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Iowa Sales Tax Guide

By Cristina Garza

Iowa, known as the Hawkeye state, is the birthplace of famous celebs such as Johnny Carson, John Wayne, and Abigail Van Buren (Dear Abby). And though it isn’t regarded as being especially entrepreneur-friendly, many find running a business in Iowa to be the best thing since sliced bread (which was originally invented there). If you’re one of the many proud small business owners who call Iowa home, you’ll obviously need to be sure your business complies with Iowa's sales tax laws.

 

No worries! We have assembled this all-in-one guide for sales tax so that you can meet the sales tax compliance requirements for a small business in Iowa. 

After reading this guide, you will have learned:

  • How to be prepared for your call with the Iowa Department of Revenue.
  • How to contact the Iowa Department of Revenue.
  • When to charge sales tax in Iowa.
  • What goods, products, and services are taxable in Iowa.
  • When you establish a sales tax nexus with the state of Iowa, and the nuances of various thresholds.
  • How to register for a sales tax license in Iowa.
  • How to collect sales tax in Iowa.
  • How to file and pay sales tax in Iowa.

If, after reading, you still have any questions to help you determine your tax sales obligations in Iowa and how to fulfill them, we are here for your small business bookkeeping needs! 

 

 


Iowa Sales Tax Contacts

Iowa Sales Tax Contacts

✅  Do you need to get in touch with the Iowa Department of Revenue?

✅  Are you uncertain about whether to visit, call them, or contact them through their website?  

✅ Do you wonder what information you should have ready before you contact them?

 

If you answered “Yes” to any of these questions, please read onward, as we have just the information you need! :)

The Iowa Department of Revenue is reachable by phone at 800-367-3388. 

You can also shoot a message to them via the contact form on their website, or you may visit their singular physical location in Des Moines. If you are hoping for the fastest response, our suggestion is that you call rather than send a message or visit in person. 

When you do call the Iowa Department of Revenue, you will want to have some information on hand. It will save time to have the following information easily accessible before you call: 

  • Taxpayer Name
  • EIN
  • Sales & Use Tax ID Number

If you are calling on behalf of an individual or a business, or having a third party call on your behalf, you must have an Iowa Power of Attorney (form  IA 2848, PDF) signed before you call or else you will be wasting your time; they can only help if you have a completed form. 

If you have any more questions, please feel free to contact us so we can assist you with your sales tax needs.

 

 


Iowa Sales Tax Registration

Iowa Sales Tax Registration

 

Are you a new business selling tangible property in Iowa? If yes, you are going to want to register your business with the Iowa Department of Revenue so that you can pay your sales tax on time. 

You need not fret as this is a relatively simple process and one for which you’re about to be fully prepared. We are going to outline the steps below so you are totally ready to register for your sales tax license.

Here we go! Remember...

Preparation is key. 

Let’s get started!

 

 

How do I register to collect sales tax in Iowa?

You can apply or register for an Iowa sales tax permit by visiting the Iowa Department of Revenue and following the instructions provided.

Iowa also has an old school paper based form (PDF) you can print and mail in, but this is going to be a slower setup and with greater possibility for errors. We don’t recommend it, but wanted to make the option available in case it suits the needs of someone out there. 

 

 

What information do I need to register for an Iowa sales tax permit?

Great question!

Before you sign up for Iowa sales tax permit you’ll want the following information on hand:

  • Business name
  • Business entity type 
  • Description of business activities
  • Date business activities began or will begin
  • Business address and mailing address
  • Business contact information
  • Associated business entities 
  • NAICS code that best matches the business
  • Federal Employer Identification Number (FEIN)
  • List of business officers, partners, managing members, and/or trustees

Don’t forget! Preparation is key. When you have all this information ready, you can go online and register for your permit at the Iowa Business Tax Registration Application website. 

 

 

How much does it cost to register for an Iowa sales tax permit?

Iowa charges precisely zero dollars and zero cents for a business to register to pay sales tax :) 

 

 

Do I need a Federal Tax ID Number or EIN to register for an Iowa sales tax permit?

Indubitably, yes! You will most assuredly need one, but if you don’t already have one and need to get a new EIN, it’s a painless process. You can register for a Federal EIN right here :). 

