Honda West

Interstate Sales Tax Guidelines

My customer lives in another state. If I charge him Indiana Sales Tax, will he have to pay the sales tax again when he registers and/or title his purchase in his home state?

All States are mandated to give credit for a legally imposed sales tax paid to one state against another state;s sales/use tax. This is due to the United States Commerce Clause, which is a federal statue. Thus, if your customer lives in another state, that state should allow the amount of sales tax paid to Indiana as a credit against the amount of sales tax or use tax due. Your customer may have to pay an additional amount if his home state has a higher tax rate that Indiana or if his state has any local (non-state) imposed tax.

Example: California currently has a state rate of 7.25% plus local taxes. If the Indiana sales tax of 7%  is paid at the time of purchase, your customer will have to pay only California's extra .25% state sales tax plus any local taxes due in California. He will get credit for the 7% paid to Indiana, thus no double-taxation. (see warning below)

Warning-A few states impose a tax different from a sales/use tax, often termed an excise tax. Because the tax is not the same type of tax as Indiana's sales tax, these states may not allow the credit for a sales tax paid in Indiana against their tax. A few states might have specific tax statues that do not allow for a credit for a sales tax paid to another tax. States known to the Indiana Department of Revenue that might not allow a credit for a sales tax paid to Indiana are Arkansas, Maryland, Mississippi, Oklahoma, and West Virginia. These states may impose additional taxes upon registration and/or titling in their state without allowing a credit for the sales tax paid to Indiana. This list might not be all-inclusive. It is provided solely to alert dealers and customers of the existence of these types of situations.

My Customer lives in another state that has a sales tax rate lower than Indiana's 7% tax rate. Will the buyer be entitled to a refund for the difference in tax rate?

The customer will not receive a refund from either state.

Interstate Commerce Exemption

A vehicle or trailer sold in interstate commerce is not subject to the Indiana sales tax. To qualify as being "sold in interstate commerce" the vehicle or trailer must be physically delivered, by the selling dealer, to a delivery point outside Indiana. The delivery may be made by the dealer, or the dealer may hire a third-party carrier. Terms and the method of delivery must be indicated on the sales invoice. The dealer must document terms of delivery and must keep a copy of such items of delivery to substantiate the intestate sale. The exemption does not apply to sales to out-of-sale buyers in which the buyer takes physical possession of a vehicle or trailer in Indiana, nor is the exemption valid if the buyer, and not the seller, hires a third-party carrier to transport the vehicle or trailer outside Indiana. If the buyer hires the carrier, the carrier is acting as an agent for the buyer, and thus the buyer takes physical possession within Indiana. Possession taken within the state does not qualify as an interstate sale.