Are services taxable in Indiana? For business owners navigating compliance is absolutely critical. The short answer: most services escape taxation, but the exceptions could cost you.
Understanding Indiana’s service tax rules protects you from audit surprises and keeps your collections accurate. Whether you provide professional services, SaaS, telecommunications, or lawn care, knowing which services trigger that 7% rate keeps you compliant in this deceptively simple tax environment.
At Hands Off Sales Tax (HOST), we handle multi-state compliance across all 45+ states with sales tax, including Indiana’s unique landscape. From nexus analysis to automated filings, we keep you collecting correctly while you focus on growth.
Indiana’s General Rule: Services Walk Free
Indiana’s sales tax applies to tangible personal property, so the things you can touch. Services typically fall outside that net.
According to the Indiana Department of Revenue, “sales of services are generally exempt unless specifically designated taxable.” This default exemption makes Indiana relatively business-friendly compared to states that tax services broadly.
Indiana’s 7% statewide rate applies uniformly with no local add-ons. While this simplicity helps, determining which services fall under that 7% requires attention to Indiana’s “true object” test.
The “True Object” Test: When Services Become Taxable
Indiana uses the “true object” test to determine taxability when services create or transfer tangible property. The question: what is the customer primarily purchasing?
If the customer primarily seeks the service = non-taxable
If the customer primarily seeks the product = taxable
Example: A graphic designer creates a logo. Billed as “design services with digital delivery”? Non-taxable service. Billed as “purchase of logo artwork”? The tangible product becomes the focus, potentially triggering taxation.
This distinction matters for photographers, videographers, designers, and anyone whose service produces deliverables. Structure your invoicing carefully, because that “true object” determines everything.
Which Services ARE Taxable in Indiana?
Telecommunications Services
Telecommunications services are taxable at 7%: local and long-distance telephone, mobile/cellular services (taxed based on customer’s primary location), and intrastate telecommunications.
Internet access remains exempt under federal law. However, bundled telecommunications and internet packages require proper allocation.
Cable Television and Satellite Services
Cable, satellite TV, and satellite radio terminating in Indiana face the 7% tax. Installation services typically aren’t taxable when separately stated.
Public Utilities
Utility services provided to Indiana customers are taxable: electricity, natural gas, water (in certain circumstances), and sewage services when provided as utilities.
Lawn Care Services (Critical 2026 Update)
The Indiana Department of Revenue changed this in July 2025, effective January 1, 2026.
New ruling: Lawn care application services (fertilizer, herbicide application) are now non-taxable because the primary object is the service, not the chemicals. However, providers still owe sales tax when purchasing materials.
This update may extend to pool cleaning, pest control, and snow removal. Anywhere service dominates over tangible property.
Short-Term Lodging
Room rentals under 30 days are taxable. Many Indiana counties also impose separate County Innkeeper’s Tax (5-9%).
Quick Reference: Common Service Taxability
| Service Type | Taxable? | Key Detail |
| Legal services | No | Professional services exempt |
| Telecommunications | Yes | 7% applies to all telecom |
| Janitorial/cleaning | No | Service without property transfer |
| Construction labor | No | When separately stated from materials |
| SaaS/cloud software | No | Remote access non-taxable |
| Photography (digital files only) | No | Service is the true object |
| Photography (with prints/albums) | Partially | Physical products taxable |
| Lawn care applications | No (effective Jan 1, 2026) | Service now exempt |
| Warranty contracts (optional) | No | Service-only support exempt |
Which Services Are NOT Taxable?
Software as a Service (SaaS)
SaaS is not taxable in Indiana. According to Revenue Ruling #2024-04-RST, remotely accessed software without permanent ownership transfer isn’t tangible personal property.
Critical distinction: Downloadable software customers install is taxable. The exemption applies only to cloud-based software accessed via subscription.
Digital Products: The Permanent Use Test
Indiana taxes “specified digital products” only when sold for permanent use:
- Digital audio works (songs, ringtones)
- Digital audiovisual works (movies, videos)
- Digital books (e-books, magazines)
Key distinction: Permanent ownership = taxable. Temporary access/streaming = non-taxable.
Examples:
- Netflix streaming subscription = non-taxable (temporary access)
- iTunes song download = taxable (permanent ownership)
- Kindle Unlimited = non-taxable (temporary access)
- E-book purchase = taxable (permanent file)
Professional and Personal Services
These remain broadly exempt: legal services, accounting, consulting, medical and healthcare services, architectural and engineering services, real estate services, haircuts and salon services, massage therapy, fitness training, and spa services.
