Indiana Omnibus Bill Amends Sales Tax Nexus Economic Threshold, Clarifies Pass-through Entity Tax Provision, Makes Other Changes

By Margaret Eisler

On March 13, 2024, Indiana Governor Eric Holcomb signed legislation that amends the economic threshold for sales tax nexus by eliminating the number of sales transactions in the state as one of the two triggers that require collection and remittance of sales tax. The legislation clarifies that the pass-through entity tax (PTET) paid on behalf of an electing pass-through entity (PTE) that is more than its PTET liability cannot be treated as PTET to its direct owners. The legislation also enacts an elective exemption for retail merchants that receive at least 75% of receipts from the sale of prepared food equal to 50% of the sales tax imposed on purchases of electricity, makes changes to statute of limitations provisions, allows the Department of Revenue to disclose taxpayer information to tax preparers and software providers when it suspects a fraudulent return has been filed and a prior year system breach, and provides that certain alcoholic beverage taxes that are received from an unpermitted out-of-state seller must be paid by the permittee that first receives the liquor, wine or hard cider in Indiana. (L. 2024, S228, effective 03/13/2024 and as stated.)

Sales tax economic nexus threshold.

Effective retroactive to January 1, 2024, the legislation provides for a sole trigger subjecting a retail merchant that does not have a physical presence in Indiana to collect and remit sales tax. That economic nexus trigger applies to a retail merchant that has gross revenue from any combination of: (1) the sale of tangible personal property that is delivered into Indiana; (2) a product transferred electronically into Indiana; or (3) a service delivered in Indiana, that exceeds $100,000 for the calendar year in which the retail transaction is made or for the calendar year preceding the calendar year in which the retail transaction is made.

This sole economic threshold trigger applies to tobacco products tax remote sellers and retail dealers, electronic cigarette retailers, waste tire management fee collectors, fireworks retailers, and prepaid wireless telecommunications service sellers.

The alternate trigger for meeting the economic threshold, which was selling any combination of tangible personal property delivered into Indiana, a product transferred electronically into Indiana, or a service delivered in Indiana, in 200 or more separate transactions, in the calendar year in which the retail transaction is made or for the calendar year preceding the calendar year in which the retail transaction is made, has been eliminated.

PTET paid on behalf of electing PTE.

Effective retroactive to January 1, 2022, with regard to tax paid on behalf of an electing PTE, a PTE may not treat an amount less than its own PTET liability as PTET to its direct owners.

Elective utility sales tax exemption.

Effective January 1, 2025, a retail merchant that receives 75% or more of its receipts from the sale of prepared food, including bakery items, may elect to claim an exemption equal to 50% of the gross retail tax imposed on transactions involving electricity purchased by the retail merchant that is derived through a single meter. The election must be submitted on forms provided by the Department. Upon acceptance of the election, the Department will issue a partial exemption certificate to the utility and any third party suppliers, if applicable. The election may also be submitted with a claim for refund. The election is irrevocable for any period for which the partial exemption has already been claimed. The election can be withdrawn on a prospective basis.

Statute of limitations changes.

Effective July 1, 2024, the legislation defines a “periodic tax” as a listed tax for which a return or report is required to be filed and the tax is required to be remitted four times or more in a calendar year. The term does not include estimated tax payments or withholding payments. If a provision of the law relating to a listed tax permits a taxpayer to file returns or reports or remit the tax less frequently than four times per calendar year, the listed tax is considered a periodic tax for a taxpayer who files or remits less frequently.

The legislation also sets a uniform due date of January 31 of the year after the calendar year for which the return is filed for all periodic taxes.

Confidentiality of tax information.

Effective July 1, 2024, the Department may share a taxpayer’s name and other personal identification information with a tax preparer or tax preparation software provider in cases where the Department suspects that a fraudulent return has been filed on behalf of a taxpayer and the Department suspects that the system of a taxpayer’s previous year tax preparer or tax preparation software provider has been breached.

Alcoholic beverage taxes.

Effective January 1, 2025, alcoholic beverage taxes on liquor, wine, and hard cider that are received from an out-of-state seller that does not have an Indiana permit must to be paid by the permittee that first receives the liquor, wine, or hard cider in Indiana.