Establishing Tax Accounts
I-B. ESTABLISHING TAX ACCOUNTS
I-B-1. Federal Tax Information
Any 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
800-829-1040(info), 800-829-3676 (forms & publications)
800-829-4933 (EIN assignment)
http://www.irs.ustreas.gov/
I-B-2. STATE TAX INFORMATION
I-B-2-a. Registration for Sales, Use, and Income Taxes
How 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. Form: BT-1 is available form any Department of Revenue office (listed in Appendix C), or the State Information Center.
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
100 N Senate Ave., N105
Indianapolis, IN 46204
Sales Tax: 317-233-4015
http://www.in.gov/dor
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).
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.
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 6% as of December 1st 2002.
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) 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
100 N Senate Ave., N105
Indianapolis, IN 46204
Withholding: 317-233-4016
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
100 N. Senate Avenue
Indianapolis, IN 46204
Corporate Tax Section: 317-233-4015
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 $400 or more.
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
100 N Senate Ave., N105
Indianapolis, IN 46204
Individual Income: 317-232-2240
I-B-2-b. Property Tax
Property taxes in Indiana are imposed at the local level on real property (land and buildings) and certain types of personal property. Business personal property consists of inventories, machinery and equipment, special tooling, and construction in progress. Individual personal property consists of a variety of items, such as, recreational vehicles, campers, trailer, non-motorized boats, ATV's, snowmobiles etc., which do not pay an excise tax.
The assessment date is March 1. Property taxes are based on a "rate per hundred" dollars of assessed value. Township and county officials determine the assessed value of real property and taxpayers are responsible for filing annual returns for personal property. The assessment level in Indiana is 100% of true value, which by statute does not mean market value. True tax value is determined through the application of the rules of the Department of Local Government Finance.
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:
Department of Local Government Finance, Assessment Division
100 N Senate Ave., N1058
Indianapolis, IN 46204
317-232-3773
http://www.in.gov/dlgf
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