How Indiana Sales Tax Works and What You Pay

Indiana charges a 7% state sales tax on most goods, plus any local tax your county or city adds

Indiana's state sales tax rate is 7%. This applies to tangible personal property — things you can touch and take home. On top of the state rate, most Indiana counties and cities add their own local sales tax, which ranges from 0% to 2.5% depending on where you live. Your total sales tax bill is the state rate plus your local rate combined.

The tax is calculated on the purchase price at the register. If you buy an item for $100 in Indianapolis, you pay $100 plus the combined state and local tax rate for Marion County. The retailer collects the tax from you and sends it to the Indiana Department of Revenue and your local taxing authority.

Not everything is taxed the same way. Groceries, prescription medications, and some medical devices are taxed at a lower rate or not taxed at all. Services — like haircuts, repairs, or consulting — are generally not subject to sales tax in Indiana, though there are exceptions.

Key Takeaways

• Indiana's state sales tax is 7%, and your county or city may add between 0% and 2.5% on top of that.
• Groceries and prescription medications are taxed at a lower rate (2%) or not taxed, while most other goods are taxed at the full combined rate.
• Services like haircuts and repairs are not subject to sales tax in Indiana.
• The tax is collected by the retailer at the point of sale and sent to the state and local governments.
• Online purchases from out-of-state sellers may or may not be taxed depending on whether the seller has a physical presence in Indiana.

What items are taxed at the lower 2% rate

Groceries and certain food items are taxed at 2% instead of the full state rate. This includes items like bread, milk, eggs, vegetables, and meat. The intent is to reduce the tax burden on essential food purchases. However, prepared foods — like deli items, hot foods, or restaurant meals — are taxed at the full rate.

Prescription medications are not subject to sales tax in Indiana at all. Over-the-counter medications like pain relievers or cold medicine are taxed at the full rate. Medical devices prescribed by a doctor may also be exempt, but this depends on the specific device and how it is classified.

What is not taxed in Indiana

Services are generally not subject to sales tax. If you pay a plumber to fix a leak, a mechanic to repair your car, or a salon to cut your hair, that labor is not taxed. However, if you buy parts or products as part of that service, the products themselves may be taxed.

Clothing and footwear are not subject to sales tax in Indiana. This applies to most apparel, including shoes, jackets, and accessories. Some items like hats, gloves, and belts are also exempt. The exemption does not explore to special clothing like costumes or athletic uniforms sold as uniforms.

Prescription eyeglasses and contact lenses are exempt from sales tax. However, non-prescription sunglasses and reading glasses are taxed at the full rate.

How local sales tax varies by county and city

Indiana allows counties and cities to add their own sales tax on top of the 7% state rate. The local rate depends on where you make the purchase. Marion County (Indianapolis) has a local rate of 1.25%, bringing the total to 8.25%. Lake County (Gary, Hammond) has a local rate of 1%, making the total 8%. Other counties range from 0% to 2.5% local tax.

Some Indiana counties have no local sales tax at all, so you pay only the 7% state rate. To find your local rate, you can check the Indiana Department of Revenue website or ask the retailer. The rate that applies is the one where the purchase happens, not where you live.

Local tax revenue goes to county and city governments to fund schools, roads, and public services. The rate can change if voters approve a referendum to increase or decrease it, though this happens infrequently.

Sales tax on online and out-of-state purchases

If you order from an online retailer that has a physical location in Indiana — like a warehouse or store — the retailer must collect Indiana sales tax on your order. This applies even if the item ships from out of state. If the retailer has no physical presence in Indiana, they are not required to collect Indiana sales tax, though some choose to do so anyway.

Many large online retailers now collect sales tax in all states, including Indiana, regardless of whether they have a physical location there. This changed after a 2018 U.S. Supreme Court ruling that expanded states' authority to require sales tax collection. Check your receipt or the retailer's tax policy to see whether tax was charged.

If you buy from an out-of-state retailer and no sales tax was collected, Indiana law technically requires you to pay use tax on that purchase when you file your state income tax return. Use tax is the same rate as sales tax and applies to items you bring into Indiana from out of state. In practice, most individual taxpayers do not report use tax, but it remains a legal obligation.

Who collects and where the money goes

The retailer — the store or online seller — collects sales tax from you at the point of sale. The retailer then sends the tax to the Indiana Department of Revenue and to the local taxing authority in the county or city where the sale occurred. Retailers file sales tax returns monthly or quarterly, depending on the amount of tax they collect.

The state keeps the 7% state portion and distributes it to state programs. The local portion goes to the county or city government. Some local tax is dedicated to specific purposes, like funding a public transit system or school district, depending on how the local tax was approved.

Frequently Asked Questions

Do I pay sales tax on clothes in Indiana?

No. Clothing and footwear are exempt from sales tax in Indiana. This includes most apparel like shirts, pants, shoes, and jackets. The exemption applies to everyday clothing but not to special items like costumes or athletic uniforms sold as uniforms.

What is the total sales tax rate in my county?

The total rate is 7% (state) plus your local county or city rate. Local rates range from 0% to 2.5%. To find your exact rate, check the Indiana Department of Revenue website or ask a retailer in your area.

Do I have to pay sales tax on groceries?

Groceries are taxed at 2% instead of the full rate. This includes items like bread, milk, eggs, and vegetables. Prepared foods and restaurant meals are taxed at the full combined rate.

Is sales tax charged on services like haircuts or car repairs?

No. Services are not subject to sales tax in Indiana. However, if you buy products as part of the service — like hair products at a salon or parts at a repair shop — those products are taxed at the full rate.

Do I owe Indiana sales tax on items I buy online from out-of-state sellers?

It depends on whether the seller has a physical presence in Indiana. If they do, they must collect Indiana sales tax. If they do not, they are not required to collect it, though some do anyway. Indiana law requires you to pay use tax on untaxed purchases when you file your state income tax return, though most individuals do not report it.