The Herald Bulletin

Morning Update


February 12, 2013

So, what is the real Indiana sales tax rate?

How aware are you?

I have come to suspect that many people have little knowledge of things that confront them regularly. For reasons of space, I will limit my attestation to only one area this week as an example: sales tax.

A while back, I was sitting through a presentation about the possibility of a “tax holiday” in Indiana. It’s not a novel idea; other states have done this for a few years, and they typically fall around the August time frame.

Essentially, the state declares on one or more days that all back-to-school purchases will be exempt from sales tax. To illustrate the possibility, the two presenters then talked about how many hundreds of dollars are spent by families on clothes, book, supplies and so on and how this would enable those families to save $2 for every one of those hundreds spent.

Since Indiana sales tax is considerably more than 2 percent on the items that were mentioned and has been since I was young, I dismissed it at the time as being a presentation by two individuals who had not done their homework.

This week, however, we decided to have some remodeling work done at our house and have had contractors making suggestions. One of them pointed out that if we purchased all of our fixtures and other tangibles for the project online, we could save the 5 percent sales tax.

Right off the bat, two red flags went up. The first is that Indiana expects you to pay the tax whether the retailer collects it or not: there is a line on the annual income tax form where you get to declare said purchases.

Second, the sales tax rate in Indiana is not 5 percent on those non-food items in question and has not been for over a decade.

This led to my wondering how many actually know what the state tax rate is for non-food items such as books, televisions, and clothing.

I included it as a survey/quiz question and asked three different groups of individuals for a total of 58 responses. Of those that responded, only 69 percent correctly chose 7 percent, and the guesses given ranged from 3 percent to 10 percent.

As one might expect, the older the individual, the more likely they were to give the correct answer. But still, only 82 percent of those that would fall into the category of working adults knew the right rate.

When you think about the sheer number of purchases that are made during the course of a year, and the tax that gets added to each, you have to question how this scenario can be.

Would this be the case if we still had to count out dollars and cents to pay for purchases instead of swiping a plastic debit or credit card? If almost one third of the population doesn’t know how much they are paying for something, are there other expenses and costs that they are similarly unmindful of?

It is my contention that is indeed the case, and next week I will give two more examples to further substantiate this.


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