in-20260610-IR-045260168NRA: Revenue Ruling #2026-01-RST

DEPARTMENT OF STATE REVENUE Revenue Ruling #2026-01-RST May 26, 2026 NOTICE: Under IC 4-22-7-7, this document is required to be published in the Indiana Register and is effective on its date of publication. It shall remain in effect until the date it is superseded or deleted by the publication of a new document in the Indiana Register. The publication of this document will provide the general public with information about the department's official position concerning a specific issue. ISSUES Sales and Use Tax - Imposition of Sales/Use tax Authority: IC 6-2.5-1-10.7; IC 6-2.5-1-16.5; IC 6-2.5-1-22.2; IC 6-2.5-13-3; Sales Tax Information Bulletin #54 STATEMENT OF FACTS The Company is an Indiana based direct mail producer and printer. Historically, the Company has sourced its sales to Indiana because its sole production facility is in Indiana, which was consistent with a previous audit determination. The Company believes it would be subject to compliance with other jurisdictions based on where the direct mail is received that the Company produces in Indiana. The Company is seeking clarification on the taxability and sourcing of its various components of production. The Company's clients' billing is itemized by function. The Company is also seeking guidance as to the application of Indiana sales tax to the following activities: DISCUSSION When interpreting the Indiana General Assembly's use of terms, the state applies the statute as written, giving all its words their plain and ordinary meaning unless the statute indicates otherwise. See, Covance Cent. Lab'y Servs. LP v. Indiana Dept of State Revenue, 204 N.E.3d at 348, 355 (Ind. Tax 2023). Sales tax sourcing determines which state, county, or local taxing jurisdiction has the right to collect sales tax on a transaction based on where the sale is deemed to have occurred. The sourcing of direct mail transactions depends on many factors, including: the locations of the printer, the purchaser, and the recipients of the materials, whether the printer and/or purchaser has physical presence or economic nexus in Indiana. Sourcing may be impacted if a purchaser presents a direct pay permit or provides forms or other information related to distribution of direct mail materials to the seller. A seller is relieved of all obligations to collect, pay, or remit the applicable tax on any transactions involving direct mail in which the seller received a direct pay permit, direct mail form, certificate of exemption claiming direct mail, or information to show the jurisdiction to which the direct mail is delivered to recipients. See, IC 6-2.5-13-3(c). It is the purchasers' responsibility to source the transactions to the jurisdictions to which direct mail is to be delivered to the recipients if they present a direct pay permit, direct mail form, or exemption certificate claiming direct mail. The purchaser is obligated to pay and remit the applicable tax on a direct pay basis. See, IC 6-2.5-13-3(b). If the seller receives the sourcing documentation listed in IC 6-2.5-13-3(c), then the seller must source the sale to the jurisdictions to which the direct mail is delivered. If the seller does not receive a direct pay permit, direct mail form, or exemption certificate claiming direct mail or the documentation provided for in IC 6-2.5-13-3(a) then the transaction will be determined by the location from which the direct mail was shipped. See, IC 6-2.5-13-3(d) and Sales Tax Information Bulletin #54. The Company must collect Indiana sales tax on its sales of direct mail if it does not receive a direct pay permit, direct mail form, exemption certificate claiming direct mail or information showing the jurisdictions to which direct mail will be delivered. The Company is a direct mail producer. Direct mail is defined as printed material delivered by United States mail or another delivery service to a mass audience or addresses on a mailing list provided by a purchaser and not billed directly to the recipient. See, IC 6-2.5-1-16.5. Direct mail is considered the sale of tangible personal property. See, IC 6-2.5-4-1. Sales tax is imposed on retail transactions made in Indiana unless a valid exemption is provided by the purchaser. IC 6-2.5-2-1 and IC 6-2.5-8-8. A person is engaged in selling at retail when in the ordinary course of a person's regularly conducted trade or business the person (1) acquires tangible personal property for the purpose of resale; and (2) transfers that property to another person for consideration. IC 6-2.5-4-1(b). Gross retail income means the total amount of consideration for tangible personal property is sold including, (1)seller's cost of property sold; (2) cost of materials used, labor or service cost to the seller, (3) charges by the seller for any services necessary to complete the sale, (4 ) delivery charges, or (5) consideration received by seller from a third party. See, IC 6-2.5-1-5(a). Charges made for the preparation, fabrication, alteration, modification, finishing, completion, delivery, or other service performed with respect to the property transferred before its transfer and installation are subject to sales tax, even when separately stated on the invoice, bill of sale, or similar document. IC 6-2.5-1-5(d)(2). Similarly, charges for costs that represent the seller's overhead or operating expenses are part of a unitary transaction. Charges for such activities cannot be transformed into nontaxable services by separately stating the charges on an invoice. The Company's charges for data services and imaging and digital services represent a mixed bag. Some of these services are provided with respect to tangible personal property prior to transfer. For instance, loading, downloading and uploading data files appears to be a routine back-office activity that is required in order for the Company to engage in its business and the service of digitally tracking a package would by definition be a service with respect to the direct mail before its delivery. Similarly, digital imaging and preparation appear to be steps in producing direct mail and not a distinct service. However, some of the services are stand-alone services such as mail/digital tracking, data address verification and data sanitation that are not performed with respect to the transfer of tangible personal property. These data services, when separately invoiced, appear to be services performed with regard to the data provided by the customer and not with respect to the direct material being produced. The Company's charges related to production, finishing and bindery services are taxable services when producing its customers' direct mail items. These activities are all clearly services performed relative to tangible personal property prior to transfer. Delivery/Shipping charges that are incurred on behalf of the seller of tangible personal property are included in the definition of gross retail income and are subject to sales tax, regardless of the shipping terms used. See, IC 6-2.5-1-5(a)(4) and Sales Tax Information Bulletin #92. Postal charges are defined to mean the purchase price of stamps or similar charges as incurred by the seller on behalf of its customers, for mail or parcel delivery through the United States mail, without any additional amounts added to the actual price. Postal charges are not subject to sales tax. See, Sales Tax Information Bulletin #92. Credit card surcharges/processing fees are taxable since they are a cost of the seller. These fees are taxable to the extent the underlying charges are taxable. See, IC 6-2.5-1-5(a)(3) and Sales Tax Information Bulletin #92. RULING The Company must collect Indiana sales tax on its taxable sales transactions of direct mail if it does not receive a direct pay permit, direct mail form, exemption certificate claiming direct mail, or information showing the jurisdictions to which the direct mail will be delivered. The Company should collect sales tax on charges for imaging and digital services; production; finishing and bindery services, shipping, and administrative credit card usage fees. The Company should not collect sales tax on its charges for data services that are separate from the production of the direct material and separately stated on the invoice. CAVEAT This ruling is issued to the taxpayer requesting it on the assumption that the taxpayer's facts and circumstances as stated herein are correct. If the facts and circumstances given are not correct, or if they change, then the taxpayer requesting this ruling may not rely on it. However, other taxpayers with substantially identical factual situations may rely on this ruling for informational purposes in preparing returns and making tax decisions. If a taxpayer relies on this ruling and the Department discovers, upon examination, that the fact situation of the taxpayer is different in any material respect from the facts and circumstances given in this ruling, then the ruling will not afford the taxpayer any protection. It should be noted that subsequent to the publication of this ruling a change in statute, regulation, or case law could void the ruling. If this occurs, the ruling will not afford the taxpayer any protection. Sincerely, Indiana Department of Revenue Replaces Ruling Document: New