Sales Tax Exemption for Indiana Restaurants

Effective Jan. 1, 2025, a new Indiana law enacted under S.B. 228 allows restaurants to qualify for a sales tax exemption for electricity purchases without satisfying certain administrative requirements. The new treatment, as detailed by the Indiana Department of Revenue, provides a streamlined process for restaurants to claim a 50% sales tax exemption on their electricity purchases.

Crowe observation

Restaurants might be unaware that they qualify for certain sales tax exemptions, including the new exemption for electricity, because these tax benefits generally are perceived to be reserved for traditional manufacturing activities.

New law removes administrative requirements

Indiana imposes a state gross retail tax on the sale of utilities such as electricity. Indiana has allowed restaurants to claim a sales tax exemption on their gas and electricity purchases. However, restaurants were required to conduct energy studies and provide other administrative calculations to substantiate their claims.

The new law provides an option for restaurants to bypass the energy study requirement and instead submit Form ST-200R, “Electric Utility Sales Tax Exemption Application for Restaurants,” to the Department of Revenue. Upon receipt of Form ST-200R, the department will issue an ST-109R certificate to the applicant.

A restaurant then can provide the ST-109R certificate to its utility company to secure a 50% sales tax exemption on its electricity purchases.

Looking ahead

The new Indiana law provides a streamlined process for restaurants to claim a 50% sales tax exemption on their electricity purchases. Indiana restaurants should consult their tax advisers to understand how to satisfy the streamlined procedures and identify other opportunities that might be available to reduce their state tax burden.