Indiana Construction Sales Tax Guide
Prepared by Sales Tax Helper
Table of Contents
- Introduction
- Nexus
- Standard / Physical Nexus
- Independent Contractor Triggers
- Economic Nexus
- General Rules
- Real Property vs. Tangible Personal Property (TPP)
- Fixtures
- State-required Forms
- Two-State Tax Treatment Models
- Mixed Use Contractors
- Subcontractors
- Exempt Transactions
- Incentives
- Sourcing Rules
- Audit Considerations
- Voluntary Disclosure Agreements (VDAs)
- Tax Collected Issues
- Conclusion
- References and Resources
1. Introduction
Indiana construction sales tax can make or break a project’s bottom line. One mis-aligned
contract clause can expose contractors and CFOs to double tax, audits, and personal liability.
Unlike most states that focus on whether an item becomes real property, Indiana taxes
construction almost entirely by how you draft the contract. Price the job as a lump-sum and you become the end-consumer—paying tax on materials up front and billing the owner tax-free. Break the same work into time-and-materials, and you morph into a retailer who must collect and remit tax on every widget you install.
The upside? Smart contract structuring gives savvy builders a lawful edge in bids and cash-flow planning. The downside is steep: Indiana’s Department of Revenue audits construction
aggressively, and trust-fund violations on collected tax can follow owners home. Master the rules now, or pay for them later
The stakes couldn't be higher. Indiana's Department of Revenue aggressively audits construction companies, knowing the complexity of contract-based taxation generates errors. Business owners face personal liability for uncollected sales tax, and criminal prosecution remains a real threat for those who mishandle collected funds. With construction projects routinely reaching six and seven figures, even small compliance mistakes can trigger five-figure assessments.
For construction industry professionals navigating Indiana's unique landscape, the path forward requires understanding not just the technical rules, but the strategic implications of contract structuring, registration requirements, and the critical distinction between acting as a consumer versus retailer of construction materials.
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