Indiana law distinguishes between business personal property and other types of property for tax purposes. Business personal property, which includes tangible property used or held for use in the production of income, is subject to annual assessment and taxation by local assessing officials. The assessment of business personal property in Indiana is governed by Indiana Code Title 6, Article 1.1, Article 5, specifically focusing on the valuation and reporting requirements. A key aspect is the determination of the “true tax value” of the property. For depreciable personal property, this value is generally determined by applying statutory depreciation schedules to the original cost of the property. These schedules are designed to reflect the declining value of assets over time. For example, for manufacturing equipment, specific depreciation rates are applied based on the asset’s age. The Indiana Department of Local Government Finance (DLGF) provides guidance and forms, such as the Personal Property Tax Return (Form 102), for taxpayers to report their business personal property. The assessment date for business personal property in Indiana is March 1st of each year. Failure to file a timely and accurate return can result in penalties and interest. The tax rate applied to the assessed value is determined by the local taxing units. Understanding the distinction between business personal property and other property, the assessment date, and the valuation methodologies, including statutory depreciation, is crucial for compliance with Indiana tax law.

The Indiana Gross Income Tax Act, codified in Indiana Code Title 6, Article 5, Chapter 1, imposes a tax on the gross income of most individuals and businesses operating within Indiana. This tax is levied on the total gross receipts from all sources, regardless of whether they are derived from business or non-business activities, unless specifically exempted by statute. The Act defines gross income broadly to include all income derived from whatever source acquired, including but not limited to compensation for services, rents, royalties, interest, dividends, and gains from the sale of property. However, certain exclusions and deductions are permitted. For instance, Indiana Code \(6-5-1-7\) outlines exemptions, which can include income from governmental obligations, certain retirement benefits, and income derived from sources outside of Indiana for non-residents. The tax rate can vary depending on the type of income and the entity receiving it, with different rates often applied to adjusted gross income, business income, and other specific categories. The core principle is the taxation of gross receipts, which distinguishes it from net income taxes prevalent in many other states. The administration of this tax is handled by the Indiana Department of Revenue. Understanding the scope of what constitutes taxable gross income and the specific statutory exemptions is crucial for accurate compliance.

The Indiana Gross Income Tax Act imposes a tax on the gross income received by individuals and businesses within Indiana. For a taxpayer domiciled in Indiana, income earned outside of Indiana is generally taxable if it is considered Indiana source income. Indiana follows the “domicile” principle for taxing residents on their worldwide income, but the source of income is critical for non-residents. For a resident of Indiana, income derived from services performed outside Indiana is generally not considered Indiana source income unless specific exceptions apply, such as income from intangible property with a situs in Indiana. The question specifically asks about income earned from services performed entirely outside Indiana by an Indiana resident. Indiana Code \(6-2.1-3-1\) and related administrative rules clarify that gross income derived from services performed outside Indiana by a resident is not subject to Indiana Gross Income Tax, unless the income is derived from an intangible with a situs in Indiana. Therefore, income from services performed outside Indiana by an Indiana resident is not taxable.

Indiana Code IC 6-2.5-4-1 defines gross retail income for sales tax purposes. This section specifies that gross retail income includes the total amount of consideration, whether received in money or by exchange or barter, for all sales of tangible personal property, unless the sales are specifically exempted. Consideration is broadly interpreted to encompass the entire value of the transaction. For instance, if a business in Indiana sells a piece of equipment for $10,000 and also provides installation services valued at $1,000 as part of the same transaction, the gross retail income subject to sales tax would be the total $11,000, assuming no exemptions apply. This is because the installation is considered an integral part of the sale of the tangible property. The Indiana Department of Revenue interprets “consideration” to include not only the stated price but also any other benefits or value exchanged. This comprehensive definition ensures that the sales tax base is as broad as possible, capturing the full value of taxable transactions within the state. Understanding this broad definition of gross retail income is crucial for accurate sales tax reporting and compliance for businesses operating in Indiana.

