in-20260930-IR-045240395FRA: SALES TAX; USE TAX

TITLE 45 DEPARTMENT OF STATE REVENUE Final Rule LSA Document #24-395 DIGEST SALES TAX; USE TAX Amends 45 IAC 2.2-1-1 to update general definitions. Amends 45 IAC 2.2-2-2 concerning collection of tax. Amends 45 IAC 2.2-2-3 regarding retail tax rate. Adds 45 IAC 2.2-2-6 and 45 IAC 2.2-2-7 concerning tax rate on certain vehicles. Amends 45 IAC 2.2-3-4, 45 IAC 2.2-3-5, and 45 IAC 2.2-3-6 concerning imposing use tax on tangible personal property, motor vehicles, aircraft, and watercraft. Amends 45 IAC 2.2-3-9 and 45 IAC 2.2-3-10 concerning tax on construction material purchased. Amends 45 IAC 2.2-3-12 concerning contractors. Amends 45 IAC 2.2-3-15 concerning liability for tax following nonexempt use after exemption certificate issued. Amends 45 IAC 2.2-3-21, 45 IAC 2.2-3-22, and 45 IAC 2.2-3-23 concerning collection of use tax on merchandise accepted outside Indiana for motor vehicles, aircraft, and watercraft. Amends 45 IAC 2.2-4-1 and 45 IAC 2.2-4-2 concerning selling at retail. Amends 45 IAC 2.2-4-6 and 45 IAC 2.2-4-7 concerning retail transactions; soft water, water conditioning. Amends 45 IAC 2.2-4-8 and 45 IAC 2.2-4-9 concerning accommodations furnished for less than 30 days; accommodation defined. Amends 45 IAC 2.2-4-11 concerning power subsidiary; retail transaction. Amends 45 IAC 2.2-4-14 concerning intrastate telecommunications service. Amends 45 IAC 2.2-4-21 concerning tangible personal property sold for incorporation into real property. Amends 45 IAC 2.2-4-22 and 45 IAC 2.2-4-24 concerning tax not paid on construction material purchased by contractor; construction material not furnished by contractor. Amends 45 IAC 2.2-4-26 concerning contractors. Amends 45 IAC 2.2-4-27 concerning tangible personal property renting and leasing. Amends 45 IAC 2.2-4-35 concerning auction sales; application of exemption. Adds 45 IAC 2.2-4-36 concerning bundled transactions. Adds 45 IAC 2.2-4-37 concerning aircraft leasing or renting; flight instruction services. Adds 45 IAC 2.2-4-38 concerning specified digital products. Adds 45 IAC 2.2-4-39 and 45 IAC 2.2-4-40 concerning prewritten computer software; computer software maintenance contracts. Amends 45 IAC 2.2-5-1 concerning agricultural production; definitions. Adds 45 IAC 2.2-5-3.5 concerning drainage water management system. Amends 45 IAC 2.2-5-4 concerning purchasers engaged in agricultural production. Amends 45 IAC 2.2-5-5 concerning applying gross retail tax when raising horses, donkeys, and ponies. Amends 45 IAC 2.2-5-6 concerning directly producing agricultural commodities; agricultural machinery sales. Amends 45 IAC 2.2-5-8 concerning sales of manufacturing machinery, tools, and equipment used in directly producing tangible personal property. Amends 45 IAC 2.2-5-11 concerning sales of tangible personal property used in directly producing manufacturing or agricultural equipment. Amends 45 IAC 2.2-5-12 concerning sales of tangible personal property directly consumed in manufacturing, processing, refining, or mining. Amends 45 IAC 2.2-5-13 concerning sales of tangible personal property directly consumed in agriculture, horticulture, floriculture, or arboriculture. Amends 45 IAC 2.2-5-14 concerning material incorporated into tangible personal property produced for resale. Amends 45 IAC 2.2-5-15 concerning sales for resale. Adds 45 IAC 2.2-5-15.5 concerning exempt transactions and fees of power subsidiary or public utility. Amends 45 IAC 2.2-5-16 concerning wrapping materials and containers. Amends 45 IAC 2.2-5-24 concerning sales to Indiana and its instrumentalities. Amends 45 IAC 2.2-5-25 concerning application of gross retail tax for purchases by government agencies and units. Amends 45 IAC 2.2-5-26 concerning sales of newspapers. Amends 45 IAC 2.2-5-33 concerning prescription drugs; sales. Amends 45 IAC 2.2-5-35 concerning sales of drugs to doctors and other licensed practitioners. Amends 45 IAC 2.2-5-36 concerning gross retail tax for purchases by licensed practitioners. Amends 45 IAC 2.2-5-38, 45 IAC 2.2-5-39, 45 IAC 2.2-5-40, 45 IAC 2.2-5-41, 45 IAC 2.2-5-42, and 45 IAC 2.2-5-43 concerning exemption for food for human consumption and food not exempt: candy, soft drinks, prepared foods. Amends 45 IAC 2.2-5-44 updating combination business and restaurant; definitions. Amends 45 IAC 2.2-5-45 concerning caterers. Amends 45 IAC 2.2-5-46 concerning school meals. Amends 45 IAC 2.2-5-48 concerning gross retail income exempt from gross income tax; U.S. and Indiana tax collection agents. Amends 45 IAC 2.2-5-49 concerning sales to the United States. Amends 45 IAC 2.2-5-50 concerning selling at retail; gross income. Amends 45 IAC 2.2-5-51 concerning United States retailer's and manufacturer's excise taxes. Amends 45 IAC 2.2-5-52 concerning encumbrances on trade-ins. Amends 45 IAC 2.2-5-55 concerning not-for-profit organizations; acquisitions. Amends 45 IAC 2.2-5-56 concerning fraternities, sororities, and student cooperative housing organizations; acquisitions. Amends 45 IAC 2.2-5-57, 45 IAC 2.2-5-58, and 45 IAC 2.2-5-59 concerning Not-for-profit organizations; sales. Amends 45 IAC 2.2-5-61 concerning public transportation; acquisitions. Amends 45 IAC 2.2-5-65 concerning manufactured homes; industrial residential structures. Amends 45 IAC 2.2-5-67 concerning exemption for income from selling manufactured home or industrialized residential structure. Amends 45 IAC 2.2-5-68 concerning other exemptions. Amends 45 IAC 2.2-5-69 concerning Administration; Form ST-108MH. Amends 45 IAC 2.2-5-70 concerning environmental quality control equipment. Adds 45 IAC 2.2-5-71 concerning professional motor racing vehicle parts exemptions. Adds 45 IAC 2.2-5-72 concerning coins, bullion, and legal tender. Adds 45 IAC 2.2-5-73 concerning hot mix asphalt plant equipment; trucks; pavers. Amends 45 IAC 2.2-6-4 concerning accrual basis; reporting and payment. Amends 45 IAC 2.2-6-5 concerning consolidated filing. Amends 45 IAC 2.2-6-11 concerning record keeping requirements on exempt sales less than seven cents. Amends 45 IAC 2.2-6-17 concerning heating assistance deductions. Amends 45 IAC 2.2-8-9 concerning outstanding tax warrants. Amends 45 IAC 2.2-8-12 concerning exemption certificates. Amends 45 IAC 2.2-8-15 concerning direct payment permits. Amends 45 IAC 2.2-8-16 concerning applying for direct payment permits. Amends 45 IAC 2.2-8-17 concerning contractors with direct payment permits. Repeals 45 IAC 2.2-2-1; 45 IAC 2.2-2-5; 45 IAC 2.2-3-3; 45 IAC 2.2-3-7; 45 IAC 2.2-3-8; 45 IAC 2.2-3-11; 45 IAC 2.2-3-13; 45 IAC 2.2-3-14; 45 IAC 2.2-3-18; 45 IAC 2.2-3-19; 45 IAC 2.2-3-20; 45 IAC 2.2-3-24; 45 IAC 2.2-3-25; 45 IAC 2.2-4-3; 45 IAC 2.2-4-12; 45 IAC 2.2-4-13; 45 IAC 2.2-4-15; 45 IAC 2.2-4-16; 45 IAC 2.2-4-23; 45 IAC 2.2-4-25; 45 IAC 2.2-4-30; 45 IAC 2.2-4-31; 45 IAC 2.2-4-32; 45 IAC 2.2-4-33; 45 IAC 2.2-4-34; 45 IAC 2.2-5-2; 45 IAC 2.2-5-3; 45 IAC 2.2-5-7; 45 IAC 2.2-5-9; 45 IAC 2.2-5-10; 45 IAC 2.2-5-17; 45 IAC 2.2-5-18; 45 IAC 2.2-5-19; 45 IAC 2.2-5-20; 45 IAC 2.2-5-27; 45 IAC 2.2-5-32; 45 IAC 2.2-5-34; 45 IAC 2.2-5-37; 45 IAC 2.2-5-47; 45 IAC 2.2-5-53; 45 IAC 2.2-5-54; 45 IAC 2.2-5-60; 45 IAC 2.2-5-62; 45 IAC 2.2-5-63; 45 IAC 2.2-5-66; 45 IAC 2.2-6-1; 45 IAC 2.2-6-2; 45 IAC 2.2-6-3; 45 IAC 2.2-6-6; 45 IAC 2.2-6-7; 45 IAC 2.2-6-8; 45 IAC 2.2-6-9; 45 IAC 2.2-6-10; 45 IAC 2.2-6-12; 45 IAC 2.2-6-13; 45 IAC 2.2-6-14; 45 IAC 2.2-6-15; 45 IAC 2.2-6-16; 45 IAC 2.2-7-1; 45 IAC 2.2-7-2; 45 IAC 2.2-7-3; 45 IAC 2.2-7-4; 45 IAC 2.2-7-5; 45 IAC 2.2-7-6; 45 IAC 2.2-7-7; 45 IAC 2.2-8-1; 45 IAC 2.2-8-2; 45 IAC 2.2-8-3; 45 IAC 2.2-8-4; 45 IAC 2.2-8-5; 45 IAC 2.2-8-6; 45 IAC 2.2-8-7; 45 IAC 2.2-8-8; 45 IAC 2.2-8-10; 45 IAC 2.2-8-11; 45 IAC 2.2-8-13; 45 IAC 2.2-8-14; 45 IAC 2.2-8-18; 45 IAC 2.2-9-5; 45 IAC 2.2-9-6; 45 IAC 2.2-9-7. HISTORY Notice of First Public Comment Period: 20260624-IR-045240395FNA Regulatory Analysis submitted with the Notice of First Public Comment Period: 20260624-IR-045240395RAA Date of Public Hearing: July 27, 2026 CITATIONS AFFECTED: 45 IAC 2.2 SUMMARY/RESPONSE TO COMMENTS The Department of State Revenue (department) requested public comment from June 24, 2026, through July 24, 2026, and during the public hearing on July 27, 2026. The department received no comments in response to the Notice of First Public Comment Period. This adopted version of the rule is the same as or does not substantially differ from the last published version of the proposed rule. FINAL RULE Sec. 1. (a) Unitary Transaction. For purposes of the state gross retail tax and use tax, such taxes shall apply and be computed in respect to each retail unitary transaction. A The definitions in IC 6-2.5-1 and this section apply throughout this article. (b) "Unitary transaction" shall include has the meaning set forth in IC 6-2.5-1-1. Additionally, a unitary transaction includes all items of tangible personal property and/or or services, or both, for which a total combined charge or selling price is computed for payment irrespective of the fact that services which that would not otherwise be taxable are included in the charge or selling price. For purposes of the state gross retail tax and use tax, those taxes apply and are computed for each retail unitary transaction, unless the transaction meets one (1) of the exceptions in IC 6-2.5-1-11.5(d). (b) Unitary Transaction-Public Utility. For purposes of the state gross retail tax and use tax, all public utility services and commodities subject to said taxes invoiced in a single billing or statement, including a minimum charge, submitted to a consumer for payment shall constitute a unitary transaction. (c) "Retail transaction" The state gross retail tax is imposed on retail transactions made in Indiana. Three general categories are designated as "retail transactions". The first category is described as transactions of a retail merchant that constitute selling at retail as described in IC 6-2.5-4-1. The second category is described as transactions of a retail merchant that constitute making a wholesale sale as described in IC 6-2.5-4-2. The third category is described as a transaction that is described in any other section of IC 6-2.5-4. has the meaning set forth in IC 6-2.5-1-2. (d) Casual Sales. The Indiana gross retail tax is not imposed on gross receipts from casual sales except for gross receipts from casual sales of motor vehicles and sales of rental property. A "Casual sale" is means an isolated or occasional sale by the owner of tangible personal property purchased or otherwise acquired for his the owner's use or consumption, where he the owner is not regularly engaged in the business of making such those sales. The Indiana gross retail tax is not imposed on gross retail income from casual sales except for gross retail income from casual sales of motor vehicles, aircraft, watercraft, and rental property. (e) Retail Unitary Transaction. Regulatory definition of "retail unitary transaction" is used synonymously with the act. (f) Person. Regulatory definition of "person" is used synonymously with the act. (g) Department. Regulatory definition of (e) "Department" as the Indiana department of state revenue is used synonymously with the act. has the meaning set forth in IC 6-2.5-1-4. (h) Gross Retail Income. Regulatory definition of "gross retail income" is used synonymously with the act. (i) Gross Retail Income of a Public Utility or Power Subsidiary. Gross retail income includes all gross retail income including minimum charge, flat charge, membership fee, or any other form of charge or billing. (j) Like Kind Exchange: Additional Consideration. Non-taxability extends (f) "Like kind exchange" has the meaning set forth in IC 6-2.5-1-6. Additionally, the following conditions apply: (l) Like Kind Exchange: Property to be Owned by Parties at Time of Exchange. (g) "Aircraft" means any device designed to provide air transportation for one (1) or more individuals or for cargo. (h) "Consume" means the dissipation or expenditure by combustion, use, or application, and does not mean or include the: of tangible personal property. (i) "Material handling equipment" means pieces of equipment that transport materials within the production process and within an onsite location. The type of equipment that falls within the meaning of this term includes dollies, forklifts, chain or belt conveyers, and pallet jacks. (j) "Onsite location" means a physical location where production takes place that is owned or leased by the person engaged in production, and any property contiguous to that property, which is also owned or leased by the same person engaged in production. (k) "Prescription" has the meaning set forth in IC 6-2.5-1-23. In addition, to "prescribe", in the context of this definition, means the issuance by a licensed practitioner, as defined in IC 6-2.5-1-21.5, of a prescription indicating that the use of medical equipment, drugs, supplies, or devices is necessary to the purchaser to treat, correct, support, or alleviate a condition brought about by illness, injury, or any other condition to the purchaser's body. (l) "Public transportation" means and includes the movement, transportation, or carrying of persons or property, or both, for consideration by a common carrier, a contract carrier, a household goods carrier, carriers of exempt commodities, and other specialized carriers performing public transportation service for compensation by highway, rail, air, or water, which carriers operate under authority issued by, or are specifically exempt by statute or regulation from economic regulation of, the: however, the fact that a company possesses a permit or an authority issued by any of the entities listed in subdivisions (1) through (7) does not mean the company is engaged in public transportation, unless it is in fact engaged in the transportation of persons or property for consideration as defined in this subsection. (m) Internal Revenue Code. Regulatory definition of "Internal Revenue Code" as the Internal Revenue Code of 1986, is used synonymously with the act. (n) Retail Merchant. Regulatory definition of "retail merchant" is used synonymously with the act. (o) Tax Year or Taxable Year. Regulatory definition of "tax year" or "taxable year" is used synonymously with the act. (m) "Transportation" means the movement, transporting, or carrying of persons or property from one (1) place to another and includes loading and unloading of persons or property into or from transportation vehicles. (n) "Watercraft" has the meaning set forth in IC 9-13-2-198.5. Sec. 2. The A retail merchant, acting as an agent for the state of Indiana, must shall collect the gross retail tax. The gross retail tax is bourne borne by the customer. Consideration is a necessary element of a taxable transaction. Sec. 3. (a) The state gross retail tax is measured by the gross retail income received by a retail merchant in a retail unitary or bundled transaction and is imposed at the following rates: STATE GROSS RETAIL TAX GROSS RETAIL INCOME RECEIVED FROM THE RETAIL UNITARY TRANSACTION $.0 less than $.10 $.01 at least $ .10, but less than $.30 $.02 at least $ .30, but less than $.50 $.03 at least $ .50, but less than $.70 $.04 at least $ .70, but less than $.90 $.05 at least $ .90, but less than $1.10 On a retail unitary transaction in which the gross retail income received by the retail merchant is one dollar and ten cents ($1.10) or more, the state gross retail tax is five percent (5%) of that rate provided by IC 6-2.5-2-2 on the gross retail income. (b) Unitary or bundled transactions in the amount of one cent ($.01) to seven cents ($.07) are not subject to the gross retail tax. However, items of one cent ($.01) to seven cents ($.07) purchased or paid for at one (1) time are subject to the gross retail tax if the total sale or sales are more than seven cents ($.07). Sec. 6. (a) The state gross retail tax on the purchase of a motor vehicle in Indiana by a person that intends to both: is imposed at the sales tax rate of the intended destination state or country, not to exceed the state gross retail tax rate. (b) As used in this section, "motor vehicle" means a vehicle that would be subject to the vehicle excise tax imposed under IC 6-6-5 if the vehicle were to be used in Indiana. (c) For purposes of this section, the "sales tax rate of the intended destination state or country": (d) If a destination state or country does not impose a sales tax or an equivalent tax, either in general or on purchases of vehicles, sales tax is not collected on the purchase of the motor vehicle subject to this section. Sec. 7. (a) The Indiana state gross retail tax on the purchase of a recreational vehicle or cargo trailer in Indiana, not to be titled or registered for use in Indiana, by a resident of a nonreciprocal state or foreign country who intends to both: is imposed at the sales tax rate of the intended nonreciprocal state or foreign country, not to exceed the state gross retail tax rate. (b) As used in this section, the following definitions apply: (c) For purposes of this section, the "sales tax rate of the intended nonreciprocal state or country": (d) If a nonreciprocal state or country does not impose a sales tax or an equivalent tax, either in general or on purchases of vehicles, sales tax is not collected on the purchase of the motor vehicle subject to this section. Sec. 4. Tangible personal property purchased in Indiana or elsewhere in a retail transaction, and stored, used, or otherwise consumed in Indiana, is subject to Indiana use tax for such that property, unless the Indiana state gross retail tax has been collected at the point of purchase. Sec. 5. (a) For purposes of the state gross retail tax and use tax, transactions representing isolated or occasional sales of vehicles required to be licensed by the state for highway use in Indiana do not qualify as casual sales and shall constitute retail transactions under the provisions of IC 6-2.5 and this section article. Every sale by a resident or nonresident person who is not a retail merchant as defined in this act of a vehicle required to be licensed by the state for highway use in Indiana shall be deemed is considered a retail transaction and the use of such that vehicle shall be is subject to the use tax which shall be and paid by the purchaser to the bureau of motor vehicles at the time of the licensing of the vehicle by the purchaser. (b) The sale of any A vehicle required to be licensed by the state for highway use in