 

 

Which agencies in Iowa do I need to additionally register with?

You may need to apply to some of the following agencies: 

You’ll want to give this some thought and do a little research or investigating; since every business is unique, and there are such different rules, regulations, and laws that may apply. 

We suggest contacting the Iowa Department of Revenue to verify which additional government agencies you may be required to register with. 

 

*****

 

Huzzah!!!

You are now prepared to register for your Iowa sales tax permit in Iowa. 

Let’s summarize what we have covered:  

  • Have all the required information easily accessible before registering online.
  • Acquire a tax ID or EIN before registering for an Iowa sales tax permit.
  • Register online at the Iowa Department of Revenue website.
  • Look into what other agencies you may have to additionally register with.

Registering for your Iowa sales tax permit will be stress free as long as you are prepared. We recommend organizing all the essential information in a folder, preferably using a system like Box.com or Dropbox (something we’re happy to handle for our customers). 

 

 


Iowa Sales Tax FAQ

Iowa Sales Tax FAQ 

 

By now, you may have already contacted the Iowa Department of Revenue and applied for an Iowa sales tax permit. 

Once you have a license to collect and remit sales taxes in Iowa, you will probably be asking yourself two questions: 

  • When do I charge a sales tax in Iowa?
  • What goods and services are subject to sales taxes in Iowa? 

We are going to go over some common questions that our clients have asked. We believe these questions will help you appreciate the nuances of taxable goods so you can be confident in fulfilling your tax obligations. 

Let’s start with the first question…

 

 

What goods and services are considered taxable in Iowa?

The following items are all taxable in the state of Iowa: 

  • Sales of tangible goods at retail.
  • Repairs or alterations of tangible personal property.
  • Property rentals, leases, or licenses [e.g. commercial, mini-warehouse]
  • Selling service warranty contracts.
  • Short-term rentals for living accommodations (e.g. motel/hotel, beach houses, condos, timeshares, vacation homes, or RV homes).
  • Rental/lease of personal goods (e.g.: machinery, vehicles, equipment, or other property).
  • Charges for admission to any place of amusement, sport, or recreation.
  • Manufacturing or producing goods for retail sales.
  • Operating vending machines or amusement rides.
  • Services are mostly exempted... mostly.

 

The bottom line is …

Your business must pay taxes on sales of any non-exempt goods, and some taxable services.

*****

 

Let’s now review some of our clients’ frequently asked questions:

  • Is Iowa an Origin or Destination sales tax State?
  • What creates a sales tax nexus in Iowa?
  • What is the economic threshold in Iowa?
  • Does Amazon have fulfillment centers in Iowa?
  • Does Iowa have a Click-Through Nexus?

To best understand your tax obligations, new businesses need to consider how they are doing business and the type of relationships they have with buyers and any third parties to their transactions. 

 Let’s discuss some questions that will help you understand the nature of your small business and the subsequent tax implications.   

 

 

Is Iowa an origin or destination-based sales tax state?

Iowa is a destination-based sales tax state, which simply means you charge sales tax based on the location of the purchaser rather than that of the seller. Local cities and unincorporated areas may choose to add an additional 1%. Iowa’s Department of Revenue offers a website to check the sales tax rate based on an address.

 

 Protip: Charge the customer tax based on their location.

 

What creates a tax nexus with the state of Iowa?  

Having nexus, also known as "sufficient business presence,” with Iowa means your business has established a taxing connection with a state. When this happens, you are required to collect and remit sales tax in Iowa because you created a sales tax Nexus.

Even if your business maintains its main headquarters in another state, you may still have to charge and pay sales tax to the Iowa Department of Revenue even if you never step foot in Iowa.   

So, how do you create a sales tax nexus in Iowa?

 

A business establishes a nexus in Iowa by:

  • having a business location in Iowa;
  • having property stored in Iowa;
  • employing any person in Iowa;
  • contracting with a salesperson or other agent in Iowa;
  • leasing equipment used in Iowa;
  • performing services in Iowa;
  • licensing the use of intangible property in Iowa, or transporting property in Iowa using the taxpayer’s vehicles.