Indiana Code § 6-3-1-3.5 defines a “resident” for income tax purposes. A resident is an individual who is domiciled in Indiana or an individual who is present in Indiana for 183 days or more during the taxable year and who is not subject to tax as a resident of another state. Domicile is generally understood as the place where an individual has their permanent home and to which they intend to return whenever absent. The determination of domicile involves examining various factors such as where the individual votes, maintains a driver’s license, registers a vehicle, has a bank account, and spends significant time. The presence test, requiring 183 days or more of physical presence, creates a presumption of residency, but this presumption can be rebutted if the individual can demonstrate they are a resident of another state. Therefore, for an individual to be considered a resident of Indiana for tax purposes, they must either have their domicile in Indiana or meet the 183-day presence test and not be a resident of another state. The question asks about an individual who has established domicile in Indiana and spends less than 183 days in the state. Since domicile is the primary factor for residency, and the individual’s domicile is established in Indiana, they are considered an Indiana resident regardless of the number of days spent in the state, as long as they do not also qualify as a resident of another state under that state’s laws. The key is the intent to return to Indiana as their permanent home.

The Indiana Gross Retail Tax (Sales Tax) is imposed on the retail sale of tangible personal property and certain services within Indiana. For a sale to be subject to sales tax, it must be a retail transaction, meaning the property or service is being sold for use or consumption and not for resale in the ordinary course of business. The key concept here is whether the transaction constitutes a retail sale. When a business purchases items for use in its operations, rather than for inventory to be resold, those purchases are generally subject to sales tax unless a specific exemption applies. In this scenario, the printing company is purchasing paper and ink for the purpose of producing flyers that will be distributed to potential customers of its clients. The flyers themselves are not being resold by the printing company; rather, they are a service provided to its clients, and the paper and ink are consumed in the production of that service. Therefore, the purchase of paper and ink by the printing company for this purpose is considered a retail purchase of tangible personal property for use in its business operations. Indiana law, specifically Indiana Code Title 6, Article 2.5, governs sales and use tax. While there are exemptions for items purchased for resale, this situation does not qualify. The printing company is not selling the paper and ink to its clients; it is selling the finished flyers. The paper and ink are incorporated into the final product, but the transaction is not a direct resale of those raw materials. Consequently, the printing company is liable for paying Indiana sales tax on its purchases of paper and ink for this purpose.

In Indiana, the taxation of business income is primarily governed by the Indiana Corporate Income Tax, which is levied on the adjusted gross income of corporations. For a business operating in Indiana and also in another state, apportionment is a critical concept to determine the portion of its total income subject to Indiana tax. Indiana utilizes a three-factor apportionment formula, which includes property, payroll, and sales. However, recent legislative changes have moved towards a single-sales factor apportionment for many businesses. For tax years beginning on or after January 1, 2023, Indiana generally employs a single-factor apportionment based solely on sales. This means that the proportion of a business’s total sales that are sourced to Indiana determines the percentage of its total income that is taxable by Indiana. Sales are sourced to Indiana if the income-producing activity is performed in Indiana, or if the taxpayer is physically present in Indiana and the income-producing activity is performed within and without Indiana, the sale is in Indiana if the greater proportion of the income-producing activity is performed in Indiana. For sales other than sales of tangible personal property, the sale is sourced to Indiana if the benefit of the sales activity is received in Indiana. For sales of tangible personal property, the sale is sourced to Indiana if the property is delivered or shipped to a purchaser in Indiana, or to any person for the benefit of the purchaser in Indiana, excluding delivery or shipment to a public utility. If the destination of the property is outside Indiana, the sale is not considered Indiana sales. Therefore, understanding the sourcing rules for various types of income is paramount for accurate tax liability calculation.

In Indiana, the determination of whether a transaction constitutes a sale for resale, thereby exempting it from sales tax, hinges on the intent of the purchaser and the ultimate use of the purchased goods. Indiana Code \(6-2.5-4-1\) defines a sale for resale as a transaction where the purchaser acquires property for the purpose of reselling it to another person in the ordinary course of the purchaser’s business. This exemption is crucial for maintaining the integrity of the sales tax system, preventing cascading taxation. For a purchase to qualify as a sale for resale, the purchaser must provide a valid Indiana Sales Tax Exemption Certificate (Form ST-105) to the seller at the time of the transaction. This certificate serves as documentation that the goods are not for the purchaser’s own consumption but will be resold. Without this certificate, the seller is generally obligated to collect sales tax. The exemption is not based on the seller’s knowledge of the buyer’s intent alone, but rather on the buyer’s documented assertion of that intent via the exemption certificate. The exemption applies to tangible personal property and certain enumerated services that are consumed in the process of producing tangible personal property for sale. For instance, raw materials that become an integral part of the manufactured product are exempt. However, items consumed in the manufacturing process that do not become part of the final product, such as lubricants or cleaning supplies used by the manufacturer, are generally taxable unless they meet specific criteria for manufacturing exemptions. The burden of proof lies with the purchaser to demonstrate that the purchase was for resale.