Indiana shall constitute selling at retail and shall be is otherwise subject to the sales or use tax because it is required to be licensed by the state for highway use in Indiana unless such the purchaser is entitled to at least one or more (1) of the exemptions as provided on form ST-108 ST-108E. (c) If the a vehicle is purchased from a registered Indiana motor vehicle dealer, the dealer must shall collect the tax and provide the purchaser a completed form ST-108 showing that the tax has been paid to him the dealer, or if the purchaser claims exemption and no tax is collected by the dealer, the certificate at the bottom of form ST-108 form ST-108E must be completed and signed by the purchaser instead. Title applications on sales by registered dealers without a form ST-108 or ST-108E, completed respectively by the dealer or purchaser, will not be accepted. The Form ST-108 must be attached to the revenue copy of the title application (TA) by the license branch. Whenever a purchaser claims exemption on the reverse side of form ST-108 ST-108E, the dealer must shall retain a completed exemption certificate. (d) On any vehicle which that is not purchased from a registered Indiana dealer, the license branch must shall collect the gross retail or use tax at the time of registration unless the purchaser is entitled to claim an exemption from the tax for one (1) of the reasons shown on the reverse side of the form ST-108 ST-108E. When the tax is collected by the license branch, a person will be required to have an affidavit signed under penalty of perjury by the seller that contains the actual selling price of the vehicle. However, in the absence of an affidavit the buyer will be charged on the average selling price for that vehicle, as determined under a used vehicle guide, and the affidavit would be is attached to the title instead of an ST-108; in the situation above; however, in the absence of the affidavit the amount of the selling price, trade-in, and the amount subject to the use tax must be noted on the title application TA by the license branch. (e) If the purchaser claims exemption on a vehicle not purchased from a registered dealer, the ST-108 ST-108E must be completed by the customer purchaser or the license branch and attached to the revenue department's copy of the title application TA by the license branch. The ST-108 ST-108E must show the specific paragraph under which the exemption is claimed and be signed at the bottom of the form by the purchaser. (f) Exemptions from the sales gross retail tax will not be allowed except for the reasons listed on the reverse side of the revised form ST-108 ST-108E. (g) The dealer or license branch must shall collect sales gross retail tax in the usual manner from any purchaser claiming exemption from the sales gross retail tax for a reason other than those shown on the ST-108 ST-108E. The purchaser may instead apply for a refund of this tax from the Indiana Department of Revenue, Sales Tax Division department. (h) The deduction for trade-in allowance applies only to vehicles traded-in and does not apply to other property, either personal or real, which is traded on a vehicle. (i) The assumption by the purchaser of an installment contract or other obligation on a vehicle is subject to the gross retail tax on the amount of the obligation plus any other consideration given. Sec. 6. (a)(1) The term "aircraft" will include "any device which is designed to provide air transportation for one (1) or more individuals or for cargo." (b) For the purpose of the state gross retail and use tax: (1) (a) The sale of aircraft or watercraft by any a person licensed as an aircraft or a watercraft dealer in Indiana has been, and will continue to be, is a retail sale transaction. Transactions representing isolated or occasional sales of aircraft or watercraft required to be licensed by the state for use in Indiana do not qualify as casual sales and shall constitute retail transactions under the provisions of this section. Every sale by a resident or nonresident person who is not a retail merchant as defined in the Indiana gross retail tax act of an aircraft or a watercraft required to be licensed by the state for use in Indiana shall be deemed is considered a retail transaction, and the use of such that aircraft shall be or watercraft subject to the use tax which shall be and paid by the purchaser to the aeronautics division of the department of transportation (in the case of aircraft) or the bureau of motor vehicles (in the case of watercraft) at the time of the licensing of the aircraft or watercraft by the purchaser. (c)(1) (b) Persons licensed as aircraft dealers in Indiana will shall collect sales gross retail tax on their sales of aircraft and will record the selling price of the aircraft and the amount of sales gross retail tax collected on sales tax form ST-108AC. Form ST-108AC forms prescribed by the department that will be used by the purchaser as proof of payment of sales tax when registering the aircraft in Indiana. If the aircraft is purchased from any a person other than an aircraft dealer licensed in Indiana, the purchaser must shall pay all the sales or use tax due to the aeronautics division of the department of transportation at the time the aircraft is first registered in Indiana by the purchaser. (2) (c) Persons licensed as watercraft dealers in Indiana will shall collect sales gross retail tax on their sales of watercraft and will record the selling price of the watercraft and the amount of sales gross retail tax collected on sales tax form ST-108WC ST-108. Form ST-108WC ST-108 will be used by the purchaser as proof of payment of sales gross retail tax when registering the watercraft in Indiana. If the watercraft is purchased from any a person other than a watercraft dealer licensed in Indiana, the purchaser must shall pay all the sales or use tax due to the division of natural resources bureau of motor vehicles at the time the watercraft is first registered in Indiana by the purchaser. (d) (1) If the an aircraft has been registered previously in Indiana, the seller must shall assign certificate of ownership to the purchaser showing the selling price, trade-in, description, and price. If the aircraft has not been previously registered in Indiana, the seller must furnish shall provide a bill of sale, signed by the seller, showing the make, model, year, selling price, and trade-in on the aircraft. At the time of registration, the purchaser must furnish the aeronautics division of shall provide the department of transportation with either the properly assigned certificate of ownership or bill of sale. (2) (e) If the a watercraft has been registered previously in Indiana, the seller must shall assign certificate of ownership to the purchaser showing the selling price, trade-in, description, and price. If the watercraft has not been previously registered in Indiana, the seller must furnish shall provide a bill of sale, signed by the seller, showing the make, model, year, selling price, and trade-in on the watercraft. At the time of registration, the purchaser must furnish the division of natural resources shall provide the bureau of motor vehicles with either the properly assigned certificate of ownership or bill of sale. (e) (f) Only the trade-in value of an aircraft for another aircraft, or the trade-in value of a watercraft for another watercraft, may be deducted from the selling price gross retail income as a like kind exchange for sales gross retail tax purposes. (f) (g) Aircraft which are purchased by a nonresident of Indiana to be taken immediately within thirty (30) days to another state for registration in that state, and not for registration or use in Indiana, are not subject to the Indiana sales gross retail tax. The purchaser must furnish shall provide the seller with exemption certificate ST-136AC, in triplicate ST-108AIR. The seller is required to keep one (1) copy for his their files. Two copies An additional copy of the exemption certificate must be certified by the dealer and forwarded to the sales tax division of the Indiana department. of revenue. Sec. 9. (a) A contractor may purchase construction material exempt from the state gross retail tax only if he issues either an exemption certificate or a direct pay certificate to the seller at the time of purchase. (b) A contractor who purchases construction material exempt from the state gross retail tax or otherwise acquires construction material "tax-free", is accountable to the Department of Revenue for the state gross retail tax when he disposes of such property. (c) A contractor has the burden of proof to establish exempt sale or use when construction material, which was acquired tax-free, is not subject to either the state gross retail or use tax upon disposition. (d) Disposition subject to the state gross retail tax. A contractor-retail merchant has the responsibility to collect the state gross retail tax and to remit such tax to the Department of Revenue whenever he disposes of any construction material in the following manner: (e) Disposition subject to the use tax. (a) With respect to construction materials a time and materials contractor acquired tax-free exempt from the gross retail tax, the contractor is liable for the use tax and must shall remit such the tax, measured on the purchase price, to the department of Revenue when he the contractor disposes of such the property in the following manner as follows: (f) (b) A disposition under C. subsection (a)(3) will be exempt from the use tax only if the contractor received a valid exemption certificate, not a direct pay permit, from the ultimate purchaser or recipient of the construction material, as converted, provided such if that person could have initially purchased such the property exempt from the state gross retail tax. A direct payment permit does not establish or serve as evidence that the ultimate purchaser is exempt, and may not be accepted by the contractor. Sec. 10. A contractor that has paid gross retail tax on construction material in a taxable transaction has no further liability for either the state gross retail tax or use tax with respect to for the construction material acquired by the contractor, in a taxable transaction, provided the contractor disposes of such the property in the following manner as follows: Sec. 12. (a) Tangible personal property purchased to become a part of an improvement to real estate under a contract with an organization entitled to exemption is eligible for exemption when purchased by the contractor. (b) In order To be exempt on such purchases described in subsection (a), the contractor must be registered as a retail merchant, must shall obtain an exemption certificate from the exempt organization, and must issue an their own exemption certificate to his their supplier. (c) Utilities, machinery, tools, forms, supplies, equipment, or any other items used or consumed by the contractor and which that do not become a part of the improvement to real estate are not exempt regardless of the exempt status of the person for whom the contract is performed. (d) A person making a non-time and materials contract for the improvement to real estate whereby the material becoming a part of the improvement and the labor are quoted as one price is liable for the payment of sales gross retail tax on the purchaser purchase price of all material so used. (e) A person selling tangible personal property to be used as an improvement to real estate may enter into a completely separate contract to furnish the labor to install or construct such that improvement, in which case and the sales gross retail tax shall must be collected and remitted by such the seller on the materials sold for this purpose. Such The sale of materials must be identifiable as a separate transaction from the contract for labor. The fact that the seller subsequently furnished information regarding the charges for labor and material used under a flat bid quotation non-time and materials contract shall not be considered to constitute separate transactions for labor and material. Sec. 15. If any A person who that issues an exemption certificate in respect to the state gross retail tax or use tax to a vendor and thereafter makes any use of the tangible personal property, covered by such certificate, or in any way consumes, stores, or sells such the tangible personal property where such use, consumption, storage or sale is in a manner which is not permitted by such exemption, such use, consumption, or storage shall become subject to the use tax (or such sale shall become subject to the gross retail tax), and such person in a manner that is not covered by the exemption claimed on the certificate or any other exemption permitted under IC 6-2.5-5, shall become liable for the use tax or gross retail tax due thereon. Sec. 21. All Purchases of tangible personal property which that are accepted by the purchaser outside the state of Indiana, but which are stored, used, or otherwise consumed in Indiana, are subject to the use tax. The use tax must be remitted directly to the Indiana department of Revenue by the Indiana purchaser. (See 6-2.5-3-5(b)(010).) Sec. 22. No A vehicle shall may not be licensed registered by Indiana for highway use in Indiana unless the registered owner thereof shall present of the vehicle either: Sec. 23. No An aircraft or a watercraft shall may not be registered by Indiana for use in Indiana unless the registered owner thereof shall present of the aircraft or watercraft either: Sec. 1. (a) Where ownership of tangible personal property is transferred for a consideration, it will be considered a transaction of a retail merchant constituting selling at retail unless the seller is not acting as a retail merchant. (b) All elements of consideration are included in gross retail income subject to tax. Elements of consideration include, but are not limited to: Sec. 2. (a) Professional services, personal services, and services in respect related to property not owned by the person rendering such those services are not transactions of a retail merchant constituting selling at retail, and are not subject to gross retail tax. Where, in conjunction with rendering professional services, personal services, or other services, the serviceman serviceperson also transfers tangible personal property for a consideration, this will constitute a bundled transaction of a retail merchant constituting selling at retail unless one (1) of the exceptions in IC 6-2.5-1-11.5(d)(1) or IC 6-2.5-1-11.5(d)(2) applies. (b) Services performed or work done in respect related to property and performed prior to delivery to be sold by a retail merchant must, however be included in the taxable gross receipts retail income of the retail merchant. (c) Persons engaging in repair services are servicemen with respect to servicepeople regarding the services which they render, and retail merchants at retail with respect to regarding repair or replacement parts sold. (d) A serviceman serviceperson occupationally engaged in rendering professional, personal, or other services will be presumed to be a retail merchant selling at retail with respect to regarding any tangible personal property sold by him them, whether or not the tangible personal property is sold in the course of while rendering such those services. If, however, the transaction satisfies the four (4) requirements set forth in 6-2.5-4-1(c)(010), paragraph (1) either of the exceptions to a bundled transaction in IC 6-2.5-1-11.5(d)(1) or IC 6-2.5-1-11.5(d)(2), the gross retail tax shall does not apply to such the transaction. Sec. 6. (a) Water conditioning companies, including all soft water companies, are retail merchants making retail transactions with respect to all tangible personal property sold, leased, or rented by them and must shall collect the sales gross retail tax on all such that property unless the purchaser or user is entitled to claim exemption from the sales gross retail tax and furnished a properly completed exemption certificate. (b) For purposes of collection of the tax, the term "water conditioner" shall include all includes automatic softeners, softener tanks, exchange tanks, purifiers, chlorinators, or any other device or equipment, together with the minerals contained therein used to condition, purify, or soften water. (c) Rented or leased water conditioners, including those leased with an option for purchase, or those otherwise furnished for a monthly or other periodic charge are subject to the sales gross retail tax on the amount charged. Such These conditioners subsequently sold after July 1, 1969, shall be are subject to the tax on the full selling price. The tax is also due on any payment required to exercise the option. (d) Purchases by a water conditioning company of water conditioners, tanks and other equipment to be subsequently sold or rented are not subject to the sales gross retail tax. (e) Purchases of all other equipment, supplies, and materials not for resale, including salt or any other cleaning agent used to rejuvenate water tanks or the minerals therein, are subject to the sales gross retail tax. Sec. 7. When a customer is billed separately for materials used to alter or change plumbing to accommodate conditioning equipment, the sales gross retail tax shall be is charged on such those materials. If materials used in an installation are not billed as a separate item to the customer, the company shall then be liable for the use tax thereon. Sec. 8. (a) For the purpose of the state gross retail tax and use tax, Every a person engaged in the business of renting or furnishing for periods of less than thirty (30) days any accommodation including booths, display spaces, and banquet facilities, cubicles, or spaces used for: in any place where accommodations are regularly furnished for a consideration is a retail merchant making retail transactions in respect thereto and the gross retail income received therefrom shall constitute constitutes gross retail income from retail unitary transactions. (b) In general, the gross receipts retail income from renting or furnishing accommodations are taxable. An accommodation which that is rented for a period of thirty (30) days or more is not subject to the gross retail tax. (c) There is no exemption for purchases made by persons who are engaged in renting or furnishing accommodations. Such persons are deemed to purchase or otherwise acquire tangible personal