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DEPARTMENT OF STATE REVENUE

Information Bulletin #26
Sales Tax
April 2022
(Replaces Bulletin #26 dated September 2019)
Effective Date: Upon Publication


SUBJECT: Dry Cleaning and Laundry Establishments Rental and Nonrental Services


DISCLAIMER: Information bulletins are intended to provide nontechnical assistance to the general public. Every attempt is made to provide information that is consistent with the appropriate statutes, rules, and court decisions. Any information that is not consistent with the law, regulations, or court decisions is not binding on either the department or the taxpayer. Therefore, the information provided herein should serve only as a foundation for further investigation and study of the current law and procedures related to the subject matter covered herein.

SUMMARY OF CHANGES
Aside from nonsubstantive, technical changes, this bulletin has been edited to include a reference to Sales Tax Information Bulletin #42, concerning rentals and leases.

I. NONRENTAL SERVICE

The service provided by persons engaged in the operation of laundries or dry cleaning establishments is generally not subject to the Indiana sales tax. All purchases by laundries and dry cleaning establishments of tangible personal property used in the operation of such businesses are subject to the sales tax, including the purchases of:

1. detergents;
2. cleaning fluids;
3. machinery and equipment;
4. utilities consumed in the operation of the business; and
5. all wrapping materials, including garment bags and hangers.

The above rules apply uniformly to coin operated dry cleaning, conventional dry cleaning, industrial dry cleaning, and laundry businesses.

II. CLEAN LINEN, TOWEL, AND UNIFORM RENTAL SERVICE

The rental of clean linens, towels, uniforms, and other garments is subject to sales tax, and the operators of such businesses are retail merchants required to collect the tax from their customers. If not collected, the tax becomes the liability of the lessor as well as customer-lessee. Out-of-state operators delivering such clean linen, towel, uniform, and garment rental service to Indiana customers are making Indiana transactions and are required to register as Indiana retail merchants and to collect and remit Indiana sales tax. The taxability of rental transactions, as well as the taxability of various charges associated with rentals, is covered in Sales Tax Information Bulletin #42, available online at in.gov/dor/legal-resources/tax-library/information-bulletins/sales-tax-information-bulletins/.

Tangible personal property purchased expressly for rental use, such as linens, towels, uniforms and other garments, as well as wrapping materials in which such rented property is furnished to customers, is exempt from sales and use tax when purchased by the operators of such rental service. However, the subsequent sale by the operators of any tangible personal property which has been rented or leased is subject to sales tax.

The purchases by rental businesses of all other materials, supplies, tools and equipment, and all other tangible personal property is subject to sales tax. All such purchases by any laundry, dry cleaner, or operators of a rental service on which Indiana sales tax is not paid at the time of purchase, including purchases made online, are subject to the payment of use tax by the purchaser.

Example #1: Soaps, detergent cleaning fluids, deodorants, bleaches, water, electricity, gas washers, dryers, ironers, and mangles purchased by a rental business would all be subject to sales tax.

Example #2: Linens, towels, uniforms, and other garments purchased by a rental business would be exempt from Indiana sales tax as a sale for rental.
_________________________
Robert J. Grennes, Jr.
Commissioner

Posted: 05/11/2022 by Legislative Services Agency

DIN: 20220511-IR-045220149NRA
Composed: Dec 01,2022 8:07:05AM EST
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