Indiana Code § 6-2.5-5-33 governs exemptions from sales tax for certain agricultural products. Specifically, it exempts from the state gross retail tax the sale of tangible personal property to a farmer for use in the production of agricultural commodities for sale. This exemption is narrowly construed. The key element is the direct use in the production process. Items used for storage, maintenance, or general farm operations, but not directly in the cultivation or harvesting of agricultural commodities, are typically not exempt. For instance, a tractor used for plowing fields for planting would be exempt, but a pickup truck used for general transportation around the farm, or tools used for repairing farm equipment, would not be. The exemption applies to tangible personal property purchased by a farmer, meaning an individual or entity engaged in the business of producing agricultural commodities for sale. The purchase must be for use in Indiana. The Department of Revenue provides specific guidance on what constitutes direct use in agricultural production. The exemption is not a blanket exemption for all items purchased by a farmer.

Indiana Code § 6-2.5-4-1 defines gross receipts tax as a tax imposed on the gross income derived from transactions of a retail merchant in Indiana. The definition of a “retail merchant” under Indiana Code § 6-2.5-1-13 includes a person engaged in the business of acquiring tangible personal property for the purpose of selling it at retail, or engaging in the business of providing a service for which the retail merchant receives consideration. However, Indiana Code § 6-2.5-5-1 through § 6-2.5-5-27 outlines various exemptions from this tax. Specifically, Indiana Code § 6-2.5-5-12 provides an exemption for the sale or lease of tangible personal property to a person who purchases the property for use in the manufacturing, processing, or refining of other tangible personal property. This exemption is often referred to as the manufacturing equipment exemption. For this exemption to apply, the property must be directly used in the manufacturing process, which is defined broadly to include activities that transform, convert, or refine raw materials or components into a new form or product. The exemption is not applicable to property used in administrative, sales, or general support functions, even if those functions are essential to the overall business operation. Therefore, a sophisticated industrial robot used on an assembly line to weld components onto a vehicle chassis would qualify for the exemption, as it is directly involved in the transformation of raw materials into a finished product. Conversely, a forklift used to move finished goods from the assembly line to a warehouse for storage would not qualify, as its use is post-manufacturing. The intent of the law is to encourage manufacturing within Indiana by reducing the tax burden on capital investments directly tied to production.

The Indiana Department of Revenue (IDOR) administers various tax laws within the state. For sales and use tax purposes, the determination of whether a transaction constitutes a taxable sale of tangible personal property or an exempt service is crucial. Indiana Code \(6-2.5-4-1\) defines a taxable gross income as income derived from the sale of tangible personal property. Indiana Code \(6-2.5-4-10\) further clarifies that the provision of certain services is also subject to sales tax. However, specific exemptions exist. For instance, the sale of certain professional services, such as those rendered by an attorney or accountant, are generally not subject to Indiana sales tax unless they are inextricably linked to the sale of tangible personal property. In the scenario presented, the creation of custom software, while involving intellectual property, is considered a service. If the software is delivered electronically and not embodied in a physical medium, it is generally not treated as tangible personal property for sales tax purposes in Indiana. The key distinction lies in whether the product is tangible or intangible. Indiana law focuses on the transfer of possession and the physical nature of the item. Electronic delivery of software, without a tangible component like a disk or manual, is typically viewed as the performance of a service, and thus, not subject to Indiana sales tax unless a specific statutory provision makes it taxable. The IDOR guidance often clarifies that the sale of pre-written or canned software, whether delivered electronically or physically, is treated as the sale of tangible personal property and is taxable. However, custom-developed software, where the unique specifications are created for a specific customer, is generally treated as a service. The sale of a service is not subject to Indiana sales tax unless specifically enumerated as taxable. Since custom software development is not enumerated as a taxable service in Indiana, and its electronic delivery without a tangible medium further supports its classification as an intangible service, it remains non-taxable.

In Indiana, the determination of whether a transaction constitutes a taxable sale or a non-taxable service is crucial for sales and use tax purposes. Indiana Code § 6-2.5-4-1 defines a retail transaction subject to sales tax as the transfer of tangible personal property for consideration. However, the application of sales tax to services is more complex and often hinges on whether the service is considered “ancillary” to the sale of tangible personal property or a distinct taxable service. Indiana Department of Revenue guidance, particularly concerning Information Bulletin #38, clarifies that services that are an integral part of or incidental to the performance of a taxable sale of tangible personal property are generally not separately taxable if the charges are not separately stated. Conversely, if a service is performed independently of a sale of tangible personal property, or if it is a specifically enumerated taxable service, it will be subject to sales tax. In the scenario presented, the installation of a custom-built computer system by a vendor who also sells the components involves both the transfer of tangible personal property (the computer parts) and a service (installation). If the installation is considered an inseparable part of delivering the functional computer system and the total charge is presented as a lump sum for the completed system, it is generally treated as a sale of tangible personal property, making the entire transaction taxable. If the installation were a distinct, separately billed service unrelated to the sale of tangible property, or a specifically enumerated taxable service under Indiana law, it would be taxed independently. The key is the nature of the service in relation to the tangible personal property transfer and how the charges are presented. Indiana law focuses on the economic substance of the transaction.

The Indiana Gross Income Tax Act imposes a tax on the gross receipts of individuals and businesses derived from sources within Indiana. For a nonresident individual, the tax applies only to gross income derived from sources within Indiana. The determination of Indiana-source income for a nonresident is crucial. Indiana Code § 6-2.1-3-13 specifically addresses the taxability of income earned by nonresidents from services performed within Indiana. This statute establishes that compensation for services rendered by a nonresident is considered Indiana-source income if the services are physically performed within the state’s borders. Therefore, even if a nonresident’s employer is based in another state, and the payment is processed elsewhere, the physical location where the work is done dictates the tax situs for gross income tax purposes. In this scenario, Ms. Anya Sharma, a resident of Ohio, performed all her work physically within Indiana for her employer, a company headquartered in Illinois. Consequently, her entire gross income from this employment is subject to Indiana Gross Income Tax, as the source of the income is the performance of services within Indiana. The rate of tax applicable would depend on the classification of the income (e.g., retail sales, services, or other business income), but the fundamental principle for a nonresident is the situs of the service performance.

In Indiana, the classification of a business for sales tax purposes hinges on its primary business activity. This classification determines whether the business must collect sales tax on its transactions. For a business providing both tangible personal property and services, the rule of thumb is to identify the predominant purpose of the transaction. If the primary purpose is the sale of tangible personal property, then sales tax applies to the entire transaction, including any incidental services. Conversely, if the predominant purpose is the rendition of a service, and the tangible personal property is merely incidental to that service, then sales tax generally does not apply to the service component, and may not apply to the incidental property depending on its nature and how it is incorporated into the service. Indiana Code \(6-2.5-4-1\) and related administrative rules, such as 45 IAC 2.2-8-1, provide guidance on this distinction. The key is to analyze the transaction from the customer’s perspective to determine what they are primarily purchasing. For instance, if a customer contracts for a custom-designed software solution that includes installation and ongoing support, the primary purpose is the service of creating and implementing the software. The physical media or any hardware provided would be incidental. However, if a business sells pre-packaged software on a disk with optional installation assistance, the primary purpose is the sale of the tangible property, and the installation is an ancillary service. The Indiana Department of Revenue often looks at the relative value of the property versus the service, but the ultimate determination rests on the overall intent and substance of the agreement.

Indiana Code § 6-3-2-1 defines adjusted gross income for purposes of the state’s income tax. This definition generally follows federal adjusted gross income, with specific modifications. One such modification involves the treatment of certain retirement income. For Indiana adjusted gross income, a taxpayer may subtract up to \$5,000 of retirement income received from a public retirement system. Public retirement systems include those established by Indiana law for state or local government employees. This subtraction is available to individuals who have reached retirement age, typically defined as age 62, or who are retired due to disability. The subtraction is applied on a per-taxpayer basis. Therefore, if a married couple files jointly and both are eligible for the subtraction, they can each subtract up to \$5,000 of their respective public retirement income, for a total potential subtraction of \$10,000. The question asks for the maximum aggregate amount of public retirement income that can be subtracted by a married couple filing jointly, assuming both are eligible and receive qualifying retirement income. Since each individual can subtract up to \$5,000, the combined maximum is \$5,000 + \$5,000 = \$10,000.

The Indiana Gross Retail Tax (sales tax) is imposed on the retail sale of tangible personal property in Indiana for use, storage, or consumption in Indiana. However, certain exemptions exist to encourage specific economic activities or support particular entities. One such exemption pertains to the purchase of tangible personal property by qualified organizations for use in their exempt activities. For a not-for-profit organization to qualify for this exemption on its purchases, it must be recognized as exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and also obtain a Letter of Determination from the Indiana Department of Revenue confirming its Indiana sales tax exemption status. The exemption applies to purchases made directly by the organization for its use in furthering its exempt purposes. If an organization does not possess a valid Letter of Determination from the Indiana Department of Revenue, it cannot legally claim the sales tax exemption on its purchases, even if it holds a 501(c)(3) status from the IRS. Therefore, the absence of the Indiana Department of Revenue’s determination letter prevents the application of the exemption.

The Indiana Gross Income Tax Act, codified in Indiana Code Title 6, Article 5, imposes a tax on the gross income of most individuals and businesses operating within Indiana. For a business that is a sole proprietorship, the business income is generally treated as the personal income of the owner for tax purposes. Indiana Code § 6-5-1-2 defines gross income broadly to include all receipts derived from services rendered, sales of goods, and other business activities. However, certain specific types of income are exempt or deductible. For a sole proprietorship operating in Indiana, the primary method of taxation is through the individual’s Indiana Adjusted Gross Income Tax return, where the business’s net earnings are reported. While the question asks about “gross income tax,” it’s important to distinguish this from the income tax levied on net income. Indiana’s gross income tax applies to the total revenue generated before the deduction of business expenses. However, for a sole proprietorship, the tax is ultimately paid by the individual owner. The question implies a scenario where a sole proprietor is considering how their business activities are taxed under Indiana law. The most direct and accurate way to describe the taxation of a sole proprietorship’s earnings in Indiana, concerning gross income, is that the owner’s gross income is subject to Indiana’s gross income tax. This means the total revenue from the business activities is the base for this specific tax, even though the ultimate tax liability is calculated on the owner’s personal return, often after considering deductions and exemptions allowed by Indiana law. The key is that the business’s revenue stream is the source of the gross income being taxed. The Indiana Department of Revenue administers these taxes. The correct understanding is that the owner’s personal income, derived from the sole proprietorship’s gross receipts, is what is taxed under the gross income tax framework.

In Indiana, the determination of whether a business activity constitutes a “retail transaction” subject to sales tax hinges on the primary purpose of the exchange. Indiana Code \(6-2.5-4-1\) defines gross receipts from the sale of tangible personal property as taxable. However, the taxability of services is more nuanced. Generally, services are not taxable in Indiana unless specifically enumerated by statute. For a business providing both tangible goods and related services, the critical factor is the predominant nature of the transaction. If the service is merely incidental to the sale of tangible personal property, and the property is the primary focus of the customer’s purchase, then the entire transaction may be considered a retail sale of tangible property, and thus taxable. Conversely, if the service is the primary purpose, and the tangible property is secondary or consumed in the performance of the service, the transaction might be considered a non-taxable service. This distinction is crucial for businesses that offer integrated solutions. For instance, a company that sells custom-designed software and also provides installation and ongoing maintenance services must carefully analyze the customer’s intent and the contractual agreement to correctly classify the revenue for sales tax purposes. If the customer is primarily purchasing the right to use the software (a service aspect) and the installation is a necessary component of that use, the transaction leans towards a service. However, if the customer is purchasing a physical copy of the software, or a license that grants ownership of the program itself, and the installation is merely an ancillary benefit, it would likely be considered a sale of tangible personal property. Indiana law emphasizes the “true object” test in such cases, seeking to understand what the customer is truly buying.

The Indiana Gross Retail Tax, commonly known as sales tax, applies to the retail sale of tangible personal property and certain enumerated services. For a business operating in Indiana, understanding what constitutes a taxable sale versus an exempt sale is crucial for compliance. Indiana Code § 6-2.5-4-1 defines a taxable sale as the “retail transaction” of tangible personal property. However, certain transactions are specifically exempted by statute. Indiana Code § 6-2.5-5 outlines various exemptions, including those for manufacturing equipment used directly in the production process. In this scenario, the specialized robotic arm purchased by “Innovate Manufacturing Inc.” is intended for use in the automated assembly line of their new product. Since this equipment is directly involved in the manufacturing process, it qualifies for the manufacturing equipment exemption under Indiana law. Therefore, the purchase of the robotic arm is not subject to Indiana sales tax. The exemption is not based on the business’s overall profit margin or its status as a sole proprietorship versus a corporation, but rather on the nature and use of the purchased item.

Indiana Code IC 6-3-1-3.5 defines adjusted gross income for Indiana income tax purposes. It starts with federal adjusted gross income and then makes specific Indiana modifications. One significant modification involves the treatment of certain retirement income. Indiana provides a deduction for retirement income, up to a certain limit, for taxpayers who are at least 62 years old. This deduction is for income received from pensions, annuities, and other retirement plans. The maximum annual deduction for retirement income for an individual taxpayer is \$5,000. This deduction is applied against the taxpayer’s adjusted gross income. Therefore, for a taxpayer with \$15,000 in qualified retirement income, the maximum amount that can be deducted from their Indiana adjusted gross income is \$5,000. The remaining \$10,000 of retirement income would still be subject to Indiana income tax, assuming it is not otherwise exempt or deductible under other provisions of Indiana tax law. The calculation is straightforward: the lesser of the total qualified retirement income or the statutory maximum deduction. In this case, it’s the lesser of \$15,000 and \$5,000, which equals \$5,000.

Indiana Code § 6-8.1-5-1 governs the assessment of tax liabilities. When a taxpayer fails to file a return or pays an incorrect amount of tax, the Department of Revenue is empowered to issue a Notice of Proposed Assessment (NPA). This notice outlines the department’s determination of the tax due, including any penalties and interest. The taxpayer then has a statutory period, typically 60 days from the date of the notice, to file a written protest. This protest must state the reasons for the objection and be delivered to the department. If a timely protest is filed, the department must review the taxpayer’s submission. If the department does not grant the protest, it will issue a Notice of Final Determination. The taxpayer then has further recourse, usually by filing an appeal with the Indiana Tax Court. Failure to file a timely protest or appeal can result in the assessment becoming final and collectible. The core principle is providing the taxpayer with an opportunity to be heard and to present their case before the assessment is irrevocably established. This due process is fundamental to tax administration.

In Indiana, the sales tax exemption for manufacturing equipment is governed by Indiana Code § 6-2.5-5-3. This statute provides an exemption for gross receipts from the sale, lease, lease-rental, or use of tangible personal property that is used by a taxpayer in a qualified manufacturing process. To qualify, the property must be directly used in the production of tangible personal property for sale. This includes machinery, equipment, and tools that are essential to and directly involved in the manufacturing operation. The exemption is not a blanket exemption for all business property; it is specifically tied to the direct use in the manufacturing process itself. For example, general office equipment, vehicles used for transportation of finished goods to customers, or property used in administrative functions would not qualify. The key is the direct and immediate contribution of the property to the transformation of raw materials or components into a finished product intended for sale. Therefore, a conveyor belt system that moves partially finished goods between workstations on an assembly line is directly used in the manufacturing process.

The Indiana Department of Revenue administers various taxes, including the Indiana Gross Retail Tax (Sales Tax). For sales tax purposes, a transaction is generally considered taxable if it involves the transfer of tangible personal property for consideration, unless an exemption applies. Services are generally not taxable in Indiana unless they are specifically enumerated as taxable services under Indiana Code Title 6, Article 2.5. The question concerns a business providing a service that also involves the incidental transfer of tangible personal property. To determine taxability, one must analyze the primary purpose of the transaction. If the tangible personal property is merely incidental to the performance of a nontaxable service, the entire transaction may be considered nontaxable. Conversely, if the tangible personal property is the primary subject of the sale, or if the service is merely incidental to the sale of taxable tangible personal property, then the transaction would be taxable. In this scenario, the primary purpose of the business is to provide a repair service. The replacement parts are necessary for the repair but are not the primary item being sold; rather, they are integral to the service provided. Indiana law, specifically under IC 6-2.5-3-2, taxes gross receipts from the sale of tangible personal property. However, when tangible personal property is transferred as part of a repair service, the taxability hinges on whether the property is incidental to the service or the service is incidental to the property. Given that the core offering is the repair service, and the parts are consumed or incorporated into the repair, the transaction is generally treated as a nontaxable service with incidental parts. This interpretation aligns with the principle that services, unless specifically enumerated, are not subject to gross retail tax in Indiana. Therefore, the business is not required to collect Indiana sales tax on the total charge for the repair service, including the cost of the replacement parts, as the dominant purpose of the transaction is the provision of a service.

The Indiana Gross Income Tax Act, as codified in Indiana Code Title 6, Article 5, Chapter 1, establishes a tax on the gross income of individuals, partnerships, corporations, and other entities doing business in Indiana. The Act defines “gross income” broadly to include all receipts from any source, whether in the form of money, credits, or other valuable consideration. However, specific exemptions and deductions are provided. For a business operating solely within Indiana and providing services, the primary consideration is whether the income received constitutes taxable gross income. Indiana Code § 6-5-1-2 defines gross income, and § 6-5-1-4 outlines exemptions. Services performed within Indiana by a business physically located in Indiana are generally subject to the gross income tax. The tax rates are tiered, with a lower rate for wholesale sales and manufacturing, and a higher rate for other services and retail sales. For a service business not falling into specific exempt categories, the income derived from services rendered within the state is taxable at the applicable rate. The question focuses on the taxability of service income for a business operating exclusively within Indiana. The fundamental principle is that income from services rendered within Indiana is subject to the gross income tax unless a specific exemption applies. Since the scenario specifies a service business operating entirely within Indiana, and no exemptions are mentioned, the income derived from these services is taxable. The rate applied would depend on the specific nature of the services and whether they qualify for any preferential rates, but the fact of taxability is the core concept being tested. The Indiana Department of Revenue provides guidance on specific service classifications and applicable rates. The general rate for services not otherwise specified is typically the higher rate.

In Indiana, the determination of whether a transaction constitutes a sale for sales tax purposes hinges on the transfer of title or possession. When a contractor provides materials and labor for the improvement of real property, the taxability depends on whether the contractor is considered to be consuming the materials or reselling them. If the contractor installs tangible personal property that becomes a permanent fixture, it is generally considered a taxable retail transaction for the contractor, who then collects sales tax from the customer. However, if the contractor uses materials that are incorporated into the real property and do not retain their separate identity as tangible personal property after installation, the transaction is viewed differently. Specifically, when a contractor uses materials that are consumed in the performance of a construction contract for real property, the contractor is the end-user of those materials. Therefore, the contractor must pay sales tax on the purchase of these materials. This is often referred to as the “contractor as consumer” rule. The key distinction lies in whether the materials are being resold to the customer as tangible personal property or are being consumed by the contractor in the performance of the service. In Indiana, for improvements to real property, the contractor is generally treated as the consumer of materials used, making the purchase of those materials by the contractor subject to sales tax. This means the contractor cannot claim an exemption for materials that will be incorporated into real property.

Indiana Code § 6-3-1-3.5 defines a “resident” for income tax purposes. A resident is an individual who is domiciled in Indiana. Domicile is established by being physically present in Indiana with the intent to remain indefinitely or to return if absent. An individual can be physically present in Indiana for 183 days or more in a taxable year and still not be considered a resident if their domicile is elsewhere. Conversely, someone domiciled in Indiana is a resident, even if they are temporarily absent for a portion of the year. The key factor is the intent to make Indiana their permanent home. Therefore, for an individual to be considered an Indiana resident for tax purposes, they must have established a domicile in the state, regardless of the number of days spent within Indiana’s borders during the tax year. This distinguishes residency from mere physical presence.