property for use or consumption in the regular course of their business. (d) (c) The renting or furnishing of an accommodation for less than thirty (30) days constitutes a retail merchant making a retail transaction. Every A person so engaged must shall collect the gross retail tax on the gross receipts retail income from such those transactions. The tax is borne by the person or organization who that uses the accommodation. (e) (d) The tax is imposed on the gross receipts retail income from furnishing an accommodation for less than thirty (30) days. The gross receipts retail income subject to tax include includes the amount which that represents consideration for the rendition of rendering those services which that are essential to the furnishing of the accommodation, and those services which that are regularly provided in furnishing the accommodation. Such Those amounts are subject to tax even when they are separately itemized on the statement or invoice. (f) The tax is imposed on the gross receipts from accommodations which are furnished for periods of less than thirty (30) days. Sec. 9. (a) For purposes of the state gross retail and use tax taxes, an "accommodation" is any space, facility, structure, or combination thereof, including booths, display spaces, and banquet facilities, and cubicles or spaces used for adult relaxation, massage, modeling, dancing, or other entertainment, together with all associated personal or real property, including land, which is intended for occupancy by human beings for a period less than thirty (30) days, including the following: (b) The tax does not apply to rental of meeting rooms to charitable or other exempt organizations to be used in the furtherance of the purpose for which they are granted exemption. -EXAMPLE- If a person moves into a room for an indefinite period, but pays weekly, sales tax must be collected until a person has rented the room for longer than 30 consecutive days. Sec. 11. (a) In general, the furnishing of electricity, natural or artificial gas, water, steam or steam heating services by public utilities or power subsidiaries to consumers is subject to the state gross retail tax. (b) A power subsidiary or a person engaged as a public utility in furnishing or selling is a retail merchant when they furnish or sell electrical energy, natural or artificial gas or mixtures thereof, water, or steam or steam heating services to a person for domestic or commercial consumption. shall be a retail merchant in respect thereto, and the gross income received therefrom, shall constitute gross retail income of a retail merchant received from a retail transaction. (c) The gross receipts retail income of power subsidiaries on or public utilities received from the furnishing or selling of natural or artificial gas, electricity, water, or steam are subject to the state gross retail tax. The tax applies to the total receipts of such the power subsidiary or public utilities for services furnished or sold, irrespective of whether the actual net charge is based upon on actual consumption, a flat rate charge, or a minimum charge. The tax is borne by the consumers. (d) The term "public utilities" as used in this regulation means any organization which is engaged in the furnishing or selling of electricity, natural or artificial gas or mixtures thereof, water, steam or steam heating, and having the right of eminent domain or subject to government regulation in connection with the furnishing of public utility services. The term includes governmental units and not-for-profit organizations which furnish public utility services. Sec. 14. (a) In general, the furnishing of telephone services by public utilities to consumers is subject to the state gross retail tax. The gross receipts of public utilities from the furnishing of local exchange telephone service or intrastate message toll service is subject to the state gross retail tax. The tax applies to the total receipts of such public utilities for furnishing such services. The tax is borne by the consumer. (b) Every (a) A person engaged as a public utility in the furnishing of communication service with respect to the furnishing or selling of local exchange telephone service or intrastate message toll telephone telecommunication services shall be and constitute a retail merchant in respect thereto, and the gross retail income received therefore upon billings or statements rendered to consumers shall constitute constitutes gross retail income received from retail transactions. (c) Local exchange intrastate telephone service. (b) The tax is imposed on the gross receipts retail income from charges on billings or statements periodically billed or invoiced to consumers for the privilege of making local exchange calls to other telephones located within the local exchange telephone area. The tax applies irrespective of whether the actual net charge is based upon flat rate charge, a message charge, a minimum charge, service charge, or a membership fee. furnishing or selling the services described in subsection (a). The tax is borne by the consumer. (d) Intrastate message toll telephone service. The tax is imposed on the gross receipts from message charges periodically biled to consumers for the privilege of transmitting messages, information, or intelligence between points located within Indiana where the amount of the charge is regulated by the Public Service Commission of Indiana. The tax applies to the total receipts of such service irrespective of whether the actual net charge is based upon a flat rate charge, a message charge, a minimum charge, service charge or a membership fee. (e) The term "public utilities" as used in this regulation means any organization which is engaged in the furnishing or selling of telephone services and having the right of eminent domain or subject to governmental regulations in connection with the furnishing of public utility services. The term includes governmental units and not-for-profit organizations which furnish public utility services. Sec. 21. (a) In general, all sales of tangible personal property are taxable, and all sales of real property are not taxable. The conversion of tangible personal property into realty does not relieve a person from liability for any owing and unpaid state gross retail tax or use tax with respect to such the tangible personal property. (b) All Construction material purchased by a contractor is taxable either at the time of purchase, or if purchased exempt or otherwise acquired exempt, upon disposition, unless the ultimate recipient could have purchased it exempt. (see 6-2.5-5). Sec. 22. (a) A time and materials contractor may purchase construction material exempt from the state gross retail tax only if he the contractor issues either an exemption certificate or a direct pay certificate to the seller at the time of purchase. (b) A time and materials contractor who that purchases construction material exempt from the state gross retail tax or otherwise acquires construction material tax-free is accountable to the department of Revenue for the state gross retail tax when he the contractor disposes of such that property, unless the ultimate recipient could have purchased it exempt. (see 6-2.5-5). (c) A contractor has the burden of proof to establish exempt sale or use when construction material, which was acquired "tax-free" exempt from the gross retail tax, is not subject to either the state gross retail tax or use tax upon disposition. (d) Disposition subject to the state gross retail tax. A time and materials contractor is a retail merchant and has the responsibility to collect and remit the state gross retail tax and to remit such tax to the department of Revenue whenever he the contractor disposes of any construction material. in the following manner: (2) Construction material sold over-the-counter. (e) Over-the-counter sales of construction materials will be treated as exempt from the state gross retail tax only if the contractor receives a valid exemption certificate issued by the person for whom the construction is being performed or by the customer who purchases over-the-counter, or a direct pay permit issued by the customer who purchases over-the-counter. (e) Disposition subject to the use tax. With respect to construction material a contractor acquired tax-free, the contractor is liable for the use tax and must remit such tax (measured on the purchase price) to the Department of Revenue when he disposes of such property in the following manner: A disposition under C. will be exempt from the use tax if the contractor received a valid exemption certificate from the ultimate purchases (purchaser) or recipient of the construction material (as converted), provided such person could have initially purchased such property exempt from the state gross retail tax. Sec. 24. (a) A contractor is not liable for either the state gross retail tax or use tax when he the contractor converts construction material into realty on land he the contractor does not own, provided such the property is furnished by the customer of the contractor. (b) When the customer furnishes the construction materials, the customer is deemed to be the user of such that property and, as such, he the customer is accountable to the department of Revenue for any taxes owing and unpaid with respect to such the construction material. (c) A contractor may function as a retail merchant having all the duties and responsibilities as such with respect to construction material, and then function as an installer or converter of such the property which that will be treated as having been furnished by the customer. (d) If a contractor functions as both a retail merchant and an installer with respect to construction materials and the over-the-counter sales price of such that property is less than fair market value, any consideration received by the contractor for installing or converting such the property will be treated as part of the over-the-counter sales price subject to the state gross retail tax. Sec. 26. (a) A person making a contract for the improvement to real estate whereby the material becoming a part of the improvement and the labor are quoted as one price that does not meet the definition of a time and materials contract is liable for the payment of sales gross retail tax on the purchase price of all material so used. (b) A person selling tangible personal property to be used as an improvement to real estate may enter into a conpletely separate contract to furnish the labor to install or construct such improvement, in which case the sales tax shall be collected and remitted by such seller on the materials sold for this purpose. Such sales of materials must be identifiable as a separate transaction from the contract for labor. The fact that the seller subsequently furnished information regarding the charges for labor and material used under a flat bid quotation shall not be considered to constitute separate transactions for labor and material. (c) (b) Tangible personal property purchased to become a part of an improvement to real estate under a contract with an organization entitled to exemption is eligible for exemption when purchased by the contractor. (d) In order (c) To be exempt on such the purchases described in subsection (b), the contractor must shall be: (e) (d) Utilities, machinery, tools, forms, supplies, equipment, or any other items used by or consumed by the contractor and which that do not become a part of the improvement to real estate are not exempt regardless of the exempt status of the person for whom the contract is performed. Sec. 27. (a) In general, the gross receipts from renting or leasing tangible personal property are taxable. This regulation only exempts from tax those transactions which would have been exempt in an equivalent sales transaction. (b) Every (a) A person engaged in the business of the rental or leasing of tangible personal property, other than a public utility, shall be deemed to be is considered a retail merchant in respect thereto and such the rental or leasing transaction shall constitute constitutes a retail transaction subject to the state gross retail tax on the amount of the actual receipts gross retail income from such the rental or leasing. However, persons engaged in the subrent or sublease of tangible personal property are not retail merchants, and those transactions are not subject to the gross retail tax. (c) In general, the gross receipts from renting or leasing tangible personal property are subject to tax. The rental or leasing of tangible personal property constitutes a retail transaction, and every lessor is a (b) A retail merchant with respect to such making transactions The lessor must subject to this section shall collect and remit the gross retail tax or use tax on the amount of actual receipts gross retail income as agent for the state of Indiana. The tax is borne by the lessee, except when the lessee is otherwise exempt from taxation. (d) (c) The rental or leasing of tangible personal property, by whatever means effected and irrespective of the terms employed by the parties to describe such the transaction, is taxable subject to the following conditions: Sec. 35. (a) An auction that meets all of the following conditions is a casual sale and is therefore not subject to sales gross retail tax: (b) Auctions which that do not meet the above conditions under subsection (a) are subject to sales gross retail tax. (c) In the event that If certain tangible personal property being sold at a particular auction sale meets the above conditions under subsection (a), but other property fails to meet such those conditions, sales gross retail tax must be collected on the sale of all property failing to meet the conditions. (d) If such a taxable sale is conducted by a licensed auctioneer, the auctioneer is a retail merchant with respect to regarding the property being sold and is responsible for the collection of the sales gross retail tax thereon. (e) If such a sale is conducted by the owner or consignee, or his their agent other than a licensed auctioneer, the owner or consignee becomes a retail merchant and must shall collect sales gross retail tax on the property being sold. (f) Before conducting a taxable sale as defined above in subsection (a), a licensed auctioneer or owner (consignee) must shall obtain a registered retail merchant certificate from the department. of Revenue. Sec. 36. (a) The gross retail income from a bundled transaction that includes tangible personal property is subject to the gross retail tax. (b) "Bundled transaction" means a retail sale of at least two (2) products, except real property and services to real property, which meets the following conditions: If a transaction does not qualify as a bundled transaction because of the scenarios presented in clauses (A) through (C), the transaction is also not considered a bundled transaction as a result of the seller offering a subsequent discount of the total sales price without itemizing the amount of the discount for each product. In this situation, if there is no sales-related documentation showing the allocation of the discount, the discount is considered to be allocated pro rata among the otherwise separately itemized products. (c) A retail sale in which the sales price of a product varies, or is negotiable, based on other products that the purchaser selects for inclusion in the transaction is not a bundled transaction. A retail sale is not considered made for "one nonitemized price" if the purchaser has the option of declining to purchase any of the products being sold and, as a result of the purchaser's selection of products, the sales price varies, or a different price is negotiated. (d) For purposes of this section, the term "bundled transaction" does not include the following types of transactions: (e) For transactions that include tangible personal property and a service or multiple services, sellers may use the "true object test" in subsection (d)(1) or the "de minimis test" in subsection (d)(2) to determine if the transaction qualifies as a bundled transaction. However, the "true object test" does not apply to transactions that include only tangible personal property. (f) The "primary products test" in subsection (d)(3) may be applied to transactions that include all types of products to determine whether the transaction qualifies as a bundled transaction. However, the "primary products test" does not apply to transactions that include products that are not tangible personal property. (g) A transaction that meets one (1) of the exceptions in subsection (d) is not considered a unitary transaction. However, a transaction that: will still be taxable as a unitary transaction. Sec. 37. (a) Except as provided in subsection (b), the amount of gross retail income attributable to a retail transaction where a person: is the amount charged by the retail merchant for the lease or rental of the aircraft used in conjunction with the flight instruction services provided to the lessee or renter. (b) Charges related to the instructor's service of instructing a student are exempt from the gross retail tax if the lease or rental of the aircraft and the charge for the instructor's services are separately stated. Sec. 38. (a) A person is a retail merchant making a retail transaction when the person: (b) As defined by IC 6-2.5-1-26.5, "specified digital products" means the following types of electronically transferred items: (c) As defined by IC 6-2.5-1-28.5, "transferred electronically" means obtained by the purchaser by means other than tangible storage media. For purposes of this definition, it is not required that a copy of the product be physically transferred to the purchaser. So long as the purchaser may access the product, it will be considered to have been electronically transferred to the purchaser. Sec. 39. (a) Generally, the sale, rental, lease, or license for consideration for the right to use prewritten computer software delivered electronically is subject to gross retail tax. However, a transaction in which an end user purchases, rents, leases, or licenses the right to remotely access prewritten computer software over the Internet, over private or public networks, or through wireless media does not constitute a retail transaction. (b) If an app or applet that allows access to remotely accessed software is provided for free separately from a transaction for remotely accessed