Key figures
Indiana payables
2026, with sources
1099s and the WH-3
Indiana’s information-return obligation runs through withholding. Once registered, an employer files WH-1 returns for every period and reconciles the year on Form WH-3 by January 31, together with the W-2s and 1099s that report Indiana state or county withholding. More than 25 W-2, W-2G or 1099-R statements must be filed electronically, through INTIME or bulk upload.
A late WH-3 costs $10 per withholding document, so a company with 20 employees and a handful of 1099s that files a week late pays a penalty per form, not per return.
The WH-1 obligation is the one startups trip on: once registered, Indiana expects a withholding return for every period, including months with no Indiana payroll, and late returns carry a penalty of up to 20% with a $5 minimum.
Use tax on what you buy
Indiana’s use tax is 7%, the same as its sales tax, with no local add-ons. It is owed on taxable purchases where the seller didn’t charge Indiana tax: hardware, furniture, and prewritten software that is downloaded or delivered. Software accessed remotely isn’t taxable in Indiana, so most of a startup’s SaaS stack is outside it.
Contractors
Indiana’s Department of Labor runs a worker misclassification program, and DWD and DOR apply their own tests for unemployment and withholding. A contractor who works like an employee — set hours, company equipment, ongoing role — is the case they look for, and reclassification brings back unemployment premiums, county tax withholding and penalties for each year.
The federal baseline
This page covers what Indiana adds. The federal rules underneath it apply here too.
Common questions
Do we send 1099s to Indiana?
Indiana’s WH-3 reconciles state and county tax withheld and is filed with the W-2s and 1099s that show Indiana withholding. A startup that pays contractors without withholding Indiana tax generally files those 1099s only federally.
Do we owe Indiana use tax on our SaaS tools?
No. Indiana does not treat remotely accessed prewritten software as a retail transaction, so SaaS subscriptions carry no sales or use tax. Downloaded prewritten software and hardware bought without Indiana tax carry 7% use tax.
Payables next door
- ILIllinois payablesIllinois asks for 1099s only where Illinois tax was withheld but wants contractors on the new-hire report, and Chicago taxes the cloud software your Chicago staff use.
- KYKentucky payablesKentucky asks for 1099s only when Kentucky tax was withheld; on the payables side, the issue is a flat 6% use tax that reaches SaaS subscriptions bought from vendors that do not collect.
- MIMichigan payablesMichigan wants a copy of every 1099 issued to a Michigan resident, filed directly for the 1099-NEC, and charges 6% use tax on untaxed goods and delivered software.
- OHOhio payablesOhio taxes the business software you buy, so untaxed SaaS invoices carry use tax; 1099s go to Ohio only when they report Ohio withholding.
Founder guides on this
- PeopleContractor or employee? Classification for startupsContractor or employee depends on control, not the contract. The IRS test, state rules, 1099s, payroll registration and the cost of getting it wrong.
- The closeWhy startups should close their books every monthA monthly close turns a bank balance into numbers an investor, an auditor or a 409A firm will accept. What it is, and why it gets expensive to skip.
More of the Indiana guide
- AccountingAccounting and state tax in IndianaCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in IndianaSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayrollPayroll taxes and employer rules in IndianaWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in IndianaRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in IndianaCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.