New Sales-Tax Rate FAQ (Frequently Asked Questions)
- When does the new sales-tax rate go into effect?
The new sales-tax rate of 7 percent is effective for all transactions* occurring on or after April 1, 2008.
- What transactions are taxable when the new sales-tax rate goes into effect?
There are no changes to the categories of transactions that are taxable. To get a complete list of transactions exempt from the sales tax, please click here.
- What sales tax rate should a business charge if the sales order was placed prior to March 31?
In general, an invoice or bill is the official document indicating that a sale is binding. Therefore, the business should charge the sales tax rate in effect on the date of the sales invoice or bill – which is usually the date the business records the sale in its accounting records.
- What sales tax rate should a business charge if the date of sale on the invoice or bill is prior to March 31, but delivery was not made until after April 1, 2008?
It depends upon when payment was received for the sale. The sales tax rate would be 7 percent if payment and/or obligation to pay occurred on or after April 1, 2008. However, property and services that are delivered after March 31, 2008, but paid prior to April 1, 2008, are not subject to the new sales tax rate.
- What sales tax rate should a business charge if the bill was issued on March 31, but the customer did not pay until after April 1, 2008?
All sales that are official prior to March 31 are subject to the 6 percent sales tax, regardless of when the payment is made. Generally a sale is official effective the date of the invoice or bill – which is the date the business records the sale in its accounting records.
- My business situation involves a sales contract signed prior to March 31, but with installment payments spanning from April 15 until Dec. 31, 2008. What sales tax rate should I charge?
Generally, the sale tax rate would be whichever is in effect the date the business records the sale in its accounting records. However, some businesses use other methods of accounting. For businesses that use methods other than the accrual method, the Department recommends they consult with a qualified accounting professional.
- Will collection allowances for retail merchants be adjusted due to the new sales-tax rate?
Beginning after June 30, 2008, sales-tax collection allowances for retail merchants will be adjusted as follows:
- 0.73% if the total sales tax collected is less than $60,000
- 0.53% if the total sales tax collected is between $60,000 and $600,000
- 0.26% if the total sales tax is more than $600,000.
- How will business taxpayers be informed of the new sales-tax rate?
The Department is using the following means to communicate the rate change to businesses:
- Direct-mail letters sent to retail businesses registered in Indiana to collect sales tax
- E-mail notices to all INtax-registered users
- ST-103MP letters to prepaid gas taxpayers
- Voice-mail and hold messages on DOR phones
- Flyers and door signs posted in district office locations
- DOR Web site updated with information specific to business taxpayers
- A column written in the Tax Talk blog
- How will practitioners be informed of the new sale- tax rate?
The Department is using the following means to communicate the rate change to practitioners:
- Direct-mail letters sent to practitioner offices
- Voice-mail notices placed on the practitioner phone line
- Communication kits e-mailed to 16 associations to share with their members
- DOR Web site updated with information specific to practitioners
- Feature article written in the Tax Dispatch e-newsletter that goes out to all practitioner offices
- Will software developers be notified of the new sales-tax rate?
Yes. The same communication kits used for business taxpayers and/or practitioners will be forwarded to software developers who produce substitute tax forms.
- How will HEA 1001 impact taxpayer’s property-tax bills?
Questions regarding HEA 1001’s impact on taxpayers’ property-tax bills should be directed to the Department of Local Government Finance at 317.232.3777.
* Please note that property and services that are delivered after March 31, 2008, but paid for prior to April 1, 2008, are not subject to the new 7-percent sales tax.