software, the app or applet is not subject to the gross retail tax when there is no consideration involved. However, if an app or applet is acquired by a customer for consideration in a separate transaction from a contract for remotely accessed software, but the app or applet allows access to remotely accessed software, the app or applet is subject to gross retail tax when it is electronically delivered. Sec. 40. (a) Entering into a computer software maintenance contract to provide future updates or upgrades to computer software is subject to the gross retail tax. (b) If software maintenance is contracted for and included as part of a transaction for prewritten computer software under a single, nonitemized price, the entire transaction is subject to gross retail tax unless: (c) If a contract for remotely accessed software includes a promise to update the software, and the transaction for the software is listed as a single, nonitemized price on the invoice, the transaction will be considered as neither involving a computer software maintenance contract nor subject to Indiana sales or use tax. However, if the contract is separately stated from the remotely accessed software, the contract will not be considered a computer software maintenance contract unless upgrades, updates, or the like are provided to the customer because the customer has possession of the software, making the contract subject to gross retail tax. Sec. 1. (a) Definitions. "Farmers" means only those persons occupationally engaged in producing food or agricultural commodities for sale or for further use in producing food or such commodities for sale. These terms are limited to those persons, partnerships, or corporations regularly engaged in the commercial production for sale of vegetables, fruits, crops, livestock, poultry, and other food or agricultural products. Only those persons, partnerships, or corporations whose intention it is to produce such food or commodities at a profit and not those persons who intend to engage in such production for pleasure or as a hobby qualify within this definition. "Farming" means engaging in the commercial production of food or agricultural commodities as a farmer. "To be directly used by the farmer in the direct production of food or agricultural commodities" requires that the property in question must have an immediate effect on the article being produced. Property has an immediate effect on the article being produced if it is an essential and integral part of an integrated process which produces food or an agricultural commodity. (b) (a) For purposes of this section, the following definitions apply: (b) The state gross retail tax shall does not apply to any of the following transactions: (c) For purposes of this section, "to be directly used by the purchaser in the direct production of food or agricultural commodities" requires that the property in question must have an immediate effect on the article being produced. Property has an immediate effect on the article being produced if it is an essential and integral part of an integrated process that produces food or an agricultural commodity. (d) The following purchases are not exempt because they are not directly used by the purchaser in the direct production of food or agricultural commodities: (e) The following purchases are exempt because they are directly used by the purchaser in the direct production of food or agricultural commodities: (c) Energy Equipment. (1) (f) Equipment used to modify energy purchased from public utilities for the production process of food or agricultural commodities is exempt if the equipment is used to modify the utilities for use by exempt equipment. (2) Further, equipment used to create energy that could can otherwise be purchased exempt from a public utility for use by exempt equipment is exempt. (3) When However, for any equipment that qualifies as essential and integral to the production process and also is used in an alternative nonessential and/or non-integral or nonintegral manner, or both, the exemption shall only apply applies to the percentage (%) of use of the equipment used in the exempt manner. (g) Equipment purchased on or after July 1, 2023, is fully exempt if it is included in the purchasers' business personal property return or, if IC 6-1.1-3-7.2(f) applies, the equipment would otherwise be included on a business tangible personal property tax return and is predominantly (e.g., more than fifty percent (50%)) used in an exempt manner under this section. (h) The only purchasers eligible for this exemption are persons, partnerships, or corporations occupationally engaged in the commercial production for sale of vegetables, fruits, crops, livestock, poultry, and other food or agricultural commodities. Purchasers must intend to produce the food or those commodities at a profit. Purchasers intending to engage in production for pleasure or as a hobby do not qualify for this exemption. Examples of these nonexempt purchases includeb [sic, include] the following: (i) In general, purchases of tangible personal property by persons occupationally engaged in the business of producing food and agricultural commodities for human, animal, and poultry consumption are taxable. If a purchase does not fall within the exemption outlined in this section, or as otherwise provided in IC 6-2.5-5 or this rule, it is subject to the gross retail tax. Sec. 3.5. (a) The gross retail tax does not apply to transactions involving a component of a drainage water management system if the person acquiring the component is engaged in the business of agriculture. (b) As used in this section, "drainage water management system" means a subsurface system of drainage tubing, drainage tiles, water flowgates, control valves, and related control systems designed to facilitate controlled water drainage from agricultural land used for crop production. Sec. 4. (a) Agricultural An eligible purchase for the exemption under sections 1 or 6 of this rule is evidenced by providing a vendor with a properly completed Indiana exemption certificates may be used only if the certificate (Form ST-105) from a purchaser is occupationally engaged in the business of producing food or commodities for human, animal, or poultry consumption for sale or for further use in such the production. (b) The department has determined that persons only purchasers eligible for the exemption are persons, partnerships, or corporations occupationally engaged in producing food and commodities as used in the Indiana sales and use tax act, shall mean and include only those persons, partnerships, or corporations whose intention it is to operate a farm at a profit and not those persons who intend to operate a farm for pleasure as a hobby. for sale of vegetables, fruits, crops, livestock, poultry, and other food or agricultural commodities. Purchasers must intend to produce the food or commodities at a profit. Purchasers intending to engage in production for pleasure or as a hobby do not qualify for this exemption. Operations similar to those of a pony farm, riding stable, or the production and raising of dogs and pets, are not classified as farms for the purpose of the state gross retail tax act. (c) The following is a partial list of items which are considered subject to the sales tax. TAXABLE TRANSACTIONS (d) Each of the following items is considered exempt from the sales tax ONLY when the purchaser is occupationally engaged in agricultural production and uses the items directly in direct production of agricultural products. EXEMPT TRANSACTIONS (e) (c) The fact that an item is purchased for use on the farm does not necessarily make it exempt from sale the gross retail tax. It The item must be directly used by the farmer purchaser in the direct production of food or agricultural products. commodities. The property in question must have an immediate effect on the article being produced. Property has an immediate effect on the article being produced if it is an essential and integral part of an integrated process which that produces food or agricultural products. commodities. The fact that a piece of equipment is convenient, necessary, or essential to farming is insufficient in itself to determine if it is used directly in direct production as required to be exempt. (f) (d) If a farmer makes a purchase is made tax exempt and it is later determines determined that the purchase should have been taxable, a use tax is due by the purchaser on the purchase price and should, which may be remitted to the department of revenue along with the next annual income tax return except for sales tax on gasoline which must be shown on the claim for motor fuel tax refund. or through the department's online tax filing system. (g) (e) A farmer would not ordinarily qualify to producer of food or agricultural commodities may claim an exemption on electric or other utility bills unless if the amount of electricity or other utility directly used in direct agricultural production is separately metered. In order To qualify for an exemption when separate meters are not use used, a farmer should be prepared to must prove to the satisfaction of the department of revenue that the predominant use of electricity or other utility was for direct agricultural production under IC 6-2.5-5-5.1. An exemption should never cannot be claimed for telephone service. (h) (f) The sale by a farmer producer of agricultural commodities or of grocery food not for immediate human consumption or food ingredients, as defined by IC 6-2.5-1-20, from a stand located on the seller's property is not subject to sales gross retail tax, and the farmer is not required to register as a retail merchant unless he conduct they conduct sales of taxable items. -EXAMPLE- Sec. 5. (a) The Except as provided in subsection (d), raising of saddle horses, harness horses, ponies, donkeys, or any other similar animals not used directly in direct agricultural production does not qualify as agricultural production for human consumption under the gross retail sales and use tax act IC 6-2.5. Consequently, the purchase of supplies, food, materials, and equipment used in raising or maintaining such these animals are subject to the sales gross retail tax unless the items are directly used or consumed in the production of such these animals for resale in the regular course of the purchaser's business. (b) The purchase of any of the above animals discussed in subsection (a) is subject to the sales gross retail tax unless the purchaser is a registered retail merchant and is buying such the animal for resale in the regular course of his the purchaser's business. (c) A valid exemption certificate must be furnished by the purchaser setting out the reasons for any exemption. (d) An agricultural exemption certificate may be used only for the (c) The purchase of draft animals, as well as food for those animals, which are to be directly used in direct production of agricultural products, are exempt from gross retail tax as discussed in section 1 of this rule. (d) The purchase of a race horse in a claiming race, which is a race in which any horse starting the race may be purchased for a designated amount in accordance with the rules of the Indiana horse racing commission, is exempt from the state gross retail tax, even if the horse is not directly used in the direct production of food or agricultural commodities. Sec. 6. (a) In general, all purchases of tangible personal property by persons engaged in the direct production, extraction, harvesting, or processing of agricultural commodities are taxable. The exemption provided in this regulation section extends only to agricultural machinery, tools, and equipment. (b) The state gross retail tax shall does not apply to sales of agricultural machinery, tools, and equipment, including material handling equipment purchased for the purpose of transporting materials into activities described in this subsection from an onsite location, to be directly used by the purchaser in the direct production, extraction, harvesting, or processing or of agricultural commodities for sale, including grain. These activities refer to performance as a business of an integrated series of operations that results in tangible personal property in a form, composition, or character different from that in which it began. For purposes of this section, "agricultural machinery, tools, and equipment" refers to machinery, tools, and equipment used to cultivate, grow, produce, reproduce, harvest, extract, or process animals, poultry, and crops that are used to produce food or agricultural commodities for human or animal consumption, or for further use in producing food or agricultural commodities. (c) Purchasers of agricultural machinery, tools, and equipment to be directly used by the purchaser in the direct production, extraction, harvesting, or processing of agricultural commodities are exempt from tax, provided such the machinery, tools, and equipment have a direct effect upon on the agricultural commodities produced, harvested, etc. Property is Agricultural machinery, tools, and equipment are directly used in the direct production, extraction, harvesting, or processing of agricultural commodities if the property in question has an immediate effect on the article being produced. Property Agricultural machinery, tools, and equipment has an immediate effect on the article being produced if it is an essential and integral part of an integrated process, i.e. confinement buildings, cooling, heating, and ventilation equipment. The fact that such machinery, tools, or equipment may not touch the commodity or livestock or, by itself, cause a change in the product, is not determinative. Additionally, component parts of a unit of machinery or equipment that has an immediate effect on the article being produced are exempt if the components are an essential and integral part of the unit. (d) Exempt purchases The fact that machinery, tools, or equipment may not touch the commodity or livestock or, by itself, cause a change in the product, is not determinative. To be considered to have an immediate effect on the article being produced, machinery, tools, or equipment must be both: The fact that particular machinery, tools, or equipment may be considered essential to the conduct of the business of production because its use is required either by law or by practical necessity does not itself mean that the property has an immediate effect on the article being produced. Instead, in addition to being essential for one (1) of those reasons, the property must also be an integral part of an integrated process that produces agricultural commodities for sale. (e) The following purchases are exempt because the machinery, tools, or equipment purchased are directly used by the purchaser in the direct production, extraction, harvesting, or processing of agricultural commodities: (e) Taxable (f) The following purchases are not exempt because they are not directly used by the purchaser in the direct production, extraction, harvesting, or processing of food or agricultural commodities: (f) (g) "Agricultural machinery, tools, and equipment" as used in this regulation section, refers to machinery, tools, and equipment used on a farm to cultivate, grow, produce, reproduce, harvest, extract or process animals, poultry, and crops that are used to produce food or agricultural commodities for human or animal consumption (or for further use in producing food or agricultural commodities). (g) "Direct production, extraction, harvesting or processing agricultural commodities" means action which has an immediate effect on the agricultural commodities being produced by "farming" as defined in Regs. 6-2.5-5-1(010) for a human, animal, or poultry consumption. Property has an immediate effect on the article being produced if it is an essential and integral part of an integrated process which produces agricultural commodities. (h) Farmer and farming. Refer to Regs. 6-2.5-5-1(010) for definitions of "farmer" and "farming". (h) For purposes of this section, "direct use in the direct production process" begins at the point of the first operation or activity constituting part of the integrated production process and ends at the point that the production has altered the item to its completed form, including packaging, if required, and does not include preproduction or postproduction activities. (i) The only purchasers eligible for this exemption are persons, partnerships, or corporations occupationally engaged in the commercial production, extraction, harvesting, or processing for sale of agricultural commodities. Purchasers must intend to produce, extract, harvest, or process those commodities at a profit. Purchasers intending to engage in production, extraction, harvesting, or processing for pleasure or as a hobby do not qualify for this exemption. (j) The purchase by a service provider of agricultural machinery or equipment, including material handling equipment purchased for transporting materials into activities described in this subsection from an onsite location, is exempt from the state gross retail tax if the service provider acquires the property for their direct use in: for consideration. (k) For purposes of this section, "service provider" means a person occupationally engaged in providing the services described in subsection (a) on property that is: (l) Regarding the exemption for material handling equipment, "onsite location" refers to a location where the agricultural production takes place that is owned or leased by the person occupationally engaged in agricultural production and property next to that property, which is also owned or leased by the same person occupationally engaged in agricultural production. The onsite location is not property owned or leased by the service provider, unless the property is located within the property that is owned or leased by the person occupationally engaged in agricultural production. Sec. 8. (a) In general, all purchases of tangible personal property by persons engaged in the direct production, manufacture, fabrication, assembly, extraction, mining, processing, refining, or finishing of tangible personal property for sale are taxable. The exemption provided in this regulation section extends only to manufacturing machinery, tools, and equipment directly used by the purchaser in direct production, manufacturing, fabrication, assembly, extraction, mining, processing, refining, or