Indiana provides a business friendly tax environment in order to retain and attract quality employers. The state offers competitive tax rates and does not have many of the taxes common in other states. The following types of taxes are NOT applicable in Indiana:

• Franchise tax
• Unitary tax
• Intangibles tax
• Employment tax
• Inventory tax (beginning in 2006)
• Local sales tax

Major state taxes include corporate income and sales tax, while major local taxes include real and personal property tax. The chart below lists the business taxes and the jurisdictions which are allowed to assess taxes on various classes of real and personal property.

Indiana Taxable Jurisdictions
	State	County	City	Schools
PROPERTY TAXES:
Real Estate-Land & Buildings	Yes	Yes	Yes	Yes
Manufacturing Machinery	Yes	Yes	Yes	Yes
Pollution Control Equipment	No	No	No	No
Raw Materials & Goods-in-Process*	N/A	N/A	N/A	N/A
Finished Goods Inventory*	N/A	N/A	N/A	N/A
Goods in Transit*	N/A	N/A	N/A	N/A
Other Personal Property	Yes	Yes	Yes	Yes
Motor Vehicles	Yes	Yes	Yes	Yes
Furniture & Office Equipment	Yes	Yes	Yes	Yes
OTHER TAXES:
Sales and Use	Yes	No	No	No
Income	Yes	Yes	No	No
Other	No

Source: Indiana Taxing Authority
*Beginning in 2006, all inventory taxes in Indiana will be eliminated.

Property Taxes
There are two types of property tax in Indiana, real property tax and personal property tax. Real property is defined as land and improvements considered permanent fixtures. Personal property is considered tangible property not permanently affixed to and a part of real estate.

Method of Assessment
Property in Indiana is assessed for taxes based on 100% of "market value in use", also known as true tax value. Indiana offers liberal depreciation schedules for personal property but freezes depreciation at 30% of value. Most manufacturing equipment will be fully depreciated (30%) in five years.

Real Property Tax
This tax is valid for all real property and for certain types of personal property. The taxable amount is the market value of the property.  For estimating purposes, market value is approximately 80% of cost.

2006 Dearborn County - Real Property Tax Rates
Tax District Name*	2006 Tax Rate (per $100 of market value)	2006 Net Rate
Aurora City-Center Twp.	2.8133	2.130290
Aurora City-L'burg. Twp	2.6149	1.796972
Greendale Town-A	2.7619	1.913458
Greendale Town-B	2.7619	1.913466
Lawrenceburg City-A	2.6478	1.817294
Lawrenceburg City-B	2.6478	1.817294
Dillsboro Town	2.4902	1.871328
Moores Hill Town	2.4073	1.799180
St. Leon Town	2.2311	1.745115
Center Township	2.0865	1.542850
Harrison Township	2.2474	1.758835
Jackson Township	2.2350	1.748235
Kelso Township	2.2314	1.745548
Lawrenceburg Township	1.8987	1.218012
Washington Township	2.1040	1.558260

Source: Indiana Department of Local Government Finance
*  Rates are a representative sample of the 24 townships/towns in Dearborn County.

Net rates include adjustment for State Property Tax Replacement Credit (SPTRC).

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Business Personal Property Tax
This tax is assessed on all types of personal property, with the exception of personal property subject to the real property tax. The inventory pools used to assess the value of personal property are derived from the schedule of class lives and recovery periods determined by the Internal Revenue Service (IRS). Beginning in 2006, all inventory must be reported, but will be exempt from personal property tax.

2006 Dearborn County - Business Personal Property Tax Rates
Tax District Name	2006 Tax Rate (per $100 of market value)	2006 Net Rate
Aurora City-Center Twp.	2.8133	2.421801
Aurora City-L'burg. Twp.	2.6149	2.093709
Greendale Town-A	2.7619	2.240757
Greendale Town-B	2.7619	2.240752
Lawrenceburg City-A	2.6478	2.126612
Lawrenceburg City-B	2.6478	2.126612
Dillsboro Town	2.4902	2.098696
Moores Hill Town	2.4073	2.015796
St. Leon Town	2.2311	1.900846
Center Township	2.0865	1.694995
Harrison Township	2.2474	1.917147
Jackson Township	2.2350	1.904745
Kelso Township	2.2314	1.901142
Lawrenceburg Township	1.8987	1.377503
Washington Township	2.1040	1.712502

Source: Indiana Department of Local Government Finance

Net rates include adjustment for State Property Tax Replacement Credit (SPTRC).

 

Indiana Corporate Income Tax
All companies doing business in Indiana except businesses subject to the Financial Institutions Tax, international banking facilities, subchapter S corporations, and federally tax-exempt not-for-profit organizations are subject to the corporate income tax.

• The tax rate is 8.5% of Indiana adjusted gross income.
• Single Sale Tax Apportionment - Indiana will transition from a "property, payroll & double sales" apportionment formula to a "single sales" only system by January 1, 2011.

