How Does the Food & Beverage Tax Work in Indiana?

You’ve opened your dream restaurant. The lights are on, your staff is trained, and customers are starting to roll in. The register is ringing, and things are finally falling into place. Then someone asks, “Are you collecting the food and beverage tax?” You pause. What food and beverage tax?

You thought you had everything covered — sales tax, payroll, permits, inspections. But now there’s another tax you didn’t even know existed. What is it? Do you need to collect it? How do you file it? And what happens if you’ve been missing it all along?

Many Indiana business owners don’t learn about this local tax until it’s too late. Unlike the state’s regular sales tax, the food and beverage tax only applies in certain counties and cities, and each place may have slightly different rules. If you’re not paying close attention, it’s easy to overcharge, underreport, or miss it altogether.

If your business sells prepared food or drinks, whether in a restaurant, food truck, coffee shop, or even at catered events, understanding this tax is essential. Below, we’ll explain where it applies, how much to charge, and how to stay compliant, so you can avoid penalties and keep things running smoothly.

What Is the Food and Beverage Tax?

Indiana counties and cities can choose to apply a local food and beverage tax in addition to the state’s 7% sales tax. Local governments use this tax to raise funds for public projects such as stadiums, convention centers, or community attractions. While not every area in Indiana applies the tax, businesses located in areas that do must collect and remit it.

This tax applies to businesses that sell prepared food and drinks intended for immediate consumption. That includes meals served in restaurants, takeout orders, fountain drinks, alcoholic beverages, and catered food at events. Whether customers eat on-site or take their food to go, the business must charge the tax if the product is ready to eat or drink.

The tax does not apply to items that customers plan to consume at a later time. Grocery items, bottled beverages, and retail merchandise like mugs or t-shirts are only subject to the regular 7% sales tax. Business owners must understand the distinction between taxable and non-taxable items to charge customers accurately and submit accurate tax filings.

Who Needs to Charge the Food and Beverage Tax?

If your business sells ready-to-eat food or drinks, you likely need to collect the food and beverage tax. This tax doesn’t just apply to traditional restaurants — it can also affect a wide range of businesses that serve food and beverages for immediate consumption. 

Whether your customers dine in, take their order to go, or enjoy your food at an off-site event, you may be required to charge the tax depending on what you’re selling and where the sale takes place. 

This includes:

• Restaurants and cafés
• Bars and taprooms
• Food trucks
• Catering businesses
• Coffee shops
• Convenience stores with hot food

Some businesses don’t realize they fall under this rule. For example, a salon that offers drinks for sale or a boutique that serves snacks during events may need to collect the tax, even if food isn’t their main product. If you sell food or beverages in any form, whether it’s your primary business or just a side offering, it’s worth double-checking your requirements.

On the other hand, sales of items such as branded t-shirts, packaged coffee, or mugs are subject only to the regular sales tax, not the food and beverage tax.

Where Does the Food and Beverage Tax Apply?

This tax does not apply statewide. Instead, individual counties or cities choose whether to adopt it. Many areas around Indianapolis, including Marion, Hamilton, Boone, and Johnson counties, have adopted the tax. Other cities like Evansville and Bloomington also collect it.

In some locations, both the county and the city charge a tax — meaning businesses may need to collect more than 1%. For example, a restaurant in Hamilton County may collect:

Not every county charges the tax, and those that do can set their own rates. The Indiana Department of Revenue (DOR) maintains an updated list of where the tax applies. Be sure to check this list before opening or expanding your business.

How Much Is the Tax?

The food and beverage tax is typically 1%, but in some areas, it can be as high as 2%, depending on whether both the county and the city apply it. This is in addition to the 7% sales tax.

If your business charges a 1% food and beverage tax, a $100 customer bill would include the following taxes:

• 7% sales tax = $7.00
• 1% food and beverage tax = $1.00
• Total tax collected = $8.00
• Total bill = $108.00

Some systems combine the sales tax and food and beverage tax into a single line for customers. Behind the scenes, however, the business must separate them during the reporting process.