finishing of other tangible personal property. It does not apply to material consumed in production, manufacturing, fabrication, assembly, extraction, mining, processing, refining, or finishing, or to materials incorporated into tangible personal property produced, manufactured, fabricated, assembled, extracted, mined, processed, refined, or finished. Additionally, the exemption for processing and refining machinery, tools, and equipment provided in this section extends to industrial processors, as defined in IC 6-2.5-1-10.2 [IC 6-2.5-1-20.2]. For purposes of this section, the following definitions apply: (b) The state gross retail tax does not apply to sales of manufacturing machinery, tools, and equipment, including material handling equipment purchased for transporting materials into activities described in this subsection from an onsite location, to be directly used by the purchaser in the direct production, manufacture, fabrication, assembly, extraction, mining, processing, refining, or finishing of tangible personal property. These activities refer to performance as a business of an integrated series of operations that places tangible personal property in a form, composition, or character different from that in which it was acquired. The change in form, composition, or character must be a substantial change, and it must result in a transformation of property into a different product having a distinctive name, character, and use. Operations such as compounding, fabricating, or assembling are illustrative of the types of operations that may qualify under this definition. (c) The state gross retail tax does not apply to purchases of manufacturing machinery, tools, and equipment For purposes of this section, to be "directly used by the purchaser in the direct production, manufacture, fabrication, assembly, extraction, mining, processing, refining, or finishing process" provided that such machinery, tools, and equipment are directly used in the production process; i.e., they have requires that the machinery, tools, or equipment has an immediate effect on the article being produced, manufactured, fabricated, assembled, extracted, mined, processed, refined, or finished. Property has an immediate effect on the article being produced, manufactured, fabricated, assembled, extracted, mined, processed, refined, or finished if it is an essential and integral part of an integrated process which that produces, manufactures, fabricates, assembles, extracts, mines, processes, refines, or finishes tangible personal property for sale. Additionally, component parts of a unit of machinery or equipment that has an immediate effect on the article being produced, manufactured, fabricated, assembled, extracted, mined, processed, refined, or finished are exempt if the components are an essential and integral part of the manufacturing unit. -EXAMPLES- (d) Pre-production and post-production activities. -EXAMPLES- -EXAMPLES- (d) To be considered to have an immediate effect on the article being produced, manufactured, fabricated, assembled, extracted, mined, processed, refined, or finished, machinery, tools, or equipment must be both: The fact that particular machinery, tools, or equipment may be considered essential to the conduct of the business of production, manufacturing, fabrication, assembly, extraction, mining, processing, refining, or finishing because its use is required either by law or practical necessity does not itself mean the property "has an immediate effect on the article being produced, manufactured, fabricated, assembled, extracted, mined, processed, refined, or finished". Instead, in addition to being essential for one (1) of those reasons, the property must also be an integral part of an integrated process that produces, manufactures, fabricates, assembles, extracts, mines, processes, refines, or finishes tangible personal property for sale. -EXAMPLES- -EXAMPLES- (e) "Direct use in the direct production, manufacture, fabrication, assembly, extraction, mining, processing, refining, or finishing process" begins at the point of the first operation or activity constituting part of the integrated production process and ends at the point that the production, manufacturing, fabrication, assembly, extraction, mining, processing, refining, or finishing has altered the item to its completed form, including packaging, if required, and does not include preproduction or postproduction activities. The following conditions also apply: -EXAMPLE- (e) Storage equipment. (f) Tangible personal property used in or for the purpose of storing raw materials or finished goods is subject to tax except for temporary storage equipment necessary needed for moving materials being manufactured, fabricated, assembled, extracted, mined, processed, refined, or finished from one (1) machine to another or from one (1) production step to another, subject to the following conditions: -EXAMPLES- (f) (g) Transportation equipment used to transport work-in-process or semi-finished materials to or from storage is not subject to tax if the transportation is within the production, manufacture, fabrication, assembly, extraction, mining, processing, refining, or finishing process. Transportation equipment used in mining or extraction is taxable unless it is directly used in the mining or extraction process. However, the following uses of transportation equipment would be taxable because they are used in preproduction or postproduction activities: -EXAMPLES- (g) "Have an immediate effect upon the article being produced": Machinery, tools, and equipment which are used during the production process and which have an immediate effect upon the article being produced are exempt from tax. Component parts of a unit of machinery or equipment, which unit has an immediate effect on the article being produced, are exempt if such components are an integral part of such manufacturing unit. The fact that particular property may be considered essential to the conduct of the business of manufacturing because its use is required either by law or by practical necessity does not itself mean that the property "has an immediate effect upon the article being produced". Instead, in addition to being essential for one of the above reasons, the property must also be an integral part of an integrated process which produces tangible personal property. -EXAMPLES- (h) Maintenance and replacement equipment. (1) (h) Machinery, tools, and equipment predominantly used in the normal repair and maintenance of machinery used in the production, manufacture, fabrication, assembly, extraction, mining, processing, refining, or finishing process which are predominantly used to maintain production machinery are subject to tax. (2) However, replacement parts used to replace worn, broken, inoperative, or missing parts or accessories on exempt machinery and equipment, are exempt from tax. -EXAMPLE- A manufacturer of sheet metal repairs and upgrades used machinery by replacing worn or broken parts and adding new elements and features available in state-of-the-art equipment. All items which become components of the upgraded machinery are exempt from tax. However, all tools and equipment used to repair or upgrade used machinery would be taxable. (i) Testing and inspection. Machinery, tools, and equipment used to test and inspect the product as part of the production, manufacturing, fabrication, assembly, extraction, mining, processing, refining, or finishing process are exempt. Machinery, tools, and equipment used to test or inspect the mineral, oil, gas, stone, etc., being mined or extracted are directly used in the mining or extraction process and are also exempt. However, testing or inspection equipment used to test or inspect machinery, tools, and equipment used in extraction or mining (as distinguished from testing or inspecting the mineral, oil, gas, stone, etc., being mined or extracted) is not exempt. -EXAMPLE- Selected parts are removed from production according to a schedule dictated by statistical sampling methods. Quality control equipment is used to test the parts in a room in the plant separate from the production line. Because of the functional interrelationship between the testing equipment and the machinery on the production line and because of the product flow, the testing equipment is an integral part of the integrated production process and is exempt. (j) Managerial, sales, and other non-operational activities. Machinery, tools, and equipment used in managerial, sales, research and development, or other non-operational nonoperational activities, are not directly used in manufacturing, fabrication, assembly, extraction, mining, processing, refining, or finishing and, therefore, are subject to tax. This category includes, but is not limited to, tangible personal property used in any of the following activities: (k) "Direct production, manufacture, fabrication, assembly, or finishing of tangible personal property" is performance as a business of an integrated series of operations which places tangible personal property in a form, composition, or character different from that in which it was acquired. The change in form, composition, or character must be a substantial change, and it must result in a transformation of property into a different product having a distinctive name, character, and use. Operations such as compounding, fabricating, or assembling are illustrative of the types of operations which may qualify under this definition. (l) Energy equipment. (1) (k) Equipment used to modify energy purchased from public utilities purchased for the production, manufacturing, fabrication, assembly, extraction, mining, processing, refining, or finishing process is exempt if the equipment is used to modify the utilities energy for use by exempt equipment. (2) Further, equipment is exempt if it is used to create energy that could can otherwise be purchased exempt from a public utility for use by exempt equipment. is exempt. (3) When However, for any equipment that qualifies as essential and integral to the production, manufacturing, fabrication, assembly, extraction, mining, processing, refining, or finishing process and also is used in an alternative nonessential and/or non-integral or nonintegral manner, or both, the exemption shall only apply applies to the percentage of use of the equipment used in the exempt manner. Sec. 11. (a) The state gross retail tax shall does not apply to sales of tangible personal property to be directly used by the purchaser in the direct production or manufacture of any manufacturing or agricultural machinery, tools, and equipment described in IC 6-2.5-5-2 or IC 6-2.5-5-3. (b) The exemption provided in this regulation section extends only to tangible personal property directly used in the direct production of manufacturing or agricultural machinery, tools, and equipment to be used by such that manufacturer or producer. (c) The state gross retail tax shall not apply to For purposes of this section, purchases of tangible personal property to be directly used by the purchaser in the direct production or manufacturing process of any manufacturing or agricultural machinery, tools, or equipment provided that the machinery, tools, and equipment are directly used in the production process; i.e., they have requires that the property has an immediate effect upon on the article being produced or manufactured. The property has an immediate effect on the article being produced if it is an essential and integral part of an integrated process which that produces tangible personal property. (d) For the application of the rules above, refer to Regs. 6-2.5-5-3 with respect to Subsections (a) through (c) and sections 8 through 10 [sic] of this rule apply to tangible personal property used directly in the following activities: (e) Energy equipment. (1) (e) Equipment used to modify energy purchased from public utilities purchased for the production process is exempt if the equipment is used to modify the utilities energy for use by exempt equipment. (2) Further, equipment is exempt if it is used to create energy that could otherwise be purchased exempt from a public utility for use by exempt equipment. is exempt (3) When However, any equipment qualifies as essential and integral to the production process and also is also used in an alternative nonessential and/or non-integrated or noninteral [sic, nonintegral] manner, or both, the exemption shall only apply applies to the percentage (%) of use of the equipment used in the exempt manner. Sec. 12. (a) The state gross retail tax shall does not apply to sales of any tangible personal property directly consumed in direct production by the purchaser in the business of producing tangible personal property by manufacturing, processing, refining, extraction, or mining. For purposes of this section, "extraction" includes oil and mineral extraction. (b) The exemption provided by this regulation section applies only to tangible personal property to be directly consumed in direct production by manufacturing, processing, refining, or mining. It does not apply to machinery, tools, and equipment used in direct production or to materials incorporated into the tangible personal property produced. (c) The state gross retail tax does not apply to purchases of materials to be directly consumed in the direct production, process manufacturing, processing, refining, extraction, or in mining process, provided that such those materials are directly used in the production process; i.e., they have an immediate effect on the article being produced. The property has an immediate effect on the article being produced if it is an essential and integral part of an integrated process which that produces tangible personal property. (d) "Direct consumption in the direct production by manufacturing, processing, refining, extraction, or mining" does not include preproduction and or postproduction activities, subject to the following conditions: (e) "Have an immediate effect upon the article being produced or mined." Purchases of materials to be consumed during the production, manufacturing, processing, refining, extraction, or mining process are exempt from tax, if the consumption of such those materials has an immediate effect upon on the article being produced, and manufactured, processed, refined, extracted, or mined, or upon on machinery, tools, or equipment which that are both used in the direct production, manufacturing, processing, refining, extraction, or mining process and are exempt from tax under these regulations this section. (f) Other taxable transactions. Purchases of materials consumed in production, manufacturing, processing, refining, extraction, or mining activities beyond the scope of those described in subsection B above (e) are taxable. Such Those activities include: (g) "Consumed" as used in this regulation means the dissipation or expenditure by combustion, use, or application and does not mean or include the obsolescence, discarding, disuse, depreciation, damage, wear or breakage of tools, dies, equipment, machinery, or furnishings. Sec. 13. (a) The state gross retail tax shall does not apply to sales of tangible personal property as a material which that is to be directly consumed in direct production by the purchaser in the business of producing food or agricultural, horticultural, floricultural, or arboricultural commodities. (b) General rule. Purchases of materials to be directly consumed by the purchaser in the business of producing tangible personal property are exempt from tax, provided that such those materials are directly used in the direct production process i.e., they and have an immediate effect upon on the food or agricultural, horticultural, floricultural, or arboricultural commodities being produced. Property has an immediate effect on the food or these commodities being produced if it is an essential and integral part of an integrated process which that produces tangible personal property. (c) Refer to Regs. 6-2.5-5-5.1(010)(7) for the definition of "consumed" as used in this regulation. (d) Refer to Regs. 6-2.5-5-1 for the definition of "farmer" and "farming" as used in this regulation. (e) The term "farmer" will be used in this regulation to signify both "farmers" and "other persons engaged in the business of producing food and agricultural commodities". (f) "The business of producing tangible personal property by agriculture" means "farming" for purposes of interpreting this regulation. (g)(1) "Have an immediate effect upon commodities being produced". (c) Purchases of materials to be consumed during the production of food or agricultural, horticultural, floricultural, or arboricultural commodities are taxable unless the consumption of such those materials has an immediate effect upon on either the: The consumption of property has an immediate effect on the food or agricultural, horticultural, floricultural, or arboricultural commodity being produced or on the machinery, tools, or equipment engaged in direct production of food or those commodities if the consumption is an essential and integral part of an integrated process which produces food or an agricultural commodity. (h) Other taxable transactions. (d) Purchases of materials consumed in farming beyond the scope of those activities described in subsection (g) of this section (c) are taxable. Such These activities include, but are not limited to: Sec. 14. (a) The state gross retail tax shall does not apply to sales of any tangible personal property which that is to be incorporated by the purchaser as a material or an integral part into tangible personal property produced for sale by such the purchaser in the business of manufacturing, assembling, refining or processing. (b) The exemption provided by this regulation section applies only to tangible personal property to be incorporated as a material or an integral part into tangible personal property produced for sale by a purchaser engaged in the business of manufacturing, assembling, refining or processing. This includes tangible personal property used in commercial printing. This regulation section does not apply to persons engaged in producing tangible personal property for their own use. (c) This regulation section does not exempt from tax tangible personal property to be used in production, such as supplies, parts, fuel, machinery etc., refer to Regs. 6-2.5-5-5(010) and 6-2.5-5-5(020) (dealing with