How to Calculate Indiana Sales Tax Collection Allowances

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Indiana's Department of Revenue levies a sales tax on good and servics sold in the state and mandates its merchants collect the taxes and forward them to the state. Merchants must remit sales taxes to the state monthly. As an incentive to pay on-time, Indiana offers a sales tax "collection allowance" to those merchants who furnish payment in a timely manner. The state also includes a "tire fee" allowance in this amount if you're a merchant who sells new tires. You can determine the amount of your collection allowance by making a few simple calculations.

Calculate your "Taxable Sales." Tabulate your total sales for the month, exclusive of sales tax, and subtract from this amount any tax-exempt sales. For example, if you sold $15,683 in a month, $1,811 of which was tax exempt, your taxable sales would be $13,872.

Figure your sales tax. Indiana's state sales tax rate is 6 percent of taxable sales. If your taxable sales for a month were $13,872, you would multiple this number by .06 to determine that you owe $832.32 in sales tax.

Compute your "Tire Fee" if you're a merchant who sells tires. The state of Indiana levies a $0.25 fee per new tire sold at retail price. Consult your tire inventory to determine how many new tires you sold. For example, if you sold 214 new tires at retail price, your tire fee due would be $53.50.

Calculate your collection allowance. Indiana allows merchants to retain .83 percent of their sales tax and 1 percent of the tire fees they levied. If you paid $832.32 in sales tax, multiply this number by .0083 to determine that you can retain $6.91. If you paid $53.50 in tire fees, multiply this number by .01 to determine that you can retain $0.53. Your collection allowance is the sum of these two numbers, or $7.44.

Subtract your collection allowance from your total tax (and tire fees, if applicable) to determine how much tax you owe the state. For the example, you would owe the state $832.32 in taxes, plus $53.50 in tires fees or $885.82. Subtract from this number the $7.44 collection allowance to calculate that you owe Indiana $878.38.

Tips

  • The amount you calculate in Step 5 is exclusive of any tax you've already paid to Indiana using electronic funds transfer (EFT), if you've done so.

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About the Author

Robert Schrader is a writer, photographer, world traveler and creator of the award-winning blog Leave Your Daily Hell. When he's not out globetrotting, you can find him in beautiful Austin, TX, where he lives with his partner.

Photo Credits

  • 3D dollar sign with multiple smaller dollar signs. image by Steve Johnson from Fotolia.com