Let’s talk a bit more specifically about where your goods are stored such as in the instance of an Amazon warehouse. 

 

 

Does Amazon have fulfillment centers in Iowa?

No, Iowa has no distribution centers at this time.

This information is relevant for our customers who sell products on Amazon or are recognized as Amazon FBA (Fulfillment by Amazon) sellers. When Amazon stores products in one of its fulfillment centers in any state including, it triggers a sales tax requirement. 

 

 

Does Iowa have economic nexus?

Yes, Iowa now has an economic nexus law. As of January 1st, 2019 remote sellers are liable to pay sales tax beyond a certain threshold. This means even businesses without a physical presence or traditional nexus can be required to register for, collect, and pay sales taxes.

The threshold for registering is having a cumulative gross revenue of over $100,000 to Iowa purchasers. Other states include a separate transaction number, but not Iowa.

For  more information see the Iowa DOR’s remote sellers page here. They also have a separate page with filing info for remote sellers and marketplace facilitators.

 

 

Does Iowa have click-through nexus?

Yes, Iowa has click-through nexus as of January 1st, 2019. This means if your business is involved in affiliate marketing sales to Iowa purchasers, you may be liable to pay sales tax even if you aren’t located in the state of Iowa. 

If you are a seller selling on a marketplace, and the marketplace collects Iowa sales tax, you do not need to register. In any other situation where your business is garnering revenue from assisting sales and gross receipts exceed $100,000/year, you will need to register and pay as a marketplace facilitator. Iowa’s Department of Revenue has more information and clarity on marketplace facilitators here. They also have a separate page for filing info for remote sellers and marketplace facilitators.

 

 

Is Iowa a streamlined sales tax state?

Yep! Since October, 2005 Iowa has been a full member of Streamlined Sales Tax.

If you are planning on taking advantage of the Streamlined Sales Tax as a business, it is recommended you use a Certified Service Provider though businesses may opt to register themselves without a CSP. Ultimately the aim of streamlined sales tax is to simplify payment to multiple different states of sales and use tax. It isn’t required that you utilize them, but it can significantly reduce complexity to do so, especially if your business sells in multiple states.

 

More effectively manage your tax needs by keeping this guide handy. 

You and your business can be better equipped to avoid situations like paying fines, paying back taxes that you did know you had to pay in the first place, or facing an audit by the tax authorities in Iowa.

 

 


Collecting sales tax in Iowa

Collecting Sales Tax in Iowa

 

By now you know if you are a business that has established a nexus with Iowa. So you have an understanding about whether, and when, you are required to collect sales tax. Knowing this is just half the battle! Now, we are going to help you with the next half of the battle: how to navigate the process of collecting taxes.

Let’s review some common questions our clients have asked regarding their Iowa Sales Tax obligations. 

  • How do I collect Iowa Sales Tax?
  • Who is eligible for Iowa Sales Tax exemptions?
  • What should I do if my customer is exempt from sales tax in Iowa?
  • What happens if I lose an Iowa nontaxable transaction certificate? 

After reading this, you will be better equipped to determine when --and when not-- to collect sales tax in Iowa.

 

 

How do I collect Iowa sales tax?

Iowa is one of those few states that mandates tax be collected from customers at transaction time. You may not ‘absorb’ the tax and must convey it distinctly in the receipt if doing so. As we covered earlier, Iowa is a destination-based state, so you’ll want to collect tax based on the purchasers location. Your point-of-sale software should make this relatively simple, including accounting for any local surtaxes

 

 

What are the current Iowa sales tax rates?   

Iowa’s state-wide sales tax rate is 6% at the time of this article’s writing, with the local surtaxes potentially bringing that as high as 8%. However, since sales tax rates may change, we shall refer you to check out the Iowa Department of Revenue tax rate lookup page. Any change will be reflected on that page.

It always helps to be accurate and up to date with this type of information! :) 

 

 

What is exempt from Iowa sales tax?

Here is a sample list of exemptions: 

  • purchases for resale
  • Everyday clothing items
  • Medical supplies
  • Groceries 

Iowa has too many exempt items to list here, but they go into greater detail on their website.