Repair and Installation Labor
Labor charges for repair, maintenance, and installation are non-taxable when separately stated. This applies to auto repair labor, appliance repair, HVAC maintenance, and computer repair services.
Critical requirement: Itemize labor separately from parts. Parts are taxable; labor to install them is not.
The Unitary Transaction Trap
Indiana’s “unitary transaction” rule can convert exempt services into taxable sales. When goods and services are sold together for a single combined price, services that would be exempt become taxable.
Example: A contractor provides materials and labor. Single lump-sum price without separation? Entire transaction becomes taxable. Separately state “$5,000 materials, $3,000 labor”? Only materials are taxable.
Best practice: Always separately state exempt services and taxable goods on invoices.
Indiana’s Unusual Shipping Rules
Indiana has specific rules for shipping and handling charges that differ from most states:
USPS Shipping: When separately stated on invoices, USPS postage charges are not taxable, even on taxable sales.
Private Carriers (FedEx, UPS, etc.): Shipping charges through private carriers are taxable when the underlying sale is taxable, even when separately stated.
Your own delivery: If you deliver using company vehicles, those charges are taxable.
This distinction is unusual and catches many businesses by surprise. Document your shipping method carefully.
Economic Nexus in Indiana
Even outside Indiana, you may be required to collect based on economic nexus rules.
As of October 1, 2018, Indiana requires remote sellers to collect after exceeding $100,000 in gross sales to Indiana customers in the current or previous calendar year.
Indiana eliminated its transaction threshold (previously 200 transactions) as of January 1, 2024.
“Gross sales revenue” includes taxable and non-taxable sales, tax-exempt sales, and sales through all channels.
HOST provides comprehensive nexus analysis to determine exactly where you’ve triggered obligations.
HOST: Your Indiana Sales Tax Partner
Whether you’re providing SaaS, telecommunications, professional services, or mixed offerings, understanding Indiana’s rules is just the beginning.
What HOST Delivers:
- Nexus Analysis: We determine where you’ve met thresholds in Indiana and all other states.
- Sales Tax Registration: We handle RRMC applications with Indiana DOR, managing all paperwork.
- Sales Tax Filings: We prepare and file your returns on schedule. Monthly, quarterly, or annually.
- Service Taxability Analysis: We review your specific services for correct tax treatment, including “true object” determinations.
- Free Sales Tax Software Review: We optimize your automation tools to calculate Indiana taxes correctly.
- Audit Defense: We represent you during audits, organizing documentation and defending your positions.
- Voluntary Disclosure Agreements: We file VDAs to limit lookback periods if you discover past obligations.
We’ve been 100% focused on sales tax since 1999. That is over 25 years managing compliance so you can keep your hands on your business.
Ready to Simplify Compliance?
Service businesses face unique challenges determining what’s taxable and how to document exemptions correctly. Getting it wrong costs money through back taxes, penalties, and audit headaches.
Whether you’re navigating telecommunications taxes, applying the “true object” test, or confirming your SaaS offering is properly exempt, professional guidance ensures compliance and peace of mind.
Contact HOST today to discuss your Indiana sales tax needs or schedule a free consultation.
Want to learn more? Get our “10 Sales Tax Mistakes E-Commerce Sellers Make” e-book.
Frequently Asked Questions
Are most services taxable in Indiana?
No. Indiana does not tax most services. Services are exempt unless specifically enumerated as taxable by statute. Main taxable services include telecommunications, cable/satellite TV, utilities, and short-term lodging (under 30 days).
Is SaaS (Software as a Service) taxable in Indiana?
No. SaaS is not taxable in Indiana. The Indiana Department of Revenue confirmed in Revenue Ruling #2024-04-RST that remotely accessed software without permanent ownership transfer isn’t tangible personal property.
What is the “true object” test?
The “true object” test determines whether customers are primarily purchasing a service (non-taxable) or tangible property (taxable). If your service produces deliverables, how you structure and invoice the transaction determines taxability.
What is a unitary transaction?
A unitary transaction is when goods and services are sold together for a single combined price. Services that would normally be exempt become taxable when bundled with taxable goods without separate pricing. Always separately state exempt labor and taxable materials.
Are lawn care services taxable in Indiana?
As of January 1, 2026, lawn care application services are generally not taxable under updated guidance. The primary object is the service itself, not the chemicals applied. However, providers still owe tax when purchasing materials.
How does Indiana tax shipping charges?
Indiana has unusual shipping rules: USPS charges are non-taxable when separately stated. FedEx, UPS, and other private carrier charges are taxable even when separately stated. Your own delivery charges are also taxable.
