Indiana's Exemption for Research Property
- Oct 18, 2013 | Gail Cole
The Indiana Department of Revenue has released an information bulletin regarding a change to the sales tax exemption allowed for equipment used in research and development. That exemption expired after June 30, 2013 under HEA 1545-2013. However the act also creates “a new exemption for research and development property purchased after June 30, 2013.”
According to the information bulletin, research and development equipment is defined as follows:
“[T]angible personal property that consists of laboratory equipment, computers, computer software, telecommunications equipment, or testing equipment that has not previously been used in Indiana for any purpose and is acquired by the purchaser and devoted directly to experimental or laboratory research and development for new products, new uses of existing products, or improving or testing existing products.”
Equipment does not include: “consumables, hand-powered tools, or property with a useful life of less than one year.”
The bulletin defines research and development property as follows:
“[T]angible personal property that has not previously been used in Indiana for any purpose and is acquired by the purchaser for the purpose of research and development activities.”
It goes on to explain what is and isn’t considered “research and development activities.” In a nutshell, any activity devoted directly to laboratory research or experimental research is exempt. Activities related to most surveys (consumer surveys, economic surveys, etc) are not exempt. Office equipment and furniture and other items not directly involved in research are not exempt.
Although research and development property is only exempt if it is “purchased for the purpose of research and development activities,” there is no "useful life" requirement. This is different from the exemption that expired on June 30. Items can still qualify for the exemption if they last less than a year.
In order to purchase a qualifying item tax-free, the buyer must provide the seller with a valid exemption certificate.
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