Some Indiana cities and counties could tax prepared food and drinks

Eligible city and county councils could adopt a food and drink tax. This applies only where no other food and drink tax law requires or allows that city or county to charge one. To adopt the tax, each council must hold two earlier public hearings, then adopt it at a third hearing. It must allow public comments at all three. The proposed city and county chapters would take effect July 1, 2026.

A council could set a tax of up to 1% on covered food and drink sales. The tax would cover certain food and drinks that sellers prepare or serve in the taxing city or county. The rate must be set in steps of 0.25 percentage points. Sales exempt from the state sales tax would also be exempt from this tax. An adopted tax would apply only to sales after the later of the date named in the ordinance or the last day of the month following adoption.

A taxing city or county could spend the money on eligible building projects and related debt. The projects must be meant to help the local economy; examples include fairgrounds and convention centers. The local council must approve the spending. The money could pay for eligible projects and related financing, but not day-to-day operating costs.

Local councils could lower the tax rate or end the tax before its scheduled expiration. These rules apply to city and county taxes adopted under the proposed chapters. If debt backed by the tax remains unpaid, the rate must stay high enough to bring in 1.25 times the largest yearly debt payment. That unpaid debt also limits ending the tax early. The tax would otherwise end on the last day of the month beginning after its 22nd anniversary.