Many clients are now renting their homes and apartments out. However, they do not realize that there are tax consequences for doing so, if the rental is for less than a period of 30 days. In other words, if you rent your home out for 29 days or less, you should be charging a sales tax and innskeeper tax.
I.C. 6-2.5-4-4 states that when a person rents or furnishes rooms, lodgings, or other accommodations for periods less than 30 days, they are a retail merchant. The Indiana Department of Revenue bulletin #41 requires that people (and corporations) who furnish accommodations register as retail merchants and collect sales tax. The accommodations definition includes any real or personal property which is intended for occupancy by persons for a period of less than 30 consecutive days, and includes apartments, or rooms in the apartments. This provision applies whether a contract exists or not. Because there is a specific exemption if the accommodation is rented for 30 or more consecutive days, there will not be an innskeeper tax or sales tax if the accommodation is rented for more than 30 days and payable in increments that are at least monthly. If the plan is initially to only stay at the accommodation for 29 days, the sales tax must be charged. However, if the person stays longer, on the 30th day, a refund should be issued. If the intention is to rent for 30 or more days, and a month has been paid, no tax needs to be charged.
The Indiana Department of Revenue’s Notice #40 covers the innskeeper tax for each county. I.C. 6-9-18 is the provision governing the county innskeeper taxes. Most of Indiana’s counties follow the uniform innkeeper’s tax statute, I.C. 6-9-18, or use the same amount, which 5% (Bartholomew, Boone, Brown, Carroll, Crawford, Daviess, Dearborn, Decatur, Dekalb, Delaware, Dubois, Elkhart, Fayette, Franklin, Gibson, Grant, Hamilton, Henry, Howard, Huntington, Jackson, Jasper, Jay, Jefferson, Jennings, Johnson, Knox, Kosciusko, LaGrange, Lake, LaPorte, Lawrence, Madison, Marshall, Miami, Monroe, Morgan, Noble, Ohio, Owen, Parke, Perry, Porter, Posey, Putnam, Randolph, Ripley, Scott, Shelby, Spencer, Starke, Steuben, Sullivan, Switzerland, Tippecanoe, Vermillion, Wabash, Wayne, and White). Again, this provision only applies to periods less than 30 days. Allen county uses 7%, Montgomery county is 3%, Cass county 3.5%, Washington and Orange counties is 4% (but the Orange historic district adds 2%), Clark and Hancock and Harrison counties are 4%, St. Joseph is 6%, Vigo county is 6.5%, Hendricks and Vanderburgh counties are 8%, and Marion County is 10%.
It should be noted that currently, the Indiana Department of Revenue is only collecting taxes for the following counties: Allen, Clark, Floyd, Jefferson, Marion, Orange’s historic district, Scott, and Shelby counties. All other innskeeper taxes, if any, would be paid directly to the county where it was incurred.
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Camden & Meridew, P.C. practices in the areas of family law, domestic relations, property law, civil litigation, bankruptcy law and tax law. You can learn more about Camden & Meridew, P.C. by visiting their website at www.camlawyers.com, or by calling (317) 770-0000.