The sales tax on food in Indiana isn’t as straightforward as many businesses assume. While some grocery items are exempt, prepared foods, soft drinks, and catering services often trigger full taxation—and overlooking the fine print can lead to costly mistakes. Whether you’re running a café, managing a grocery chain, or scaling a food delivery service, understanding what gets taxed (and why) is mission-critical.
That’s where Hands Off Sales Tax (HOST) comes in. HOST helps food businesses automate filings, stay compliant across states, and simplify the chaos of tax regulations—so you can focus on growth, not government forms.
Indiana’s Sales Tax Structure
Indiana implements a statewide sales tax rate of 7% on most tangible personal property and certain services, including prepared food and beverages.
Food & Beverage Tax (FAB)
In addition to the state sales tax, certain counties and municipalities in Indiana impose a Food & Beverage Tax (FAB), typically at a rate of 1%. In some areas where both the county and a municipality have adopted the FAB, the combined rate can be 2%.
The FAB applies to transactions where food or beverages are furnished, prepared, or served by a retail merchant for consumption at a location or on equipment provided by the merchant. This includes catering services and food sold at deli counters if cooked or heated on the premises.
Businesses operating in jurisdictions with an adopted FAB must register to collect and remit this tax separately from the state sales tax. Filing and payment can be completed through the Indiana Department of Revenue’s INTIME portal.
No Local Sales Taxes
Apart from the FAB, Indiana does not have additional local sales taxes. The 7% state sales tax rate is uniform across the state, simplifying compliance for businesses operating in multiple locations.
Understanding the nuances of Indiana’s sales tax structure, including the applicability of the FAB, is crucial for businesses in the food and beverage industry to ensure accurate tax collection and compliance.
Taxability of Food Items in Indiana
Understanding which food items are subject to sales tax in Indiana is crucial for businesses to ensure compliance and avoid potential penalties. The taxability largely depends on the nature of the food item and how it is sold.
Non-Taxable Items
Generally, unprepared foods intended for home consumption are exempt from Indiana sales tax. These include:
- Fruits and vegetables
- Meat and poultry
- Dairy products
- Bread and cereals
These items remain non-taxable when sold without any preparation or heating by the seller. For detailed information, refer to the Indiana Department of Revenue’s Sales Tax Information Bulletin #29.
Taxable Items
Prepared foods are subject to sales tax. This category encompasses:
- Meals sold by restaurants, cafes, and similar establishments
- Ready-to-eat foods from grocery stores, such as:
- Hot deli items
- Rotisserie chickens
- Party platters
Prepared food is defined as:
- Food sold in a heated state or heated by the seller
- Food where the seller combines two or more ingredients
- Food sold with eating utensils provided by the seller
It’s important to note that if a seller provides eating utensils, the food may be considered prepared and thus taxable. Refer to Sales Tax Information Bulletin #29 for more details.
Special Considerations
Certain items are taxable regardless of preparation:
- Candy and soft drinks
- Alcoholic beverages
- Dietary supplements
These items are specifically excluded from the definition of exempt food and are subject to sales tax. For comprehensive guidance, consult the Indiana Department of Revenue’s Sales Tax Information Bulletin #29.
Understanding these distinctions helps ensure compliance with Indiana’s sales tax regulations.
Sales Tax Implications for Food Businesses in Indiana
Operating a food business in Indiana requires a clear understanding of the state’s sales tax obligations. Whether you’re running a restaurant, catering service, or food truck, it’s essential to know how sales tax applies to your operations.
Restaurants and Cafes
In Indiana, restaurants and cafes are considered retail merchants and are required to collect sales tax on all prepared food and beverages sold for immediate consumption, regardless of whether the food is consumed on or off the premises. This includes items like meals, sandwiches, and beverages. Providing utensils, such as plates or napkins, further classifies the food as prepared and taxable.
Caterers
Catering services are also subject to sales tax in Indiana. Sales of prepared food for events are taxable. However, charges for serving or delivering food may be exempt if they are separately stated from the price of the food or beverages. It’s important to itemize these charges clearly on invoices to distinguish between taxable and non-taxable services.
