Sales made in interstate commerce.
•  Power, electricity, and gas if 51% of the load is used for manufacturing.
•  Pollution-abatement equipment if required by federal, state or local law.
•  Sales to government entities.

Other Taxes and Business Operating Costs

Personal Income Tax
All individuals, partners, stockholders in subchapter S corporations, trusts, estates, and nonresidents with income from sources in Indiana are subject to the personal income tax.
•  The tax rate is 3.4% of Individual Adjusted Gross Income.
•  County income tax is 0.6% for residents and 0.15% for non-residents.

Deductions
•  Rent up to $2,500.
•  Employees working and living in an enterprise zone are entitled to a tax deduction equal to the lesser of 50% of earnings or $7,500.
•  Property taxes paid for an individual's place of residence up to $2,500.
•  Net operating losses derived from sources outside of Indiana.

Exemptions
•  Income tax that is exempt under federal law or the Constitution.
•  $1,000 exemption for the taxpayer, spouse, and each dependent claimed on the federal return.
•  Additional $1,500 exemption for dependent children under the age of 18.
•  $1,000 exemption for each individual age 65 or over and/or blind.

Unemployment Insurance
Every business in the State of Indiana that employs at least one person for 20 weeks or more, or if in any calendar quarter pays wages of at least $1,500, is required to pay unemployment compensation taxes.

All employers are taxed on the first $7,000 of an employee's wages for each calendar year. New businesses are required to contribute at the rate of 2.7%, until they have been in business for three years. At the end of three years, the new contribution rate is determined by the employers credit reserve ratio or debt ratio held in the employers account within the Unemployment Insurance trust fund.