Indiana's business registration nexus rules determine when businesses must register for sales tax, income tax, and employment taxes in the state. Companies domiciled or incorporated in Indiana automatically have nexus and must register from formation, while out-of-state businesses trigger registration requirements by crossing specific thresholds.
Understanding these thresholds is crucial because crossing them creates immediate compliance obligations and potential penalties for non-registration. Indiana uses different triggers for different tax types: economic thresholds for sales tax, "doing business" standards for income tax, and employee-based triggers for payroll taxes. Each operates independently, so you could owe one type of tax without owing others.
Indiana establishes sales tax nexus through economic thresholds and physical presence triggers, requiring businesses to register and collect sales tax once either condition is met.
Indiana requires remote sellers with more than $100,000 in gross sales to Indiana customers during the current or previous calendar year to register and collect sales tax. As of January 1, 2024, Indiana eliminated the previous 200-transaction threshold, simplifying compliance by focusing solely on revenue volume.
The $100,000 calculation includes all gross receipts from Indiana sales—both taxable and exempt transactions. This comprehensive approach means businesses selling primarily non-taxable items can still trigger nexus obligations if their total Indiana revenue exceeds the threshold.
Marketplace facilitators are responsible for collecting tax when their combined sales exceed $100,000. Individual sellers don't count marketplace-facilitated sales toward their personal nexus calculation when the facilitator is properly registered and collecting tax.
Certain business activities create immediate sales tax nexus in Indiana, establishing instant tax obligations regardless of sales volume:
Physical presence creates sales tax nexus instantly, making the $100,000 economic threshold irrelevant for businesses with any Indiana footprint.
Register for an Indiana retail merchant's certificate through the Department of Revenue's online system immediately upon establishing nexus. Indiana assigns filing frequency based on tax volume—monthly for larger sellers, quarterly for smaller operations.
Returns and remittances are due by the 20th of the month following the collection period.
Indiana imposes corporate income tax on any out-of-state business deriving income from Indiana sources, establishing one of the broadest economic nexus standards in the nation.
Effective January 1, 2019, Indiana taxes corporations "to the fullest extent permitted by federal law" regardless of physical presence. This economic nexus standard means that any Indiana-derived income creates corporate income tax obligations:
Unlike many states, Indiana doesn't use specific dollar thresholds for income tax nexus. Any amount of Indiana-derived income can create filing requirements.
Once income tax nexus is established, businesses must register and file annual Indiana corporate income tax returns (Form IT-20). The state uses a three-factor apportionment formula with double weight on sales sourced to Indiana.
Estimated quarterly payments are required, with annual returns due by the 15th day of the fourth month following the end of the year.
Employment tax nexus in Indiana is triggered by any employee performing work within the state, creating immediate withholding and unemployment insurance obligations.
Employment nexus triggers include:
Employment nexus requires multiple registrations, including income tax withholding accounts for deducting and remitting Indiana state income tax from employee paychecks, unemployment insurance registration with the Department of Workforce Development for employers paying at least $1,500 in quarterly wages, and compliance with new-hire reporting requirements within 20 days of hiring.
Employers must also navigate county income tax withholding if employees work in counties with local income taxes, adding complexity to payroll compliance.
Indiana's nexus rules actively capture modern digital business activities and remote work arrangements common in today's economy.
Digital products, SaaS subscriptions, and cloud-based services are subject to Indiana's $100,000 economic nexus threshold. Software delivered electronically to Indiana customers counts toward the revenue calculation, potentially creating sales tax obligations.
Remote employees working from Indiana create both employment tax nexus (immediate) and potential corporate income tax nexus if the company derives income from Indiana sources.
Third-party marketplace sales handled by registered facilitators are excluded from individual sellers' nexus calculations. However, affiliate marketing relationships or drop-shipping arrangements with Indiana-based partners can create physical presence nexus requiring immediate registration.
Once any Indiana nexus threshold is crossed, it creates immediate tax compliance obligations and often signals that a business is "transacting business" in the state. Indiana requires foreign corporations and LLCs to register with the Secretary of State before transacting business, which typically includes activities like maintaining property, having employees, or conducting regular business operations in Indiana.
While there is no exact tax-based threshold for Secretary of State registration, paying Indiana taxes strongly indicates that a company is engaged in activities likely to require foreign registration. Businesses should always consult Indiana law or the Secretary of State to confirm if registration is necessary for their specific activities.
Indiana requires comprehensive documentation supporting nexus determinations, including:
Indiana imposes penalties for late registration, non-filing, and underpayment of taxes. Interest accrues from the original due date, and the Department of Revenue can assess back taxes for all periods when nexus existed but registration was missing.
The state offers voluntary disclosure programs that may limit lookback periods and reduce penalties for businesses proactively addressing past exposure before receiving audit contact.
Discern provides comprehensive registered agent services and automated compliance tracking to ensure your Indiana obligations are met without administrative burden.
Our platform monitors compliance requirements across all jurisdictions where you operate, handling foreign registrations and ongoing filing requirements through a single dashboard.
Ready to streamline your Indiana compliance requirements? Book a demo with Discern today.
.png)
.png){kind=small}