What taxes apply to a new small business?

Taxes for New Small Businesses in Indiana

When starting a small business in Indiana, understanding your tax obligations is essential for smooth operations and compliance. Below is an overview of the primary taxes that apply to new businesses in the state.

State Taxes to Consider

• Indiana State Income Tax: Indiana imposes a flat state income tax rate on business income. Businesses structured as sole proprietorships, partnerships, or S corporations report income on personal returns, while corporations file separately.
• County Income Tax: In addition to the state income tax, Indiana has county-level income taxes that vary by location. Businesses must determine the applicable rates based on their county of operation.
• Sales Tax: Indiana charges a state sales tax on most retail sales of tangible personal property and certain services. If your business sells taxable goods or services, you must register for a sales tax permit and collect and remit sales tax.
• Use Tax: This applies to purchases made outside Indiana for use within the state when sales tax was not paid. Businesses should track and remit use tax on applicable purchases.
• Employer Payroll Taxes: If you hire employees, you are responsible for withholding Indiana state income tax from wages and paying state unemployment insurance taxes.

Additional Operational Considerations

• Business Registration: Register your business with the Indiana Secretary of State and obtain an Employer Identification Number (EIN) from the IRS for tax reporting purposes.
• Licensing and Permits: Some business types require specific licenses that may have associated fees or tax implications.
• Recordkeeping and Reporting: Maintain accurate financial records to support tax filings and compliance with state requirements.
• Automation Tools: Use accounting and payroll software to automate tax calculations, filings, and payments to reduce errors and save time.

As of 2026, tax rates and requirements may change, so regularly check with the Indiana Department of Revenue and local county offices for updates.