Indiana adjusted gross income is federal taxable income with 5 modifications:

• Deduct any income that the federal law or Constitution prohibits Indiana from taxing
• Add deductions allowed for charitable contributions under federal law
• Add deductions allowed under federal law for state income taxes
• Apportion income to Indiana based on the average percentage of property owned in Indiana, average of payroll paid in Indiana, and average sales volume attributable to Indiana
• Adjustment to disallow the federal bonus depreciation

For companies that conduct business in other states, Indiana corporate tax liability is determined by the amount of a company's adjusted taxable income. Adjusted taxable income is determined as follows:

Each factor is determined as follows:

• Payroll Factor=Indiana payroll/total payroll
• Property Factor=Indiana property/total property
• Sales Factor=Indiana sales/total sales

Financial, insurance, and utilities companies are subject to different tax laws as the nature of these businesses distinguishes them from other corporations in the State of Indiana. Please see the Indiana Department of Revenue Handbook for applicable information.

A variety of tax credits apply to corporate income taxes. These include credits for alternative energy sources, historic rehabilitation, and for venture capital investments.

Deductions and Exemptions

• Corporate income from public transportation fares.
• Income of insurance companies who pay the Insurance Premium Tax.
• Foreign income of foreign corporations
• A percentage of a domestic corporation's foreign source dividends (depends on company's stock ownership).

Sales and Use Tax
State sales tax in Indiana is 6%. There is no local sales tax.

Use tax in Indiana is 6%. Any purchase of tangible personal property is subject to use tax unless sales tax of at least 6% was paid on purchase. Use tax is common in the following instances:

• Catalog purchases by phone or mail from out-of-state vendors.
• Internet purchases from out-of-state vendors.
• Items withdrawn from inventory for personal use or to give away.

Exemptions:

• Wholesale sales.
• Purchases of things used directly in the production process, including raw materials, machinery, tools and equipment directly used in direct production.
• Sale of goods for resale.
• Public transportation.
• State and federal taxes on gasoline.
• Property consumed in commercial printing.
• Commercial printing shipped out of state.
• Items consumed and rendered unusable after its first usage for food services.
• Items used in the preparation of food for immediate consumption.
• Sales made in interstate commerce.
• Power, electricity, and gas if 51% of the load is used for manufacturing.
• Pollution-abatement equipment if required by federal, state or local law.
• Sales to government entities.

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Other Taxes and Business Operating Costs

Personal Income Tax
All individuals, partners, stockholders in subchapter S corporations, trusts, estates, and nonresidents with income from sources in Indiana are subject to the personal income tax.

• The tax rate is 3.4% of Individual Adjusted Gross Income.
• County income tax is 0.6% for residents and 0.15% for non-residents.

Deductions

• Rent up to $2,500.
• Employees working and living in an enterprise zone are entitled to a tax deduction equal to the lesser of 50% of earnings or $7,500.
• Property taxes paid for an individual's place of residence up to $2,500.
• Net operating losses derived from sources outside of Indiana.

Exemptions

• Income tax that is exempt under federal law or the Constitution.
• $1,000 exemption for the taxpayer, spouse, and each dependent claimed on the federal return.
• Additional $1,500 exemption for dependent children under the age of 18.
• $1,000 exemption for each individual age 65 or over and/or blind.

Unemployment Insurance
Every business in the State of Indiana that employs at least one person for 20 weeks or more, or if in any calendar quarter pays wages of at least $1,500, is required to pay unemployment compensation taxes.

All employers are taxed on the first $7,000 of an employee's wages for each calendar year. New businesses are required to contribute at the rate of 2.7%, until they have been in business for three years. At the end of three years, the new contribution rate is determined by the employers credit reserve ratio or debt ratio held in the employers account within the Unemployment Insurance trust fund.

2005 Unemployment Insurance Comparison
	Average Beginning Tax Rate (non-construction companies)	Wage Base	Range of Rates
Indiana	2.7%	$7,000	1.1%-5.6%
Ohio	2.7%	$9,000	0.2%-8.0%
Kentucky	2.7%	$8,000	0.5%-9.5%
Illinois	4.7%	$10,500	1.2%-9.8%
Michigan	2.7%	$9,000	0.6%-10.3%

Source: Indiana Workforce Development, Ohio Department of Job and Family Services, Kentucky Human Resources Cabinet, Illinois Department of Employment Security, Michigan Unemployment Insurance Agency

Worker's Compensation
Workers compensation benefits are provided by private insurers. The maximum number of weeks a worker can receive benefits in the State of Indiana is 125 weeks. Insurance rates for employers are determined by the Workers Compensation Rating Board based on past experience with the same or similar jobs in Indiana's workforce, and the total size of payroll.

2005 Worker's Compensation (per $100 of payroll):
Statewide Average Rate - $1.46
Average rate for manufacturing - $2.49
Maximum weekly benefit - $588

Table 15: Dearborn County Taxes