material consumed in direct production) for the application of those regulations to taxpayers engaged in the production of tangible personal property. (d) The purchase of tangible personal property which is to be incorporated by the purchaser as a material or an integral part is exempt from tax. To be considered "incorporated as a material or an integral part into tangible personal property for sale by such a purchaser", means each of the following must be met: (e) Application of general rule. Sec. 15. (a) Subject to subsections (b) and (c), the state gross retail tax shall does not apply to sales of any tangible personal property to a purchaser who that purchases the same for the purpose of reselling, renting, or leasing, in the regular course of the purchaser's business, such the tangible personal property in the form in which it is sold to such the purchaser. (b) General rule. Sales of tangible personal property for resale, rental, or leasing are exempt from tax if all of the following conditions are satisfied: (c) Application of general rule. (c) In addition to the requirements of subsection (b), the sale of a new motor vehicle for resale, rental, or leasing is exempt from the state gross retail tax only under each of the following circumstances: Sec. 15.5. (a) The provision, installation, construction, servicing, or removal of tangible personal property used in connection with the furnishing of any public utility service or commodity listed in IC 6-2.5-4-5 by a power subsidiary, or a person engaged as a public utility, is exempt from the state gross retail tax. (b) The gross retail income of power subsidiaries or public utilities engaged in furnishing electrical energy, natural or artificial gas, water, or steam to consumers from the provision, installation, construction, servicing, or removal of tangible personal property used to furnish the public utility services does not constitute the gross retail income of a retail merchant received from a retail transaction. The gross retail income from connect and disconnect charges, equipment charges, contributions in aid of construction charges, deferred payment charges, delinquency charges, and repair service charges are not subject to the state gross retail tax. (c) The sale or furnishing of electrical energy, gas, water, or steam to consumers for direct use in direct manufacturing, mining, production, refining, oil or mineral extraction, irrigation, agriculture, horticulture, or another public utility or power subsidiary described in IC 6-2.5-4-5 is exempt from the state gross retail tax. Electrical energy, gas, water, or steam will only be considered directly used in direct production, manufacturing, mining, refining, oil or mineral extraction, irrigation, agriculture, or horticulture if the utilities would be exempt under IC 6-2.5-5-5.1. (d) Sales of public utility services or commodities listed in IC 6-2.5-4-5 to consumers engaged in manufacturing, mining, production, refining, oil or mineral extraction, irrigation, agriculture, horticulture, or another public utility or power subsidiary, based on a single meter charge, flat rate charge, or other charge, are exempt if the services or commodities are separately metered or billed and will be used predominantly for the exempted purposes. However, if the services or commodities will be used for both exempt and nonexempt purposes, they will be subject to the gross retail tax unless those services or commodities are used predominantly for exempt purposes as provided in subsection (e). (e) Where public utility services are sold from a single meter and the services or commodities are used for both exempt and nonexempt uses, the entire gross retail income will be subject to tax unless the services or commodities are used predominantly for exempt purposes. Predominant use means that more than fifty percent (50%) of the utility services and commodities are consumed for excepted uses. Sec. 16. (a) Subject to subsection (b), the state gross retail tax shall does not apply to sales of nonreturnable wrapping materials and empty containers to be used by the purchaser as enclosures or containers for selling contents to be added, and returnable containers containing contents sold in a sale constituting selling at retail and returnable containers sold empty for refilling. For purposes of this section, the following definitions apply: (b) In general the gross proceeds from the sale of tangible personal property in a transaction of a retail merchant constituting selling at retail are taxable. This regulation provided an exemption for wrapping materials and containers. (c) General rule. (b) The receipt from a sale by a retail merchant of the following types of tangible personal property are exempt from state gross retail tax: (d) Application of general rule. (e) Definitions. Sec. 24. (a) As used in this rule section, "predominantly for use in the performance of a governmental function" means that the property acquired will be used for more than fifty percent (50%) of the time for the performance of a governmental function. (b) The state gross retail tax shall does not apply to sales to the state of Indiana, its agencies and instrumentalities, all Indiana counties, townships, and municipal corporations, their respective agencies and instrumentalities, and all other Indiana state governmental entities and subdivisions, including a county solid waste management district or a joint solid waste management district established under IC 13-21 or IC 13-9.5-2 (before its repeal), of tangible personal property, accommodations, and public utility services and commodities predominantly for use in the performance of governmental functions. (c) Purchases by all Indiana state or local governmental agencies of tangible personal property, accommodations, public utility services, and commodities are exempt from the gross retail tax, provided such the purchases are used predominantly in the performance of governmental functions. This exemption applies only to those purchases which are directly invoiced to the governmental entity and paid out of government funds. meet the following conditions: (f) (d) Purchases of tangible personal property to be incorporated into improvements to real estate owned by a an Indiana state or local governmental unit by contractors under a contractual obligation with a the governmental entity of tangible personal property incorporated into real property used for a governmental purpose are exempt from the gross retail tax under 45 IAC 2.2-3-9. However, (e) Generally, purchases of machinery, tools, forms, and supplies which that are used in the construction but are not incorporated into the structure are subject to tax. However, the purchase of public safety equipment and materials, as defined by IC 6-2.5-5-55, required by contract to be predominantly used to protect the general public and workers during the purchaser's performance of public works construction or maintenance, such as the construction and repair of public roads, bridges, highways, and other public infrastructure, for a governmental entity, is exempt from gross retail and use tax. (g) All purchases of public utility services used predominantly for governmental functions by the state or qualified subdivisions thereof are exempt. Sec. 25. (a) There is not a blanket exemption from the sales gross retail tax for purchases by Indiana state and local governmental agencies and units. It provides that Only the purchase of tangible personal property used by the governmental agency in connection with a governmental function may be purchased exempt from sales gross retail tax. (b) Purchases by a an Indiana state or local governmental agency or subdivision to be used in connection with or for a proprietary activity are subject to the sales gross retail tax. (c) Proprietary activities by Indiana state or local governmental agencies and subdivisions include the following: (d) In every case in which a For an Indiana state or local governmental agency engages engaging in a proprietary type activity as defined above in subsection (c)(1) or (c)(2), the agency must shall pay sales gross retail tax on the purchase of all tangible personal property used in connection therewith. with the activity. (e) The construction of buildings and structures for use in proprietary activities such as concession stands, is subject to sales gross retail tax on the tangible personal property incorporated therein. (f) Governmental agencies should refer to the gross income tax regulations and instructions for other examples of proprietary type activities. Sec. 26. (a) General rule. In general, while the sales of all publications irrespective of format are taxable, The exemption provided by this rule is limited to sales the sale of newspapers is exempt from the gross retail tax. (b) Application of general rule. For purposes of the state gross retail tax this section, the term "newspaper" means only those publications which that are: (c) Publications which that are primarily devoted to matters of specialized interest such as business, political, religious, or sporting matters may qualify for exemption if they also satisfy the criteria listed in subsection 26 of this rule (b). (d) Magazines, periodicals, journals, bulletins, advertising supplements, handbills, circulars, or the like are not newspapers until distributed as a part of a publication which that is a newspaper within the meaning of as defined in this rule section, subject to the following conditions: Any distribution not meeting the above test requirements under this subdivision does not qualify for the newspaper advertising insert exemption. Examples of items distributed with a newspaper that do not qualify for the newspaper advertising insert exemption include gum, shampoo, and detergent samples. (e) Publications issued monthly, bimonthly, or at longer or irregular intervals are generally not considered to be newspapers. (f) Racing forms and tip sheets are not newspapers. (g) A preponderance of advertising, lack of authorization to carry legal advertising, or lack of a masthead setting forth the publisher, editor, circulation, and place of publication are characteristics of publications other than that are not newspapers. (h) For exemptions pertaining to purchases and expenses of newspaper publishers, refer to Regs. 6-2.5-5-3, Regs. 6-2.5-5.1 and Regs. 6-2.5-5-6. Sec. 33. (a) The state gross retail tax shall not apply to the sales of legend or nonlegend drugs dispensed by a registered pharmacist upon the order of a practitioner licensed to prescribe, dispense, and administer drugs to human beings humans or animals in the course of his the practitioner's professional practice are exempt from the state gross retail tax when sold to the patient, or for an animal patient, their owner, on a prescription or drug order, as defined in IC 16-42-19-3. (b) In general, all sales of tangible personal property by a retail merchant including pharmacists, hospitals, and drug stores are taxable. This exemption applies only to sales of certain drugs. (c) General rule: (b) Sales of legend or nonlegend drugs are exempt from the state gross retail tax, provided the drug or drugs are sold: (d) (c) Sales of nonlegend drugs are exempt from the state gross retail tax if: (d) Sales by a retail merchant, such as a pharmacy, hospital, etc. or grocery store, for human or animal use or consumption of nonlegend drugs, such as aspirin, common cold pills, or ordinary cough medicine, and other drugs which are purchased under any other circumstances, with or without prescriptions, are not exempt. under this regulation. (e) Sales of drugs prescribed by a veterinarian or other practitioner not licensed to prescribe drugs for human use are not exempt under this regulation. Sec. 35. (a) In general, Except as provided in subsection (b) and section 36 of this rule, all purchases of tangible personal property by a licensed practitioner are subject to gross retail tax, even if they are directly consumed in the course of treating patients. This exemption is limited to sales of certain drugs, insulin, oxygen, blood and blood plasma. The gross retail tax applies to the following purchase transactions made by licensed practitioners: (b) Sales to licensed practitioners of legend drugs, which may be sold only on a prescription are exempt from the gross retail tax if the practitioner buys the drugs for direct consumption in the course of rendering professional services. (c) Sales to licensed practitioners of insulin, oxygen, blood, or blood plasma are exempt from the gross retail tax if the practitioner buys such those items for direct consumption in the course of rendering professional service. treating patients. (c) For purposes of this section, "directly consumed in the course of treating patients" means the administration of legend drugs, insulin, oxygen, blood, and blood plasma by the licensed practitioner, or the practitioner's agent, including the furnishing of the drugs as a part of a single charge for professional service. Sec. 36. (a) The gross retail tax shall apply to the following purchase transactions made by licensed practitioners: (b) The purchase of items legend or nonlegend drugs, insulin, oxygen, blood, and blood plasma for resale by the physician or surgeon. In order a licensed practitioner is exempt from the gross retail tax. To resell the items, the practitioner must be licensed as a retail merchant, and must quote the selling price of any items separately from the charge for professional service. Sec. 38. The gross retail tax act exempts sale of food and food ingredients for human consumption are exempt from the state gross retail tax. Primarily the exemption is limited applies to sales by grocery stores, supermarkets, and similar type businesses of items which that are commonly known as grocery food. However, the exemption is not limited to the transactions as long as the qualifications for the exemption are met. Sec. 39. (a) The gross retail tax act specifies the items which constitute tax exempt exemption for food and food ingredients for human consumption includes the following items if sold without eating utensils provided by the seller: (b) A number of items normally sold by grocery stores, supermarkets, and similar type of businesses are classified in this regulation under the heading "nontaxable items". These examples are for illustrative purposes and are not intended to be all-inclusive. "NONTAXABLE ITEMS" Some items in the above categories will be subject to tax if they are sold in small quantities and, therefore, are prepared for immediate consumption. Sec. 40. The gross retail tax act specifies items which do not constitute exemption for food and food ingredients for human consumption exempted by the Act. A number of items normally sold by grocery stores, supermarkets, and similar type businesses are classified in this regulation under the heading "taxable items". These examples are for illustrative purposes and are not to be all-inclusive. does not apply to the sale of the following items: "TAXABLE ITEMS" Sec. 41. (a) Preparations "Candy" does not meet the definition of "food and food ingredients", and therefore, the sale of candy is subject to gross retail or use tax. (b) Except as provided in subsections (c) and (d), "candy" means a preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts, or popcorn in combination with chocolate, sugar, honey, candy, or other confectionary, unless sold for cooking purposes, are not considered exempt "food" items. The method used in packaging and distributing these preparations, including the kind and size of container used, will be considered in determining the primary use for which these preparations are sold ingredients or flavorings in the form of bars, drops or pieces. The fact that these preparations contain ingredients that, if purchased separately, are considered exempt does not exempt these preparations. (b) (c) The term "candy" does not include any preparation that contains flour listed on the label or any preparation that requires refrigeration. (d) Chocolate commonly used for baking or cooking purposes is considered exempt "food" within the meaning of this regulation. The method used in packaging and distributing chocolate, including the kind and size of container used, will be considered in determining the primary use for which it is sold. unless it is in the form of a bar, drop, or piece and is sweetened. Sec. 42. Any (a) "Soft drinks" do not meet the definition of "food and food ingredients", and therefore, the sale of a "soft drink" is subject to gross retail or use tax. (b) Except as provided in subsection (c), "soft drink" which contains carbonated water is subject to tax. However, some other drinks which may not contain carbonated water but which are normally purchased for consumption out of "soft drink bottles or cans will also be subject to tax. This would include, for example, chocolate drinks. The term soft drinks" does not include fruit and vegetable juices. means a nonalcoholic beverage that contains natural or artificial sweeteners. (c) The term "soft drink" does not include beverages that contain milk or milk products, soy, rice, or similar milk substitutes, or greater than fifty percent (50%) of vegetable or fruit juice by volume. However, beverages that are advertised as being greater than fifty percent (50%) juice, but are made from concentrate through a water extraction method (e.g., prune juice), are considered soft drinks if they contain natural or artificial sweeteners. Further, frozen or powdered drink mixes are not sold in a liquid beverage form, and therefore, are not considered a soft drink even if they contain sweeteners. Sec. 43. (a) Sales of prepared food which ordinarily is sold for and food ingredients for human consumption by a seller are not exempt from the gross retail tax. Except as provided in subsection (d), "prepared food" includes: (b) Transactions for food items sold in a heated state or heated by the seller and ready to eat without further cooking by the purchaser are subject to the gross retail tax. However, providing customers with access to a device, such as a microwave or toaster, for their own use to heat frozen or refrigerated food not previously heated by the seller does not make the food taxable. (c) Transactions for food items where at least two (2) food ingredients are mixed or combined by the seller and sold as a single food item are subject