Sales & Use Tax Blog

Indiana Sales Tax Exemption for Manufacturing

The Indiana sales tax exemptions for manufacturing are available to all Indiana manufacturers on purchases of manufacturing machinery, tools, and equipment that are “directly used” in production, manufacture, fabrication, assembly, extraction, mining, processing, refining, or finishing of tangible personal property per Indiana Admin. Code 45 §2.2-5-10. Indiana defines manufacturing machinery, tools, and equipment to be “directly used” in the production process if they have an immediate effect on the tangible personal property being processed. Manufacturing machinery, tools, and equipment have an immediate effect on the tangible personal property being processed if they are an “essential and integral” part of an integrated production process. The integrated production process for manufacturers starts once work-in-process materials are transported into the manufacturing process and ends after the product is packaged for sale. The Indiana sales tax exemptions for manufacturing also include property incorporated as a part of the final product and property consumed that is directly used in the production process. Agile Consulting Group’s experienced sales tax consultants are available to help manufacturers take advantage of this Indiana sales tax exemption. 

Examples of Indiana Sales Tax Exemptions that are Directly Used in Production:

  • Manufacturing Equipment
  • Production Machinery Repair Parts
    • Electrical Components, Screws, Nuts, Bearings, Washers, Filters, Pumps, etc.
  • Production Tools and Supplies
    • Drills, Taps, Blades, Grinders, Sockets, Files, etc.
Indiana sales tax exemptions
  • Material Handling Equipment and Repair Parts (only used within an Integrated Production Process)
    • Forklifts, Cranes, etc.
  • Consumables
    • Abrasives, Grease, Fuel, Welding Gases, Gas Cylinders, Electricity, Natural Gas, etc.
  • Cost of Goods Sold (COGS)
    • Material incorporated into the final product
  • Safety Clothing or Equipment
    • Gloves, Coveralls, Ear Plugs, Hard Hats, Glasses, Safety Shoes, etc.
  • Packaging Supplies
    • Pallets, Boxes, Strapping, Wrap, etc.
  • Research and Development
    • Property purchased solely for research and development

In order to be set up for the Indiana sales tax exemptions for manufacturing, Indiana manufacturers will need to fill out, sign and send in Indiana Form ST-105 “General Sales Tax Exemption Certificate” to their vendors. Once the vendor has the Indiana sales tax exemption certificate on file, they will stop charging sales tax on qualifying purchases and set up the account as tax exempt.

Indiana Sales Tax “Claim for Refund”

Indiana manufacturers are also able to recover taxes erroneously paid to their suppliers or self-assessed on their use tax returns as part of the Indiana sales tax exemptions for manufacturing. The state of Indiana has a statute of limitations that enables manufacturers to go back and recover sales tax refunds up to three years, or 36 months, from when the Indiana sales or use tax was paid. In order to recover these taxes paid, the Indiana manufacturer will need to fill out, sign and send in Indiana Form GA-110L “Claim for Refund” to the Indiana Department of Revenue. Once the “Claim for Refund” form has been sent in, it will be assigned to an Indiana state sales and use tax auditor for review. After the review is completed a refund check will be sent to the manufacturer. The experienced sales tax consultants at Agile Consulting Group are excited at the opportunity to help Indiana manufacturers with this refund process.

As with all sales and use tax research, the specifics of each case need to be considered when determining taxability.  Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing Indiana sales and use tax exemptions.  If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this particular issue or any other sales and use tax issue, please contact any of Agile Consulting Group’s sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com.

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