I-B. ESTABLISHING TAX ACCOUNTS
I-B-1. Federal Tax InformationAny business with employees must have an Employer Identification Number (EIN) which identifies the tax accounts of employers, corporations, partnerships, limited liability companies with more than one owner, estates, trusts and other entities. Under federal guidelines, you also need an EIN if you have a qualified retirement plan, operate your business as a corporation or partnership, or file employment taxes, or excise taxes.
You should have only one EIN. To obtain an EIN, call the Internal Revenue Service for Form SS-4. Complete the form, and then either mail the form to the IRS, or call to receive your number. Business owners may also be required to file self employment taxes quarterly. Contact the IRS for its publications 533 and 509 on self-employment taxes. If the business does not have employees and does not expect to have any, the IRS may not allow the business to obtain an EIN. In such a case, the business owner's social security number is used as the Federal Tax Identification Number.
Internal Revenue Service
I-B-2. STATE TAX INFORMATION
I-B-2-a. Registration for Sales, Use, and Income TaxesHow to Register: A single application ( Form BT-1) is used to register with the Indiana Department of Revenue for sales tax, withholding tax, food & beverage tax, county innkeeper tax, motor vehicle rental excise tax, and prepaid sales tax on gasoline. A separate application is required for each business location. There is a $25.00 non refundable application fee for a Retail Merchants Certificate. BT-1/Business Tax Application: www.in.gov/dor (On line Services).
Sales Tax - Retail Merchants Certificate: Any individual or business entity engaged in the selling or transferring of tangible personal property is considered a retail merchant and is required to be registered as such (by filing Form BT-1) with the Indiana Department of Revenue. Registering as a retail merchant accomplishes what people commonly refer to as "getting a tax ID number" or "getting a tax-exempt number." The information regarding sales and use taxes should be read carefully, keeping in mind that taxes cannot be avoided on items which will not be resold.
Once registered as a retail merchant, the Department of Revenue will assign a tax identification number and will issue the appropriate Sales Tax Returns (ST103). The Department will also determine the business' filing status based upon anticipated sales. For additional information regarding sales or use taxes, contact the main office listed here or see one of the regional offices listed in Appendix C.
Indiana Department of Revenue
Sales Tax Exemption Certificates: Any individual or business entity registered as a retail merchant may issue exemption certificates and purchase, tax exempt, any items being purchased for re-sale or items being incorporated into a final product (manufacturing) please include state form ST105. Registered retail merchants must assess Indiana sales tax on the sale of tangible personal property unless the buyer presents a valid exemption certificate to the seller. The exemption certificate must be legible, signed, and include the tax-exempt number of the buyer. You cannot use another business entity’s tax exempt number on their behalf.
Any business or individual registered as a retail merchant may issue an exemption certificate and purchase tangible personal property exempt from sales tax when the property is:
- purchased for resale;
- incorporated into property being resold;
- directly used in the manufacturing of tangible personal property to be sold; or
- otherwise exempt by statute.
Indiana Use Tax: Under Indiana law, use tax is imposed upon the use, storage, or consumption of tangible personal property in Indiana where the property was acquired in a retail transaction and sales tax was not paid at the point of purchase. The Indiana
use tax rate is 7% as of April 1, 2008.
Indiana use tax does not apply to property purchased for re-sale, or for property exempted by statute.
Common examples of items subject to Indiana use tax include magazine subscriptions, office supplies, property used or consumed outside the scope of production, and property purchased from out of state vendors. Indiana use tax applies to all residents of Indiana and is not limited to business entities. Registered retail merchants must report and pay the use tax due on the ST-103, Indiana Sales Tax return. Business entities that are not retail merchants must report and pay the use tax due on the income tax return of the entity or on a ST-115. Individuals must report and pay the use tax due on their individual income tax return ( IT-40). Forms:ST-103, ST-115, IT-40.
