Indiana Refunds and the Lost 2021 Statute
Last Updated on September 6, 2024
Manufacturers have a few advantages when filing for refunds of overpaid sales or over-accrued use tax on fixed assets and expense purchases in Indiana. Every state allows for a 3-to-4 year statute of limitations for filing refunds, but Indiana is unique since its statutory period begins at the calendar year.
While 9 months of statute is already lost for taxpayers with typical 3-year statutes, refunds can still be filed from January 2021 to present in Indiana. When January 2025 hits, 2021 refunds can no longer be filed.
As a manufacturer, did you purchase any new equipment or expand your operations in 2021? Did you set up a new R&D lab or are you still paying sales tax on electricity, gas or water used in manufacturing or R&D? If the answer is “yes”, there is still time to capture those dollars before year-end.
Filing for sales and use tax refunds can be time consuming, and depending on the administrative red tape, the refund process can last for months, if not years. In many states, taxpayers must navigate multiple departments and filing levels to try and recoup overpaid tax.
Indiana manufacturers operate in the most amenable State for sales & use tax refunds. The state must issue a decision within 90 days of the filed claim to avoid paying interest. In most cases, the state will work in good faith to close the claim before the 90-day window. The small window serves two purposes: it drives those dollars to your bottom line to increase cash flow and it sets a precedent for the taxpayer to issue an exemption certificate and STOP overpaying tax moving forward.
There are multiple areas of opportunity, including:
- Manufacturing Equipment
- Electricity, gas and water used in Manufacturing or R&D
- Production Machinery Repair Parts
- Electrical Components, Screws, Nuts, Bearings, Washers, Filters, Pumps, etc.
- Production Tools and Supplies
- Drills, Taps, Blades, Grinders, Sockets, Files, etc.
- Material Handling Equipment, Repair Parts (if used within an Integrated Production Process)
- Forklifts, Cranes, etc. if used in manufacturing
- Abrasives, Grease, Fuel, Welding Gases, Gas Cylinders, Electricity, Natural Gas, etc.
- Cost of Goods Sold (COGS)
- Material incorporated into the final product
- Safety Clothing or Equipment
- Gloves, Coveralls, Ear Plugs, Hard Hats, Glasses, Safety Shoes, etc.
- Packaging Supplies
- Pallets, Boxes, Strapping, Wrap, etc.
- Research and Development
- Property purchased solely for research and development
- Software used in manufacturing or R&D
Filing sales and use tax refunds is never a cakewalk as each state employs its own methodology in handling them. At the end of the day, the taxpayer should only have to pay its fair share – nothing more, nothing less.
Indiana understands the right of taxpayers to file for refunds in the state and they do not penalize said taxpayers with an audit. Refund filers can typically expect to see refunds or guidance as to why refunds were denied within the 90-day window. In some cases, the turnaround time can even be faster. Compared to other states, Indiana ranks as one of the best for taxpayer sales & use tax refunds.
Questions? Speak to a Tax Recovery Specialist
For over 25 years, TaxMatrix has serviced Indiana manufacturers and pharmaceutical companies for sales & use tax audit defense and tax recovery. Our recovery service, also known as a refund review or reverse audit, is performed on a success or contingency basis with no upfront fees or costs.
If a taxpayer is paying sales tax on utilities used in production, we will bear the cost of a utility exemption study. Furthermore, we provide free process improvement assistance for exemption certificate implementation and avail our free Tax Help Desk for ad hoc sales and use tax support.
If you would like more information or would like to set up a free consultation, please contact us today!