to the gross retail tax. However, items in this category are exempt if: (d) Transactions for food items sold with eating utensils provided by the seller are subject to the gross retail tax. Except as provided in subdivisions (1) and (2), food is considered to be sold with eating utensils provided by the seller when utensils are given to the purchaser or made available for self-service by the purchaser on the seller's premises. The taxability of food sold by a restaurant or a combination business, as defined in section 44 of the rule, is determined as follows: (e) Prepared food does not include: even though they are items where at least two (2) food ingredients are mixed or combined by the seller and sold as a single food item. These items are not taxable unless they are sold with eating utensils provided by the seller. Therefore, if a bakery provides utensils, the bakery items it sells would be subject to gross retail tax, except in the case of bulk items, depending on whether the bakery qualifies as a restaurant or combination business. Sec. 44. Where a person operates a combination-type For purposes of section 43 and this section of this rule, the following apply: Sec. 45. (a) The law provides that the sale of meals shall be taxable whether such meals are served on or off the premises of the retailer. Accordingly Except as provided in subsection (b), the sale of food or meals by caterers is subject to sales gross retail tax. (b) The tax applies to the entire charge made by caterers for serving meals, food and drink, inclusive of charges for food, the use of dishes, silverware, glasses, chairs, tables, etc., used in connection with serving meals, and for labor of serving meals. (b) Charges for serving or delivering food or beverages furnished, prepared, or served for consumption at a location or on equipment provided by the caterer are not subject to gross retail tax. However, this exclusion applies only if the charges for serving or delivery are stated separately from the price of the food or beverages when the purchaser pays the charges. (c) A charge by a caterer for delivering food to a customer's location would be a taxable charge, whether separately stated or not. Sec. 46. (a) The state gross retail tax shall does not apply to the furnishings of providing school meals to school children and school employees on school premises in all schools of grades one (1) through twelve (12). (b) The fact that a school employs a private caterer to prepare and serve meals will does not negate the exemption as long as the meals are served on school property and the caterer is merely acting as an agent for the school corporation. (c) Sales of school meals to persons other than students or employees are subject to the sales gross retail tax, except for sales made by either a: Sec. 48. (a) The state gross retail tax shall not apply to such part of the gross income from transactions constituting selling at retail as is exempt from the gross income tax under the provisions of IC 6-2.1-3-5. (b) The state gross retail tax shall does not apply to taxes received or collected by the taxpayer as an agent for the state of Indiana and/or or the United States of America, or both. No person shall be is considered as an agent for the state of Indiana and/or or the United States of America, or both, under this regulation section unless he has they have been explicitly designated as a collecting agent in the statute under the terms of which the tax is imposed. Sec. 49. (a) The gross retail tax shall not apply to such part of the gross income from transactions constituting selling at retail as is exempt from the gross income tax under the provisions of IC 6-2.1-3-2. (b) The state gross retail tax shall not does apply to so much of the gross receipts retail income of any transaction from sales to the United States government, but only to the extent to which the state of Indiana is prohibited from taxing such the gross receipts retail income by the Constitution of the United States. Sec. 50. The state gross retail tax shall does not apply to such the part of the gross retail income from transactions constituting selling at retail which is representing excise tax imposed under Section 4081 of the Internal Revenue Code. Sec. 51. (a) The state gross retail tax shall not apply to such part of the gross income from transactions constituting selling at retail as is exempt from the gross income tax under the provisions of IC 6-2.1-3-6 and IC 6-2.1-3-7. (b) The state gross retail tax shall does not apply to so much of the gross receipts retail income of any transaction from retailer's excise taxes imposed by the United States solely on the sale at retail of tangible personal property and collected by a retail merchant as a separate item in addition to the price of the property sold, and which is remitted by such the retail merchant to the taxing authority. "Retailers' excise taxes imposed by the United States" includes manufacturer's excise tax imposed by the United States on motor vehicles, motor vehicle bodies and chassis, parts, and accessories therefore, such as tires, provided that such the tax is separately stated and billed by the seller. Sec. 52. (a) The state gross retail tax shall not apply to such part of the gross income from transactions constituting selling at retail as is exempt from the gross income tax under the provisions of IC 6-2.1-3-13. (b) The state gross retail tax shall does not apply to so mush of the gross receipts retail income of any transaction from all the amounts represented by an encumbrance of any kind on tangible personal property received by a retail merchant in reciprocal exchange for tangible personal property of like kind. Sec. 55. (a) Sales to a qualified not-for-profit organization of tangible personal property, accommodations, or services used primarily in carrying out the not-for-profit purpose of the organization or in raising money for carrying on such those purposes are exempt from the gross retail tax, as long as the organization is not operated predominantly for social purposes. (b) In order to qualify for the sales tax exemption on purchases, as For purposes of this section, a "qualified not-for-profit organization" must be within one (1) of the following conditions must prevail: categories: (3) (c) The exemption discussed in this section does not apply to an organization is not operated predominantly for social purposes. An organization is considered to exist for predominantly social purposes if more than fifty percent (50%) of its expenditures are for, or related to, social activities. Social activities include the following: The (d) An article purchased must be used for the same purpose as that for which the organization is being exempted. Purchases for the private benefit of any member of the organization or for any other individual, such as meals or lodging, are not eligible for exemption. Purchases used for social purposes are never exempt. (4) (e) The fact that an organization is being has been exempted by the federal government or by the state of Indiana for income tax purposes does not necessarily mean that a purchase made by the not-for-profit organization is exempt. (c) (f) Purchases of tangible personal property by a qualified not-for-profit organization used to raise funds to further the exempt purpose of the organization are exempt even if the resale of such the property is not subject to tax. The following are examples: (d) (g) While purchases of tangible personal property, accommodations, or services used primarily in carrying out the not-for-profit purpose of the qualified organization are exempt from tax, This exemption will not apply if such the property, is primarily accommodations, or services are used for a purpose other than the not-for-profit purpose of the organization, As used in this section, "primarily used in carrying out the not-for-profit purpose" means that the item or service is used more than fifty percent (50%) of the time to further the organization's not-for-profit purpose. The following are examples: the exemption will not apply. (e) (h) A social organization will be deemed is considered to exist for predominantly social purposes if more than fifty percent (50%) of its expenditures are for, or related to, social activities. Social activities include the following: Sec. 56. (a) The state gross retail tax exempts transactions occuring after December 31, 1976, and Transactions involving tangible personal property or service, are exempt from the gross retail tax if the person acquiring the property or service: (b) Purchases for the private benefit of any member of the organization or for any other individual are not eligible for exemption. -EXAMPLE- Sec. 57. (a) The state gross retail tax shall does not apply to sales by any qualified not-for-profit organization, as outlined in section 55(b) of this rule, of tangible personal property for not more than thirty (30) days during any calendar year for if either of the following apply: (b) In general, the gross receipts from sales by not-for-profit organizations are taxable. This subsection exempts from tax the gross receipts from the sale of tangible personal property by a qualified not-for-profit organization in connection with certain fund-raising activities as described in this regulation. (b) For purposes of subsection (a)(2), once sales of an organization exceed the amount described therein, the organization is required to collect state gross retail tax on sales on an ongoing basis for the remainder of the calendar year and each calendar year thereafter until the organization makes less than one hundred thousand dollars ($100,000) in sales for two (2) consecutive years. The sales of an organization include sales made by all units operating under the organization's registration under IC 6-2.5-5-25(c). (c) The gross receipts retail income from the sale or lease of tangible personal property by a qualified not-for-profit organization are is exempt under this subsection (a)(2) if the sales are made to raise money to further the not-for-profit purpose of the organization and if the sales are conducted for not more than thirty days during any calendar year. Such nonprofit makes not more than one hundred thousand dollars ($100,000) in sales in the current or previous calendar year. These sales may be made by all qualified not-for-profit organizations. For purposes of this section: (d) Except as provided in subsection (a)(1), any organization which that makes such sales for thirty-one or more days during any than one hundred thousand dollars ($100,000) in sales in the current or previous calendar year is a retail merchant and, therefore, is subject to the state gross retail tax. (Refer to Regs. 6-2.5-5-26(b) for exemption of certain sales by qualified not-for-profit organization which are not predominantly social.) However, sales that qualify under section 58 or 59 of this rule would be exempt from the gross retail tax. (e) Sales conducted for not more than thirty days. Each day during which any selling activities are conducted constitutes a "selling day" for purposes of determining whether a qualified not-for-profit organization has conducted sales for more than thirty days during any calendar year. The solicitation, acceptance, or receipts of a sales order during any day during more than thirty days during any calendar year, then all gross receipts from all sales made during the year are subject to tax. For purposes of applying these rules, the thirty days need not be consecutive. -EXAMPLE- (f) Furthering the not-for-profit purpose of the organization. The gross receipts from fund raising sales conducted for not more than thirty days are exempt only if such receipts are expended to further the not-for-profit purpose of the exempt organization. For purposes of this section, the payment of such receipts to offset the direct cost of the product sold will be considered an expenditure to further the not-for-profit purpose of the organization. (g) Definition. Refer to Regulation 6-2.5-5-25(a)(010)(2) for the definition of a "qualified not-for-profit organization". Sec. 58. (a) For purposes of section 57(a)(2) of this rule, if a not-for-profit's sales exceed one hundred thousand dollars ($100,000) in the current or previous calendar year, the state gross retail tax shall does still not apply to sales by qualified not-for-profit organizations, as outlined in section 55(b) of this rule, of tangible personal property of a kind designated and intended primarily for the educational, cultural or religious purposes of such the qualified not-for-profit organization and not used in carrying out a private or proprietary business, as long as the organization is not operated predominately for social purposes. (b) The gross receipts from each sale of tangible personal property by a qualified not-for-profit organization are exempt under this rule only if: (c) Furthering the educational, cultural or religious purpose. (b) The primary purpose of the property sold must be to further the educational, cultural or religious purpose of the qualified not-for-profit organization. -EXAMPLE- (d) Qualified not-for-profit organization. (c) This regulation section applies only to qualified not-for-profit organizations For example, the sale of educational books by a social club is taxable. as outlined in section 55(b) of this rule. A predominantly social not-for-profit organization is not a qualified not-for-profit organization with respect to sales regarding gross retail and use tax. (e) Definition. Refer to Regulation 6-2.5-5-25(a)(010)(2) for the definition of a "qualified not-for-profit organization". Sec. 59. (a) If a not-for-profit's sales exceed one hundred thousand dollars ($100,000) in the current or previous calendar year, the state gross retail tax shall does not apply to sales by qualified not-for-profit organizations, as outlined in section 55(b) of this rule, of tangible personal property of a kind designed and intended to improve the skill or professional qualification of members of the organization for carrying on the work or practice of their trade, business or profession and not used in carrying on a private or proprietary business, as long as the organization is not operated predominately for social purposes. (b) The gross receipts from sales of tangible personal property by a qualified not-for-profit organization are exempt under this rule only if: (c) Designed and intended to improve the skill of professional qualification. (b) The property sold to members of the organization must be designed and intended to improve the skills of such those members. -EXAMPLE- (d) Qualified not-for-profit organizations. (c) This regulation section applies only to not-for-profit organizations which that are qualified not-for-profit organizations. For example, sales of instructional booklets on golf techniques by a country club are taxable. A country club is a predominantly social not-for-profit organization and not a qualified not-for-profit organization. A predominantly social not-for-profit organization is not a qualified not-for-profit organization regarding gross retail and use tax. (e) Definitions. Refer to Regulation 6-2.5-5-25(a)(010)(2) for the definition of a "qualified not-for-profit organization". Sec. 61. (a) The state gross retail tax shall does not apply to the sale and for storage or use in this state of tangible personal property which is or services that are directly used or directly consumed in the rendering of providing public transportation of persons or property. As used in this section, "service" means those services that are otherwise taxable under IC 6-2.5, such as electrical or telephone services. (b) Definition: Public Transportation. Public transportation shall mean and include the movement, transportation, or carrying of persons and/or property for consideration by a common carrier, contract carrier, household goods carrier, carriers of exempt commodities, and other specialized carriers performing public transportation service for compensation by highway, rail, air, or water, which carriers operate under authority issued by, or are specifically exempt by statute or regulation from economic regulation of, the public service commission of Indiana, the Interstate Commerce Commission, the aeronautics commission of Indiana, the U.S. Civil Aeronautics Board, the U.S. Department of Transportation, or the Federal Maritime Commissioner; however, the fact that a company possesses a permit or authority issued by the P.S.C.I., I.C.C., etc., does not of itself mean that such a company is engaged in public transportation unless it is in fact engaged in the transportation of persons or property for consideration as defined above. (c) In order (b) To qualify for the exemption provided by this section, the tangible personal property must be reasonably necessary to the rendering of providing public transportation. The tangible personal property must be indispensable and essential in directly transporting persons or property. (d) (c) The following is a partial list of items which the department has determined to be necessary to the rendering of providing public transportation: (e) (d) The following is a partial list of items which that are not directly used or consumed in the rendering of providing public transportation and, therefore, are subject to tax: (f) Pre- and post-transportation activity. (e) The purchase, storage, or use of tangible personal property used or consumed for activities prior to or subsequent to the rendition providing of public transportation is subject to tax. For purposes of this regulation , transportation means the movement, transporting, or carrying of persons or property from one place to another and includes loading and unloading of persons or property into or from transportation vehicles. -EXAMPLES- (g) Storage facilities and equipment. (f) In general, storage facilities and associated equipment for exempt vehicles are exempt. Additionally, tangible personal property directly used for temporarily storing persons or property being transported is exempt from tax because temporary storage is considered to be an integral part of rendering providing transportation. -EXAMPLES- (h) Repair and maintenance facilities and equipment. (1) (g) Machinery, tools, equipment, and facilities used for repair and maintenance of tangible personal property directly used in public transportation are not subject to