Withholding Tax: Employers are considered to be withholding agents if they:
- make payments of salaries, wages, tips, fees, bonuses, and commissions that are subject to Indiana state and/or county taxes, and are required by the Internal Revenue Code to withhold federal income tax on those types of payments.
Withholding agents are required to register with the Indiana Department of Revenue (by filing Form BT-1: no fee required) and to withhold state income tax and county income tax, if applicable, from the income of all employees. Independent contractors are required to file quarterly estimated income tax payments. See Section I-C for more details regarding the difference between an employee and an independent contractor.
Once registered as a withholding agent, the Department of Revenue will issue WH-1s, the withholding tax returns, and will determine the filing status, based upon the anticipated monthly wages paid to Indiana employees. After a tax year ends, all Indiana withholding agents are required to complete and to file an annual reconciliation form, WH-3, by February 28 of the following year. For more information, contact:
Indiana Department of Revenue
Corporate Income Tax: Except as otherwise provided, a corporation doing business in Indiana, other than a corporation defined as a taxpayer under IC 6-5.5-1-17, is subject to gross income tax, adjusted gross income tax, and supplemental net income tax.
There are three types of corporate income tax returns in Indiana. They are:
- IT-20 Income Tax Return: Filed by a corporation doing business in Indiana, subject to gross income tax, adjusted gross income tax, and supplemental net income tax.
- IT-20S Income Tax Return: Filed by a corporation doing business in Indiana that qualifies as a Sub S Corporation per the Internal Revenue Code. This is an information return for the corporation. No tax is paid with this return; the shareholders report their share of the income on their individual income tax returns. The 1120S income tax return must be filed for federal purposes in order to file the IT-20S.
- IT-20SC Income Tax Return: Filed by a corporation doing business in Indiana that qualifies as a Sub S Corporation per the Internal Revenue Code, but elects to be treated as a special corporation in Indiana, paying adjusted gross income tax and supplemental net income tax with the return. In order to file the IT-20SC, the Federal Form 1120 must be filed with the IRS.
For more information regarding corporate taxes, contact:
Indiana Department of Revenue
Individual Income Tax: Individual taxes are paid by an individual operating an unincorporated business (an independent contractor or general partner). Estimated tax payments must be made by an individual who:
- receives income from which Indiana adjusted gross income tax, county adjusted gross income tax, county income tax, or county economic income tax is not properly withheld; and has an annual income tax liability that is $1,000 as of January 1, 2008.
Even if an individual does not meet these requirements, the individual may still make estimated installment payments to reduce the amount, which will be due when the annual individual adjusted gross income tax return ( Form IT-40) is filed.
Installment payments may be made by using IT-40ES tax vouchers. The four installment payments are due on April 15, June 15, September 15, and January 15 following the last month of the tax year. For more information regarding individual income tax, contact:
Indiana Department of Revenue
I-B-2-b. Property TaxPersonal property taxes are levied against equipment used in the production of income or held as an investment; billboards; foundations for the equipment; and all other tangible property other than real property. Computer application software is considered an intangible asset and is not assessable. Inventory is no longer taxed.
Personal property values are assessed March 1 of every year and are self reported by property owners to assessors using prescribed state forms. The completed personal property return must be filed with the assessors no later than May 15. Taxes on the reported values are due in two installments - May 10 and November 10 - the following year.
Beginning with the March 1, 2009 assessment date, campers and recreational vehicles are no longer subject to personal property taxation. In 2009, taxpayers will pay their 2008-pay-2009 property tax. In 2010, the Indiana Bureau of Motor Vehicles will begin collecting excise tax on the recreational vehicle when license plates are purchased.
Major exemptions include air and water pollution control equipment; property used for educational, scientific, literary, or charitable purposes; inventory located within an enterprise zone; certain property stored in a warehouse pending shipment out of state; and imports and exports stored in a Foreign Trade Zone. Keep in mind that some of these instances require the filing of specific forms to acquire the exemption. For more information, contact: