Indiana doesn’t have sales tax reciprocity agreements with any other states. This means Indiana residents pay sales tax on purchases in other states, and residents of other states pay sales tax on purchases in Indiana, regardless of their home state’s tax laws.
Myth 1: Neighboring States Offer Reciprocity
Many believe that Indiana shares reciprocity with nearby states like Illinois or Kentucky. This is incorrect. Each state sets its own sales tax rules. While some states might have agreements with each other, Indiana does not participate in any such programs.
Myth 2: Online Purchases Avoid Indiana Sales Tax
- Online retailers must collect Indiana sales tax if they have a physical presence (like a warehouse or office) in Indiana, or if they exceed a certain sales threshold in the state. Even without a physical presence, you are still responsible for paying Indiana use tax on online purchases. Use tax is equivalent to sales tax and is owed on all purchases made outside Indiana but used within the state.
Don’t assume online purchases escape Indiana sales tax obligations. Understand your responsibility for use tax on non-taxed purchases.
Keep accurate records of your online purchases made outside Indiana. File your Indiana income tax return and report your use tax liability accurately. Consult the Indiana Department of Revenue website for detailed information and clarification.
Accurate record-keeping protects you from potential audits and penalties.