How to Register, Collect, and Remit the Tax

Once you determine that your business needs to charge the food and beverage tax, the next step is making sure you handle it correctly from start to finish. That means registering in the right places, charging the correct amount, and submitting your payments on time. Here’s how to get set up and stay on track.

Step 1: Register Your Business

Businesses must register for sales tax and any applicable food and beverage tax through the INTIME portal, operated by the Indiana Department of Revenue.

If you cater or serve food in multiple counties, you may need to register in each one that charges the tax, not just where your business is based.

Step 2: Set Up Your POS System Correctly

Make sure your point-of-sale (POS) system:

• Applies the correct rate based on your location
• Separates food and beverage tax from regular sales tax
• Excludes non-taxable items (like retail goods)

Step 3: Remit the Tax on Time

Businesses typically remit food and beverage tax monthly or quarterly. Most locations require remittance through the INTIME portal, but some have exceptions. Johnson County, for example, requires direct remittance to the county treasurer.

Filing late can result in a 10% penalty plus interest, so it’s important to stay organized and on schedule.

Common Mistakes to Avoid

The food and beverage tax may seem straightforward, but applying it correctly requires attention to detail. Small errors can create problems over time, especially for businesses that operate in multiple locations or sell a mix of food and non-food items. 

Many business owners assume they’re handling it correctly, only to discover issues later when reconciling their reports or receiving a notice from the state.

Common errors include:

• Charging tax on non-taxable items, like retail products
• Failing to collect the tax when catering in a different county that charges it
• Not registering in each applicable county
• Using an incorrect rate in a location with multiple overlapping taxes
• Underreporting or overpaying because of incorrect POS setup

Even if you don’t collect the food and beverage tax from your customers, the state may still expect you to pay it. That’s why it’s important to set up your systems carefully, monitor them regularly, and make sure your tax reporting stays up-to-date as your business grows.

Are There Any Exemptions?

Yes, but they are limited.

Businesses do not need to collect food and beverage tax on:

• Sales to nonprofits that provide a valid Indiana exemption certificate
• Retail items, such as merchandise and packaged goods
• Wholesale or resale catering, with proper documentation

Catering can be especially tricky. The tax applies based on the location of the event, not your home base. If you cater an event in a county that charges the food and beverage tax, you must collect and remit it—even if you operate your restaurant in a county that doesn’t. This often surprises business owners.

Tips for Staying Compliant

Once you’ve registered and set up your systems, maintaining smooth operation comes down to consistent habits. A few simple checks each month can help you avoid common mistakes and stay ahead of any changes. Here are some practical tips to keep your business on track:

• Check your POS system monthly to make sure it is applying the correct rates.
• Compare collected amounts to your taxable sales to catch errors early.
• Track retail vs. taxable food sales separately for cleaner reporting.
• Train staff to know what items are taxable and which are not.
• Register in each county where you cater or serve food.
• Use calendar reminders or accounting software to avoid missed filings.
• Sign up for Indiana DOR email alerts to hear about rate changes or new areas adopting the tax.

Stay Compliant and Focus on What You Do Best

The food and beverage tax doesn’t need to be overwhelming, but it does require careful setup and consistent attention. Most issues arise when businesses fail to recognize that the tax applies to them, apply the incorrect rate, or overlook specific county requirements.

If your business serves prepared food or drinks, whether through a restaurant, food truck, café, or special events, understanding how this tax works can help you avoid costly mistakes. With the right systems in place, you can stay organized, file accurately, and avoid penalties.

Not sure if you’re handling the food and beverage tax correctly? TMA Accounting supports restaurants and hospitality businesses throughout Indiana by helping them stay compliant and simplify the complexity involved with food and beverage tax. 

Schedule a call today and let us help you keep your business running smoothly—so you can stay focused on serving your customers and growing your business.