New sales tax rate
Gov. Mitch Daniels signed House Enrolled Act 1001 into law on March 19, capping Hoosier property taxes at 1 percent of a homeowner’s assessed property value, and capping rental and business property values at 2 and 3 percent respectively. HEA 1001 also calls for a number of changes, most particularly, a change in the state’s sales tax rate to offset the property-tax caps so local communities can reasonably maintain necessary services and programs.
The sales tax change went into effect April 1, 2008. However, utility companies, along with cable, satellite, television and radio-service operators, are not required to collect the 7-percent rate until a customer bill is issued after April 30.
- A new sales tax multiplier also went into effect on April 1 at a rate of 6.54 percent for gasoline and special-fuel retailers. , In addition, the sales-tax collection allowance for reporting periods beginning after June 30 will change to reflect the following: 0.73 percent if the total sales tax collected was less than $60,000
- 0.53 percent if the total sales tax collected was between $60,000 and $600,000
- 0.26 percent if the total sales tax collected was more than $600,000
With HEA 1001’s historic passage, the Indiana Department of Revenue contacted more than 176,000 business taxpayers via direct-mail letters, and sent notification to more than 4,000 practitioners to ensure both groups are aware of the changes HEA 1001 will affect. Additionally, notification was also sent to 16 associations presenting tax professionals, and 25 Indiana chambers of commerce. Businesses were also notified that sales tax vouchers for the months of April, May and June 2008 will be mailed by April 30. These will reflect the new 7-percent sales tax rate.For more information about the sales tax rate change, visit www.in.gov/dor/3577.htm
Additional legislative changes that resulted from the 2008 General Assembly also affect:
UTILITY RECEIPTS TAX
- If an electric utility uses natural gas in the direct production of electricity, the purchase of natural gas is exempt from utility receipts tax (Effective upon passage).
SALES AND USE TAX
- Sales tax changes to 7 percent effective April 1, 2008, as part of one of the largest property tax cuts in Indiana history.
- Consumers must pay sales tax on digital products (Effective Jan. 1 2009).
- A person taking flying lessons must pay sales tax on the rental of the aircraft, but not for the flight instructor’s costs (Effective July 1, 2008).
- If the annual sales tax liability is less than $1,000, the merchant only files an annual return (Effective Jan. 1, 2009).
- The sale of pull tabs, punchboards, and tip boards to taverns is exempt from sales tax (Effective July 1, 2008).
- Taxpayers who pay sales tax through electronic funds transfer must file a monthly return (Effective Jan. 1, 2009).
ADJUSTED GROSS INCOME TAX
- The renter’s income-tax deduction is increased from $2,500 to $3,000 (Effective Jan. 1, 2008 -- retroactive).
- The earned income tax credit increases from 6 percent of the federal credit to 9 percent of the federal credit (Effective Jan. 1, 2009).
- The federal economic-stimulus payment will not be considered adjusted gross income in Indiana (Effective Jan. 1, 2008 – retroactive).
- Non-resident account owners of College Choice 529 plans who make a non-qualified withdrawal must recapture the credit on his individual income tax return, or the Department can bill the taxpayer for the amount of the credit (Effective Jan. 1, 2008 -- retroactive).
- A penalty for a professional preparer of $50 is imposed for each return that is not filed electronically. The maximum penalty would be $25,000 per calendar year (Effective Jan. 1, 2011).
- A nonresident alien, who is required to make estimated payments, would be allowed to claim only one exemption when calculating the amount of estimated tax to be paid (Effective Jan. 1, 2009).
- An employer who withholds taxes for a nonresident alien must limit the number of exemptions for the employee to one (Effective Jan. 1, 2009).
- A person who is making estimated payments must make a distinction between the amounts for the state adjusted gross income tax and the local option income tax (Effective Jan. 1, 2009).
- People who have withholding of adjusted gross income from an annuity, pension, or retirement plan must make a distinction between the amounts withheld for the state adjusted gross income and the local option income taxes (Effective Jan. 1, 2009).
- The Indiana code is updated to match the Internal Revenue code definition of adjusted gross income (Effective Jan. 1, 2008).
LOCAL OPTION INCOME TAXES
- Employers are required to file a report indicating the amount of county tax withheld for every county, each time the employer remits tax withheld (Effective Jan. 1, 2009).
- Counties may adopt or change local option income tax rates in 2008 through Dec. 31, 2008 (effective upon passage).
Please visit the Reference Library of the Department’s Web site at www.in.gov/dor/3330.htm for a complete summary of legislative changes.
- A distributor that purchases cigarette tax stamps on credit must use electronic funds transfer to make the cigarette tax payments (Effective July 1, 2008).
Electronic filing dominates tax season
The 2008 income-tax season ended with record numbers of electronic filers. More than 1.8 million Hoosiers filed their state income-tax returns electronically this year – a 22-percent increase over the same time last year. This continues a trend that the Indiana Department of Revenue has seen over the last few years.
As a result, the Department saw a significant decrease in suspended returns, and was able to issue refunds in an average of four days – two significant benefits for Indiana taxpayers.
New Online Inquiry Center for Tax Professionals
Practitioners may now use the new Tax Professionals Online Inquiry Center for faster answers to their questions and concerns, and to sign up or future updates and practitioner news. To use the online inquiry center, visit www.in.gov/dor
New Tax Bulletins, Directives and Notices Available Online
New Commissioner’s Directives
New Information Bulletins
Please check the Department’s Web site www.in/gov/dor/3330.htm for additional updates to tax bulletins, directives, and notices.
To better serve Indiana taxpayers, the Indiana Department of Revenue may occasionally inform taxpayers of new services, results of a survey or invite a randomly selected group of taxpayers to participate in a short electronic survey or focus group. Electronic communication and surveys enable the Department to inform you about our services and helps the Department learn how to better serve Hoosier taxpayers.
Electronic surveys and e-mail messages from the Indiana Department of Revenue will never ask for any financial or personal information and survey responses are always confidential.
If you are asked for personal or financial information (Social Security number, bank account information, etc), do not reply or click on any links in the e-mail message. Legitimate organizations should never ask for personal information by e-mail.
If you would like to further verify an e-mail you have received by the Indiana Department of Revenue, please call 317.233.5221. Remember, the Indiana Department of Revenue will never request personal information by e-mail.
For previous editions of the Tax Dispatch, click here.