The Indiana Gross Retail Tax (sales tax) is imposed on the retail sale of tangible personal property and certain services. For sales made to out-of-state purchasers who will remove the property from Indiana for use outside the state, a specific exemption applies if certain conditions are met. This exemption is designed to prevent Indiana from taxing sales that are ultimately consumed or used in another jurisdiction, thereby avoiding double taxation and promoting interstate commerce. The exemption is not automatic; the seller must obtain proof that the property is indeed being removed from Indiana for use outside the state. Acceptable proof typically includes a signed statement from the purchaser or their agent, confirming the out-of-state destination and intended use, and that the property will not be returned to Indiana for use. The seller must maintain this documentation to support the exemption claimed on their sales tax return. Failure to obtain and retain proper documentation can result in the seller being held liable for the uncollected tax. This principle aligns with the general tax doctrine that a state’s taxing authority is limited to transactions with a sufficient nexus to that state.

In Indiana, the determination of whether a transaction constitutes a taxable sale of tangible personal property or a non-taxable service hinges on the predominant nature of the transaction. This is often referred to as the “true object test” or the “essence of the transaction.” When a transaction involves both tangible personal property and services, the taxability is based on what the customer is primarily purchasing. If the primary purpose is to acquire tangible personal property, the entire transaction is generally subject to sales tax, even if some incidental services are included. Conversely, if the primary purpose is to obtain a service, and the tangible personal property is merely incidental or a byproduct of that service, the transaction may be considered a non-taxable service. Indiana law, specifically under IC 6-2.5-4-1 and related administrative rules, emphasizes this distinction. For example, the sale of a custom-made software program that is delivered on a physical medium, such as a CD or USB drive, is generally considered a sale of tangible personal property and thus taxable. The physical medium is tangible, and the transfer of the program on it constitutes a sale. However, if the software is delivered electronically and the customer is primarily paying for the right to use the software (e.g., a subscription service accessed online), it might be classified as a non-taxable service or intangible property, depending on the specifics. The key is to identify the dominant purpose of the customer’s expenditure. In the scenario described, the customer is receiving a physical product (the installed software on a disk) along with the installation service. The Indiana Department of Revenue’s guidance often points to the transfer of the physical medium as indicative of a tangible personal property sale, especially when the software itself is considered proprietary and is being sold outright rather than licensed for use. Therefore, the transaction is predominantly a sale of tangible personal property.

The Indiana Gross Retail Tax, commonly known as sales tax, applies to the retail sale of tangible personal property and certain services. In Indiana, the tax rate is 7%. When a business purchases items for resale, these items are generally exempt from sales tax under the resale exemption. This exemption is crucial for maintaining the tax’s neutrality in the supply chain, preventing cascading taxation. To claim this exemption, the purchaser must provide the seller with a valid Indiana Sales Tax Exemption Certificate (Form ST-105). This certificate serves as proof that the goods are being acquired for resale or for a specific exempt purpose. Without a properly executed exemption certificate, the seller is obligated to collect and remit the sales tax on the transaction. The onus is on the purchaser to provide the correct documentation, and on the seller to obtain it. If an exemption is improperly claimed, the seller may be liable for the uncollected tax, penalties, and interest. Therefore, understanding the nuances of the resale exemption and the proper documentation requirements is fundamental for businesses operating in Indiana.

The Indiana Department of Revenue (IDR) administers various taxes, including sales tax. For sales tax purposes, a transaction is generally considered taxable if it involves the transfer of tangible personal property for consideration. However, Indiana law provides specific exemptions. One such exemption pertains to the sale of certain agricultural products. Specifically, when tangible personal property is purchased for direct consumption in the production of agricultural commodities for sale, it is typically exempt from Indiana sales tax. This includes items like animal feed, seeds, fertilizer, and pesticides used directly in farming operations. The exemption is not for the farmer’s personal consumption or for items used in general business operations not directly tied to agricultural production. The key is the direct use in the farming process that results in a product intended for sale. For instance, a tractor used to plow fields for crops sold commercially would qualify, but a delivery truck used to transport those crops to market might not be exempt under this specific provision, as its primary use is distribution rather than direct production. Understanding the scope of “direct consumption in the production” is crucial for determining taxability.