tax. Additionally, replacement parts used to replace worn, broken, inoperative, or missing parts or accessories on exempt property are exempt from tax. -EXAMPLE- -EXAMPLE- (i) Transportation vehicles. (h) In general, all vehicles, including transportation vehicles such as airplanes, locomotives, rolling stocks, watercraft, vessels, pipelines, buses, tractors, trailers, trucks, and other vehicular equipment including containers directly used in rendering providing public transportation, are exempt from tax. This exemption does not extend to motor vehicles, including automobiles, used to solicit business or to automobiles supplied to company employees for their personal use. -EXAMPLES- (i) In general, fuel and lubricants are taxable except fuel and lubricants consumed by exempt transportation vehicles or other tangible personal property directly used in providing public transportation. (j) In general, shipping material or supplies are taxable except the shipping materials or supplies directly consumed during providing public transportation. (k) The purchase, sale, storage, use or other consumption in this state of service that is directly used or directly consumed in providing public transportation of persons or property is exempt from tax. (j) Other property. (l) In general, all any other tangible personal property or services that does not fit within a category described elsewhere in this section is taxable, except those items that are directly used or directly consumed in providing public transportation. -EXAMPLES- (k) Real property used for transportation. (m) In general, the purchase, storage, or use of tangible personal property to be incorporated into or used as an improvement to realty used in connection with rendering providing public transportation is taxable. If, however, such these items are directly used in rendering providing public transportation, this exemption is applicable. (l) Purchasing exempt property. (n) Tangible personal property used for sales or other nonoperational activities is not directly used in providing public transportation and, therefore, is subject to tax. This category includes, but is not limited to, tangible personal property used in any of the following activities: (o) To make exempt purchases under this section, the following conditions apply: (m) Promotional, sales, and other non-operational activities. Purchase, storage, or use of tangible personal property not directly used in rendering public transportation is taxable. Tangible personal property used for sales or other non-operational activities is not directly used in rendering public transportation and, therefore, is subject to tax. This category includes, but is not limited to, tangible personal property used in any of the following activities: promotional advertising; sales marketing; projection and costing; heating, air conditioning and ventilation units, and equipment for general temperature control of separate, off-site executive headquarters; research and development; waste disposal. -EXAMPLES- Sec. 65. (a) For the purpose of this regulation , "mobile home" means only a structure which: (b) If a structure does not meet each the definition of the above conditions it does not qualify as a mobile manufactured home however, as defined in 42 U.S.C. 5402(6), as adopted and in effect on January 1, 1988, it may still qualify for the reduced sales gross retail tax rate if all five of the following requirements are fulfilled and the structure constitutes an industrialized building, as defined in IC 6-2.5-5-29, to be used as a one or two family dwelling. (c) For the purpose of this regulation an "industrialized building system" means only a structure which: Sec. 67. (a) Thirty-five percent (35%) of the gross retail income derived from the sale of a "mobile "manufactured home" or an "industrialized residential structure" is not subject to the gross retail tax. (b) Thirty-five percent (35%) of the gross retail income derived from the sale of a "mobile "manufactured home" or an "industrialized residential structure" building system" is attributable to costs other than the cost of materials used in manufacturing such the structures. Sec. 68. If a dealer who purchases a mobile manufactured home or an industrialized building system as described in this regulation, does not install the structure as an improvement to realty under a lump sum contract, but rather purchases the structure for resale in the regular course of his the dealer's business, such the purchase for resale is exempted. The dealer may provide the seller with an exemption certificate (form ST-105) certifying exempt use, in which case the dealer must collect and remit sales the gross retail tax on the subsequent resale. Sec. 69. (a) On or after September 1, 1979, the Bureau of Motor Vehicles will no longer be authorized to collect sales tax on sales by retail merchants of mobile homes and industrialized building systems. (b) The When the seller or dealer sells a manufactured or modular home to a buyer, the gross retail tax must be collected by the seller or dealer, and form ST-108MH must be completed in triplicate and signed by both seller dealer and buyer. The original form ST-108MH must be attached by the seller to the certificate of origin or certificate of title used to assign ownership subject to the following conditions: Any person claiming the thirty-five percent (35%) reduction on the purchase of a mobile manufactured home or an industrialized building system must apply for registration of the structure within thirty (30) days of the purchase date. as required by the Bureau of Motor Vehicles. Sec. 70. (a) The state gross retail tax does not apply to sales of tangible personal property which that constitutes, is incorporated into, or is consumed in the operation of, a device, facility, or structure predominately used and acquired for the purpose of complying with any state, local or federal environmental qaulity quality statutes, regulations, or standards; and the person acquiring the property is engaged in the business of manufacturing, processing, refining, mining, recycling, or agriculture. (b) Definitions. (1) Consumed as used in this regulation means the dissipation or expenditure by combustion, use or application, and does not mean or include the obsolescence, discarding, disuse, depreciation, damage, wear or breakage of tools, machinery, devices or furnishings. (2) (b) "Incorporated", as used in this regulation section, means the material must be physically combined into and become a component of the environmental quality device, facility, or structure. The material must constitue constitute a material or an integral part of the finished product. (c) Portion exemption: The portion exempt equals the total sales price; multiplied by the percentage prescribed in the following table equals the portion of the sales price exempt from the state gross retail tax: one hundred percent (100%). DATE OF SALE PERCENTAGE (1) After June 30, 1980 and before July 1, 1981 33 % (2) After June 30, 1981 and before July 1, 1982 66 2/3% (3) After June 30, 1982 100% Sec. 71. (a) The state gross retail tax does not apply to transactions involving tangible personal property that will be leased, owned, or operated by: (b) The exemption provided by this section does not apply to tires and accessories. (c) For purposes of this section, the following definitions apply: Sec. 72. (a) The state gross retail tax does not apply to transactions involving the sale of: (b) The exemption under this section also applies to the lease or rental of storage for the coins, bullion, or legal tender described in subsection (a). (c) For purposes of this section, the exemption applies to legal tender: The term includes federal reserve notes and circulating notes of federal reserve banks. However, foreign gold and silver coins are not legal tender for purposes of this exemption. (d) To be exempt from the gross retail tax, coins and bullion described in subsection (a)(1) and (a)(2) are not required to be held by an IRA or IDA. Rather, the exemption applies to coins or bullion that are permitted to be held by an IRA or IDA. Sec. 73. (a) The gross retail tax does not apply to the following tangible personal property purchased and used by a person that operates a hot mix asphalt plant: (b) The exemption provided in this section is not applicable for the following purchases made by a person that operates a hot mix asphalt manufacturing plant: Sec. 4. (a) A taxpayer retail merchant may, without prior departmental approval, report and pay his state gross retail tax on the accrual basis if: (b) Definition: Accrual basis of accounting. For purposes of subsection (a), on the accrual basis, income is accounted for as and when it is earned, whether or not it has been collected. Expenses are deducted when they are incurred, whether or not paid in the same period. Sec. 5. (a) The department may permit a retail merchant, wholesaler, or manufacturer holding registered retail merchant certificates for more than one (1) store or place of business to file a return consolidating the transactions of all such stores each store or places place of business. (b) All retail merchants filing consolidated returns for more than one (1) location are assigned an a taxpayer identification number to be used in such the filing. (c) The A taxpayer identification number is in addition to the retail merchant certificate numbers which that are required for each business location. Consolidated identification numbers are not valid for use on exemption certificates or for any purpose other than reporting consolidated sales gross retail tax collections. (d) No charge is made for assigning such a taxpayer identification number; however, prior to being granted permission to file on a consolidated basis, the taxpayer is required to furnish the department of Revenue with a list of all locations and retail merchant certificate numbers which that are to be included in consolidated returns, together with such any other information as is required in the application. (e) The sales gross retail tax returns of one (1) corporation or company may not be consolidated with the sales gross retail tax returns of another corporation or company. (f) Any future location may be included in the consolidated filing by attaching a request to the original application for registration as a retail merchant. Such The request should set out the reporting number under which the returns will be filed. Sec. 11. (a) In order To minimize the taxpayer's record keeping requirements, the department has prescribed a formula for determining the retail merchant's income exclusion ration ratio for a tax year as follows: -EXAMPLE- (b) It is important that the percentage factor be arrived at from the merchant's actual records. These records must be maintained for four (4) years because the merchant will be required to substantiate prove the percentage factor used upon the request of the department. Sec. 17. (a) A retail merchant who that extends energy heating assistance under IC 4-3-10, IC 4-4-33 may deduct from his sales the merchant's gross retail and use tax liability the cost of the energy aggregate assistance extended by the retail merchant to a heating assistance program administered under IC 4-3-10 IC 4-4-33 during the reporting period for which the state gross retail and use tax payment is made. (b) If the cost of the energy heating assistance is greater than the retail merchant's sales gross retail and use tax liability for that reporting period, the retail merchant will be entitled to claim a refund from the department for the additional funds. (c) Alternatively, the excess credits may be applied to subsequent months' tax liability in lieu instead of a refund application. Sec. 9. The department may not issue or renew a certificate for a retail merchant whose name appears on the most recent monthly warrant list, unless that taxpayer pays the tax or makes arrangements satisfactory to the department for the payment of the tax. Sec. 12. (a) Exemption certificates may be issed issued only by purchasers authorized to issue such the certificates by the department. of Revenue. Retail merchants manufacturers, wholesalers and others who that must register with the department of Revenue and who that qualify to purchase exempt from tax under this Act IC 6-2.5 may issue exemption certificates with respect to regarding exempt transactions. All persons or entities not required to register with the department as retail merchants, manufacturers, or wholesalers, and who that are exempt under this Act with respect to IC 6-2.5 regarding all or a portion of their purchases are authorized to issue exemption certificates with respect related to an exempt transaction provided an exemption number has been assigned by the Department of Revenue, or provided that the Department of Revenue has specifically provided in a form and manner for issuing exemption certificates without the need for assigning an exemption number. by the department on the department's website. (b) Retail merchants are required to collect the sales and use gross retail tax on each sale which that constitutes a retail transaction unless the merchant can establish that the item purchased will be used by the purchaser for an exempt purpose. (c) All retail sales of tangible personal property for delivery in the state of Indiana shall be are presumed to be subject to sales or use tax until the contrary is established. The burden of proof is on the buyer and also on the seller unless the seller receives an exemption certificate. (d) Unless the seller receives a properly completed exemption certificate, the merchant must shall prove that sales the gross retail tax was collected and remitted to the state or that the purchaser actually used the item for an exempt purpose. It is, Therefore, very it is important to that the seller to obtain an exemption certificate in order to avoid the necessity for such needing that proof. The mere Filing of only a registered retail merchant certificate number is not sufficient enough to relieve the seller of the responsibility to collect the sales gross retail tax or prove exempt use by the buyer. (e) No exemption certificates are required for sales in interstate commerce, sourced outside Indiana; however, proper records must be maintained to substantiate such prove the sales. (f) An exemption certificate issued by a purchaser shall is not be valid unless it is executed in the prescribed and approved form and unless all the information requested on such the form is completed. (g) An exemption certificate or other evidence supporting an exempt sale must be maintained by the seller for at least three (3) years after the due date of the tax return upon on which such the exempt transaction is reported. (h) Exemption certificates may be reproduced provided if no change is made in the wording or content. Sec. 15. The department may issued issue a "direct payment permit" to retail merchants, manufacturers, or wholesalers, upon on request. The department may issue the permit subject to such conditions as it deems considers reasonable. Sec. 16. (a) The A direct payment permit must be applied for, and is normally issued only in those instances where it is shown that it is impossible at the time of purchase to determine whether or not the materials will be used for an exempt purpose. Adequate records must be maintained by the holder of the permit showing the ultimate use of the tangible personal property purchased and the amount of use tax remitted. The holder of such a the permit is required to furnish his suppliers with a copy of the permit. and the permit must be renewed annually. (b) The A retail merchant who sells selling to a customer who that furnishes a copy of a direct payment permit is not required to collect sales gross retail tax; but must however, they are required to retain a copy of the permit in his their file. (c) A direct payment permit is not a declaration that the issuer holder of the permit is entitled to exemption, but is rather a declaration that the issuer holder of the permit will remit use tax on any purchase on which sales gross retail tax was due. Sec. 17. (a) The A contractor who that has applied for and received permission to pay on a direct payment permit basis may issue direct payment permits to his their suppliers, but when acting as a contractor should remember that he they must obtain an exemption certificate not a direct payment permit from any exempt customer for whom he is they are making an improvement to real estate as a result of a flat bid or lump sum non-time and materials contract. (b) A builder contractor operating under a time and material agreement materials contract is selling the material to his their customer and should normally must collect sales gross retail tax unless their customer presents a valid exemption certificate. The builder contractor may accept a direct payment permit from his their customer, and is then relieved which relieves the contractor from the liability to collect sales gross retail tax. (c) A flat bid contractor on the other hand, does not sell operating under a non-time and materials contract is not a retail merchant selling tangible personal property, or so they do not collect sales gross retail tax as a result of his their contract. Because the contract is already not subject to gross retail tax, and the receipt of so receiving a direct payment permit is of no value to him. is not necessary. (d) If the an organization for which the a contractor is constructing the an improvement is entitled to an exemption, they must give the contractor an exemption certificate (ST-105) certifying that fact. A direct payment permit from the organization is not permitted, as it would not certify that the organization was entitled to exemption. It would only certify that they the organization would pay any tax for which they were it is liable. LSA Document #24-395 Notice of First Public Comment Period: June 24, 2026 Last Hearing Held: July 27, 2026 Approved by Attorney General: August 27, 2026 Approved by Governor: August 27, 2026 Filed with Publisher: September 1, 2026, 11:52 a.m. Documents Incorporated by Reference: None Received by Publisher Small Business Regulatory Coordinator: Bruce Kolb, Senior Counsel, Department of State Revenue, Indiana Government Center North, 100 North Senate Avenue, Room N248, Indianapolis, IN 46204, (317) 232-2566, bkolb@dor.in.gov