Food Trucks and Mobile Vendors
Food trucks and mobile vendors are subject to the same tax rules as brick-and-mortar establishments. All sales of prepared food and beverages are taxable. Vendors must collect sales tax at the location where the sale occurs, which may include additional local taxes, such as the Food and Beverage Tax, depending on the jurisdiction.
Understanding these tax implications ensures compliance and helps avoid potential penalties.
Compliance Tips for Food Businesses in Indiana
Navigating Indiana’s sales tax requirements is essential for food businesses to maintain compliance and avoid penalties. Here’s a concise guide covering licensing, tax collection, and record-keeping obligations.
Licensing Requirements
Before selling taxable meals or beverages, businesses must register with the Indiana Department of Revenue (DOR) through the INBiz portal. Upon registration, you’ll receive a Registered Retail Merchant Certificate (RRMC), which must be displayed at each business location. The RRMC is essential for legally conducting retail sales in Indiana. If your business expands or changes, update your registration accordingly via INTIME.
Tax Collection and Remittance
Once registered, you’re obligated to:
- Collect Sales Tax: Apply the 7% state sales tax to all taxable sales.
- File Returns: Submit periodic returns using Form ST-103 through the INTIME portal.
- Remit Payments: Pay the collected taxes by the due date specified by the DOR.
Filing frequencies—monthly, quarterly, or annually—are assigned based on your business’s tax liability. Even if no sales occurred during a period, you’re required to file a “zero return.”
Record-Keeping
Maintaining accurate records is vital:
- Sales Records: Document all sales, taxable and non-taxable.
- Exemption Certificates: Retain any exemption certificates received from customers.
- Retention Period: Keep all records for at least three years, as they may be requested during audits.
Implementing robust record-keeping practices ensures readiness for any state reviews and supports accurate tax reporting.
By adhering to these compliance tips, food businesses in Indiana can confidently manage their sales tax obligations and focus on growth.
Why Indiana Food Businesses Choose HOST for Sales Tax Peace of Mind
Sales tax compliance in Indiana can get messy fast—between statewide rates, local food and beverage taxes, licensing obligations, and zero-return filings, the margin for error is thin. For food businesses trying to grow without drowning in tax admin, Hands Off Sales Tax (HOST) is the game-changer.
HOST helps eliminate the guesswork and grind by offering an end-to-end sales tax solution built for modern sellers. Here’s how it works:
What HOST Does for Indiana-Based Food Businesses:
- Multi-Jurisdiction Compliance
Whether you’re serving customers in Indianapolis, Bloomington, or beyond, HOST tracks your obligations across counties and cities, including areas with special food and beverage taxes. - Automated Tax Filing & Remittance
HOST calculates, files, and remits sales tax on your behalf—always on time, always accurate. No more missed deadlines or scrambling to correct filings. - Accurate Rate Setup by Item Type
From non-taxable groceries to fully taxable hot meals, HOST ensures your POS system is set up to charge the correct rate—based on the product, location, and channel. - Real-Time Nexus Monitoring
HOST monitors where your business is growing and alerts you when registration is required in new jurisdictions. - Audit-Proof Recordkeeping
Every transaction is stored and organized, making audits less stressful and easier to navigate.
Whether you’re a restaurant expanding across counties or a grocer launching an e-commerce arm, HOST helps Indiana food businesses stay compliant, confident, and focused on what really matters—serving your customers.
Clarity Today, Confidence Tomorrow
Indiana’s sales tax rules on food aren’t always black and white—especially when you factor in local taxes, exemptions, and filing requirements. For food businesses, one misstep can mean lost revenue or penalties. That’s why proactive compliance is non-negotiable. Hands Off Sales Tax (HOST) takes the complexity off your plate. From registrations and rate accuracy to filing and audit readiness, HOST handles it all—so you don’t have to. If you’re ready to streamline your sales tax process and focus on growing your business, HOST is the solution. Reach out today for a personalized consultation.
