Through business tax incentives focused on research and development, Indiana is able to grow the knowledge base of our companies and make the state more competitive in the global economy.
The state of Indiana offers two tax incentives targeted at encouraging investments in research and development. Taxpayers may receive a credit against their Indiana state income tax liability calculated as a percentage of qualified research expenses. Additionally, taxpayers may be refunded sales tax paid from purchases of qualified research and development equipment. The Indiana Department of Revenue oversees these incentive programs.
The exemption for research and development equipment only applies to equipment purchased for the purpose of research and development activities. Research and development activities include any activities devoted directly to experimental or laboratory research and development for new products, new uses of existing products, or improving or testing existing products.
Research and development activities do not include efficiency surveys, management studies, consumer surveys, economic surveys, advertising or promotions, testing for purposes of quality control, or research in connection with literary, historical, or similar projects.
Research and development equipment refers to tangible 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. It must be 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.
Research and development equipment does not include hand powered tools or property with a useful life of less than one year.
Purchasing Exempt Equipment
The purchaser of research and development equipment is required to complete an exemption certificate if the equipment is purchased from an Indiana vendor, or an out of state vendor that is registered to collect Indiana sales and use tax. If the purchaser pays sales or use tax on the purchase of research and development equipment, the purchaser can file a claim for refund with the Department of Revenue.