According to the Tax Foundation's, 2013 State Business Tax Climate Index, Indiana has the 11th most business friendly tax climate. The index compares the states in five areas of taxation that impact business: corporate taxes, individual income taxes, sales taxes, unemployment insurance taxes, and taxes on property, including residential.
In February 2012, Indiana became the 23rd state in the nation to pass right-to-work legislation. This legislation offers Indiana as competitive location for new business investment.
Indiana's tax structure is competitive and is intended to reward investments and business innovation. State and local government levels know the significance in providing the populace equitable services and strong transportation networks while upholding a fair and impartial tax structure.
- In May 2011, Indiana approved a gradual reduction of its Corporate Adjusted Gross Income Tax from 8.5 percent of to 8 percent in 2012, with 7.5 percent for this year of 2013, then 7 percent in 2014, and finally 6.5 percent in 2015. Each reduction takes effect July 1 of each year. These reductions improve Indiana's score on Corporate Income Tax.
Indiana is also phasing in the Single-Sales Factor for apportioning corporate income tax. Indiana had determined its share of an interstate or international corporation's taxable income by weighing the Indiana portion of a company's property and the proportion of its employees in Indiana. The single-sales factor will calculate the Indiana portion based solely on the portion of a company's sales in Indiana. This change is being phased in and will be completed by 2011.
- For Gasoline and Diesel Fuel Tax, the combined federal, state and local tax on gasoline in Indiana is $0.501 per gallon. The combined federal state and local tax on diesel fuel in Indiana is $0.692 per gallon.
- Indiana has no Gross Receipts/Inventory Tax.
- Real and Personal Property Tax is assessed at 100 percent of market value. Tax rates and exemptions vary among local jurisdictions. Indiana's 2008 Property Tax Reform Act cut property taxes significantly and will provide permanent protection for homeowners and businesses. Beginning in 2010, however property taxes were capped at 1 percent of a home's assessed value, apartments and agriculture land were capped at 2 percent of assessed value, and business property was capped at 3 percent of assessed value.
- Indiana Sales and Use Tax is tax calculated at a rate of 7 percent. In manufacturing used in direct production of product, the following are exempt from the sales tax: raw materials, equipment, electrical energy, natural gas and other utility services. Wholesale items used directly in production and sales made in interstate commerce are exempt. In addition, the purchases of research and development equipment is exempt from the tax.
