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Governor Mitch Daniels signed HB 1001 which will increase the state sales and use tax rate from 6% to 7%, effective April 1, 2008. In addition, other provisions added to the new legislation include caps on the following: homeowners’ property tax bills at 1.5% of their assessed value in 2009 and 1% in 2010 then thereafter. The plan would cap rental and agricultural property at 2.5% in 2009 and 2% in 2010 and business property at 3.5% in 2009 and 3% in 2010. (H.B. 1001, Laws 2008, Indiana General Assembly, March 14, 2008)


In a recent Letter of Findings, the Indiana Department of Revenue stated that all software maintenance agreements and optional warranties are subject to sales and use taxes, unless proven otherwise by the taxpayer. The Department acknowledged that in the past, optional warranties were not taxable if there was a possibility that no tangible personal property would be transferred, but “computer technology and use has evolved” and that almost all optional warranties on computer software now included regular updates which, therefore, qualify as taxable tangible personal property (Letter of Findings No. 05-0438, Indiana Department of Revenue, November 2006)


Golf simulators described as “high tech driving ranges” were not eligible for an exemption provided for property that was acquired for rental or leasing. The Indiana Department of Revenue determined that customers who paid an hourly rate to use the machines were not renting them; they were paying for “the privilege of using the game without interference from other customers.” Since the agreement between the owner of the machines and the customers did not allow the customers to take legal possession of the machines for any amount of time, it did not qualify as a rental and the machines were subject to use tax. (Letter of Findings No. 04-0444, Indiana Department of Revenue, April 2006)


Tools acquired for use in the fabrication of tangible personal property are exempt from Indiana sales tax. An exemption is also extended for raw materials incorporated into manufactured, refined, or assembled tangible personal property for resale. Wiring and other parts serving as an electrical distribution system, also qualify for an exemption provided they are directly connected to equipment involved in production. (Revenue Ruling No. 2005-07ST, Indiana DOR)


A taxpayer that rented modular buildings to customers and delivered the property to the customer's location was properly assessed Indiana sales tax on its separately-stated delivery charges. While the taxpayer argued that the state provided that certain delivery charges were exempt from sales and use tax, the state indicated that the exemption was not applicable as the property was leased rather than sold to its customers. (Letter of Findings No. 04-0102, Indiana Department of Revenue, September 1, 2005)



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