Hello, and welcome to KSM’s annual Legislative Update. You’ll find detail after detail about what legislative actions the 2019 Indiana General Assembly took in the world of tax and economic development.

Over the past five years, many states have moved from cost-of-performance methodologies to market-based sourcing, modifying sourcing of receipts (other than of tangible personal property) and creating additional tax revenue from out-of-state service providers. On May 1, 2019, Indiana followed suit when Gov. Eric Holcomb signed Senate Bill 563 into law.

Indiana has recently issued an updated version of Sales Tax Information Bulletin #28S, changing its policy on the taxability of documentation fees, effective April 2, 2019. Historically, the Indiana Department of Revenue (IDOR) has treated these fees as if they were separate from the sale of the vehicle. It treated them as fees for helping a customer title and register a vehicle with the Indiana Bureau of Motor Vehicles (BMV). This is a nontaxable service in Indiana, so the documentation fees were not subject to sales tax. However, effective April 2, 2019, the IDOR will assume documentation fees are subject to sales tax if they are not “convenience fees,” a specific term that is defined in statute.

Effective Jan. 1, 2019, Indiana implemented a new excise tax on the rental of heavy equipment from a location in Indiana. The rental excise tax is 2.25 percent of the gross retail rental income. The renter is liable for the tax, and it will be collected by the retail merchant and sourced to the location from which the equipment is rented. The tax may be reported in the same manner used to report the retail merchant’s Indiana sales and use tax (INTax).

There are some unique Indiana sales tax rules and regulations that apply to Buy Here – Pay Here (BHPH) dealers. It is important that dealers understand the difference between a vehicle return and a vehicle repossession, as well as the impact a related finance company (RFC) can have on the dealer’s ability to recover sales tax related to bad debt charge-off.