FAB Tax

During the 2025 Legislative Session, the Indiana State Legislature authorized the City of Madison to adopt a local Food and Beverage Tax (FAB). In August of 2025, the city enacted a city-wide 1% tax on qualifying food and beverages sold within the city pursuant to Indiana Code 6-9-58. The tax takes effect January 1, 2026. 
Food and Beverage Tax (FAB) FAQs
What is the FAB Tax?
The FAB Tax is a 1% sales tax added to food and beverage purchases in certain places.
The 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.
Who will benefit from the FAB Tax?
Those who call Madison home!
A portion of the FAB will be applied toward park maintenance, Main Street Master Planning, and economic development efforts.
A majority will be set aside for capital planning in our City Park and Recreation facilities, primarily Rucker Sports Complex, Sunrise Golf Course, the Brown Gym, and the City-owned tennis courts known as the Shawe tennis courts.
When was the tax enacted?
August of 2025.
When does the collection begin?
January 1, 2026.
How much is the FAB Tax?
The FAB tax is a 1% tax that will be added to your bill for qualifying food and beverage sales made within the City of Madison. For example the tax on a $100.00 restaurant bill will add $1 to your bill, and $15 lunch bill will as just $0.15.
Who is responsible for collecting the FAB Tax?
If your business sells ready-to-eat food or drinks, you likely need to collect the FAB Tax. The tax does not just apply to traditional restaurants — it can also affect a wide range of businesses that serve food and beverages for immediate consumption.
This includes: restaurants and cafés, bars and taprooms, food trucks, catering businesses serving within the City limits, coffee shops, convenience and grocery stores with hot food.
Who is responsible for paying the tax?
The consumer. A 1% sales tax will be collected on transactions in which food or beverages are furnished, prepared, or served for consumption. This tax is paid for by the consumer, but collected by the business.
What transactions are subject to FAB tax?
In accordance with state code, the FAB tax applies to a transaction in which food or beverage is furnished, prepared, or served:
(1)    for consumption at a location or on equipment provided by a retail merchant;
(2)    in the City; and
(3)    by a retail merchant for consideration.
Transactions include food or beverage:
(1)    served by a retail merchant off the merchant's premises;
(2)    sold in a heated state or heated by a retail merchant;
(3)    made of two or more food ingredients, mixed or combined by a retail merchant for sale as a single item (other than food that is only cut, repackaged, or pasteurized by the seller, and eggs, fish, meat, poultry, and foods containing these raw animal foods requiring cooking by the consumer as recommended by the federal Food and Drug Administration in chapter 3, subpart 3-401.11 of its Food Code so as to prevent food borne illnesses); or
(4)    food sold with eating utensils provided by a retail merchant, including plates, knives, forks, spoons, glasses, cups, napkins, or straws (a plate does not include a container or package used to transport food).
For further information, the following guides from the State of Indiana are useful and informative regarding FAB Tax.
How do I register my business?
Existing Businesses:
Existing Businesses will pay FAB monthly through INTIME at intime.dor.in.gov by adding FAB to your account. Please note that paying FAB and the return (FAB-103) is separate from your monthly/quarterly sales and use tax on INTIME.
As an additional reference for INTIME, an INTIME Guide for Business Customers is available at intime.dor.in.gov. or contact DOR customer service at 317-232-2240.
New Businesses:
Register your business via INBiz at inbiz.in.gov. For help with INBiz, contact customer service at 317-234-9768.
Set up your INTIME account at intime.dor.in.gov. If needed, an INTIME Guide for Business Customers is available, or you may contact DOR customer service at 317-232-2240.
Remit FAB monthly through INTIME at intime.dor.in.gov by adding FAB to your account. Please note that paying FAB and the return (FAB-103) is separate from your monthly/quarterly sales and use tax on INTIME.
Please note that food trucks must click the caterer button on the registration form to register for multiple food and beverage tax municipalities.
How often is the tax remitted?
Businesses must remit the FAB monthly through INTIME at intime.dor.in.gov. The filing and remittance of the tax collected are due 30 days after the end of the month in which the transactions occur. However, if your monthly average FAB tax collected is $1000 or greater, your filing is due on the 20th of the month following the month in which the transactions occur.
What if I have further questions?
The Indiana DOR has resources available here.
Food and beverage tax questions should be directed to the businesstaxcompliance@dor.in.gov email box, or you can call 317-232-3425 option 5.