The Indiana Department of Revenue recently ruled that a taxpayer making remote sales of prepackaged brownies and cookies to customers in Indiana was required register with the state and file periodic “zero” returns. The taxpayer made sales via its website and through a third-party marketplace. Since October 1, 2018, a remote seller with no physical presence in Indiana has been required to collect and remit sales tax if, in the preceding or current calendar year, it has gross revenue exceeding $100,000 or 200 or more separate transactions from sales delivered in Indiana.
The Department first addressed the taxability of the taxpayer’s food products. In Indiana, “sales of food and food ingredients for human consumption,” including bakery items, are exempt from sales and use tax. The Department concluded that the taxpayer’s products were exempt bakery items because they were sold without utensils in an unheated state. However, under the state’s economic nexus standard, the sale of exempt items (here, food products) count towards the economic nexus thresholds. Therefore, if the taxpayer met or exceeded the thresholds, it was required to register with the Department. Because the taxpayer’s sales were exempt, the taxpayer would likely need to file monthly “zero” returns, or assuming the taxpayer’s tax liability was less than $1,000, annual “zero” returns. Please contact David Knuff at 216-875-8118 with questions on Revenue Ruling 2018-06ST.