If you’re standing in a checkout line in Indianapolis or scrolling through an invoice from a vendor in Fort Wayne, you’ve probably noticed that 7% hit to your wallet. It’s consistent. It’s predictable. And honestly, it’s one of the highest base rates in the entire country.
But here’s the thing: most people think that 7% is the end of the story. They assume that because Indiana doesn't have local sales taxes, the math is always simple.
It isn't.
While the Indiana sales tax rate 2025 remains fixed at 7%, the reality of what you actually pay—and what businesses have to collect—is shifting under the surface. From new exemptions for restaurant owners to weird rules about how "prepared food" is defined, staying compliant in the Hoosier state is getting a bit more nuanced.
The Flat Rate Reality (and the 2025 Exceptions)
Let’s get the big number out of the way first. Indiana is one of the few states that keeps it simple at the local level. Unlike Illinois or Ohio, where you might pay one rate in the city and another across the street in the suburbs, Indiana has no local sales taxes.
You pay 7% whether you're in a tiny town in Southern Indiana or the heart of downtown Indy.
However, "no local sales tax" doesn't mean "no local taxes at all." This is where people trip up. If you're buying a meal or booking a hotel room, that 7% is just the starting line.
The "Hidden" Add-ons: FAB and Innkeeper’s Taxes
If you’re out for dinner, look closely at your receipt. You’ll likely see a Food and Beverage (FAB) tax. This is usually an extra 1% tacked on by specific counties or municipalities to fund local projects like Lucas Oil Stadium or local convention centers.
Then there’s the Innkeeper’s Tax. If you’re staying at an Airbnb or a hotel, you could be looking at an additional 5% to 10% depending on the county. For 2025, several counties, including Boone County, have been in the news for trying to bump these rates up to fund local tourism and infrastructure.
Major Changes for Businesses in 2025
If you run a business, 2025 brought some specific breathing room, especially if you’re in the hospitality industry.
One of the coolest updates is a new 50% sales tax exemption on electricity for restaurants. Before this year, if a restaurant wanted to claim an exemption for the energy they used to cook food, they had to hire an engineer to do a complex "utility study." It was a massive headache.
Now, thanks to Senate Bill 228, the process is streamlined. You basically just file Form ST-200R through the INTIME portal. No expensive study required. It’s a huge win for small kitchens trying to keep their margins alive.
The Remote Seller "Threshold" Shift
For those of you selling goods online into Indiana, the rules changed slightly leading into 2025. Indiana officially killed the "200 transaction" rule.
Previously, if you sold 200 items to Hoosiers—even if they were $1 stickers—you had to register and collect sales tax. Now, you only need to care if your gross sales in the state hit **$100,000**. If you're a small hobbyist seller who used to stress about that 200-item count, you can officially stop worrying.
What is Actually Taxable? (The Weird Stuff)
Indiana’s tax code has some "kinda" strange distinctions about what gets taxed and what doesn't.
- Groceries: Generally, "unprepared" food is exempt. You don't pay sales tax on a head of lettuce or a carton of eggs.
- The "Utensil" Rule: If you buy a bagel at a grocery store, it's tax-free. If that grocery store slices it, toasts it, and hands it to you with a plastic knife? That’s "prepared food." Boom—7% tax.
- Software (SaaS): This is a big one for tech companies. In Indiana, if you’re just accessing software through a cloud (SaaS) and not downloading anything, it’s generally not taxable.
- Candy and Soda: These are never considered "exempt groceries." You’re paying the full 7% on your Snickers bar and your Coke.
How the Indiana Sales Tax Rate 2025 Compares
Indiana’s 7% rate is tied for the second-highest state-level rate in the U.S. (behind California’s 7.25%). But because there are no local add-ons, the combined rate is often lower than in neighboring states.
In Chicago, you might pay upwards of 10% total. In Indiana, even with a Food and Beverage tax, you’re rarely clearing 8%. It’s a trade-off that makes Indiana look "expensive" on paper but often cheaper at the register.
Actionable Steps for 2025
Whether you're a consumer or a business owner, here is how you should handle the current tax landscape:
- Check your utility bills: If you run a restaurant, get that ST-200R form filed immediately. Leaving a 50% electricity tax exemption on the table is just throwing money away.
- Audit your "Remote" status: If you’re an e-commerce seller, check your 2024 revenue. If you didn't hit $100,000 in Indiana sales, you might be able to close your sales tax account and stop filing those monthly returns.
- Use INTIME: The Indiana Department of Revenue (DOR) has moved almost everything to their "INTIME" portal. It’s actually one of the better-designed state tax sites. Use it for your filings, as they’ve become very aggressive about late filing penalties.
- Watch the gas pump: The "Gasoline Use Tax" in Indiana changes every month based on market prices. In 2025, it’s hovered around $0.17 to $0.18 per gallon. This is the sales tax equivalent for fuel, and it's baked into the price you see on the sign.
The Indiana sales tax rate 2025 isn't going to drop anytime soon. The state relies heavily on this revenue to keep income taxes low—which, by the way, just dropped to 3% for 2025. It's a "consumption over income" strategy that seems to be the Indiana way for the foreseeable future.
Keep your receipts, check your exemptions, and remember: if they give you a fork with it, you're probably paying the tax.
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For business owners specifically, the next immediate move is to log into the INTIME portal and verify your filing frequency. The DOR often moves businesses from quarterly to monthly filing if their volume increases, and missing a monthly deadline because you "thought you were quarterly" is a quick way to get hit with a 10% negligence penalty.