What is Taxable?

• Food sold for immediate consumption is taxable. A sales tax must be paid on any retail sale, renting or leasing of tangible personal property, transient rentals or lodging for less than 30 days, certain utilities and cable television services, renting or furnishing of booths and display spaces and the storage, use or consumption of tangible personal property within the state. In addition to the state sales tax, there is a statewide motor vehicle rental excise tax, and certain municipalities also charge food and beverage taxes and county innkeeper's taxes.
  
  

What is Exempt from Sales Tax?

• Professional and personal services are generally exempt from the sales tax, as are purchases of food, groceries, prescription drugs and medicines. Purchases of farm produce are generally not taxable. Retailers, contractors and other resellers can register with the state for a certificate of exemption from the sales tax when purchasing items for resale or for use in their business. Farmers do not have to pay the tax for livestock, livestock feed and fertilizers in conjunction with their agricultural operation. The law can be complicated. For example, sales of whole watermelons sold by a farmer at a produce stand are not taxable, while sales of a slice of watermelon, because it is meant to be consumed on premises, is taxable.
  
  

What is the Difference Between Sales and Use Taxes?

• The taxes are similar and are intended to ensure that a full 7 percent is collected on every purchase. If you buy a taxable item in the state of Indiana from an Indiana seller, you are required to pay the seller a 7 percent sales tax. If you're an Indiana resident and you buy a taxable item and the full 7 percent tax is not charged, you are required to pay the difference as a "use" tax on your annual state income tax. This includes items bought online and from catalogs.
  
  

Used Items Bought from a Friend or at Garage Sales

• These fall under the category of "casual" sales and are not taxable. Generally, a casual sale is exempted from tax when the seller has already paid a sales tax on an item and isn't in the business of selling merchandise. Auctions are a little trickier. Usually, items sold at an auction on the owners' premises aren't taxable, but if they are moved to an auction house and sold, they are taxable. Rental property and purchases of cars from causal sellers are taxable.