 

 

Who are eligible for Iowa tales tax exemptions?

At this point, you should know what products are exempt from sales tax in Iowa. You also want to know who may be exempt. 

Under Iowa law, the type of buyer or the way the goods will be used can qualify can buyer for a sales tax exemption. A good example of this is a merchant purchasing goods for resale, aka a wholesaler.

Other common examples of an exempt buyer may include:

  • Government agencies
  • Non-profit organizations
  • Religious groups
  • Out-of-state buyers (should their business not have nexus in their home state).

Note that a non-profit or contractor status doesn’t necessarily immediately confer tax exempt status. To learn more about tax issues for non-profits in Iowa, click here.

 

 

What should I do if my customer is exempt from sales tax in Iowa?

Purchasers who are tax exempt must have completed form 31-014 (PDF) and must present their completed exemption certificate at the time of purchase. It is then incumbent upon you, the seller, to hold on to this exemption certificate. Failure to do so may leave you unable to justify tax exempt sales.

Remember, you always want to collect and file a copy of the exempt certificate. Such certificates must be produced upon request in the event of an audit to justify tax-exempt sales.

 

 

What happens if I lose an Iowa sales tax exemption certificate?

Hmm... Obviously this issue is best to be avoided! Imagine finding out you’ll be audited and discovering you cannot produce an exemption certificate for a buyer! That nightmare scenario would mean you could be held liable to pay all taxes on behalf of the buyer. This is a bad scene and can be avoided by taking proper care with your paperwork… which happens to be one of our specialties! :) 

 

 

Does Iowa have a sales tax holiday?

Yes, they do! 🎉🥳 The tax man takes a brief rest in Iowa each year on the first Friday and Saturday in August. Items of clothing under $100 are exempt from sales tax during the holiday. For more information, check out the Iowa Department of Revenue Tax Holiday page.

 

***** 

 

We have now covered who you need to collect sales taxes from, how to determine whether goods for sale are deemed taxable, what goods and services fall under tax exemptions, who is eligible for tax exemption certificates, and, finally, the process of collecting sales tax in Iowa state. 

Now that we’re this far down the rabbit hole there’s only one thing we need to learn about next… how to pay the piper! 

 

 


Filing and Paying Sales Tax in Iowa

Filing and Paying Sales Tax in Iowa

 

It is time to talk about filing and paying your sales taxes in Iowa. In this section, We are going to cover the following frequently asked questions from our clients:

  • When is Iowa Sales Tax due?
  • What are the Iowa Sales Tax thresholds?
  • What if an Iowa Sales Tax filing date falls on a weekend or holiday?
  • How do I file an Iowa Sales Tax Return?
  • How do I correct an Iowa Sales Tax return?
  • What happens if I don’t collect sales tax?
  • What happens if I file or pay my sales tax return late?
  • Do I need to file a return if I don’t collect any sales tax in Iowa?
  • If I close my business, do I need to file a final sales tax return?
  • Does the Iowa Department of Revenue offer a discount for filing on time?

By the time you finish reading this, you will feel confident enough to file and pay your Iowa Sales Tax.

 

 

When is Iowa sales tax due?

Iowa sales tax payments are due based on the filing interval. Filing intervals are based on the company’s tax liability [detailed ahead, be patient! :p ] 

 

Filing Interval

Due day

Annually

No later than January 31st

Quarterly

No later than the last day of the month following the quarter

Monthly

No later than the 20th day of the month following the month being reported

Semi-monthly

No later than 10 days following the period being reported

 

 

What are the Iowa sales tax filing interval thresholds?

The thresholds for filing intervals are based on the expected or actual tax liability owed:

Amount Owed [anticipated if new business, actual if existing company]

Filing interval

Less than $120 in a year

Annual 

More than $120 but less than $6k in a year

Quarterly

More than $6,000 but less than $60k in a year

Monthly

More than $60k in a year

Semi-monthly [and quarterly as well]

 

For more information, consult the Iowa Department of Revenue filing intervals page.

 

Not sure how to determine your tax filing frequency?

You can review your eCommerce or Point-of-Sale Software to see the volume of sales you have generated. 

Don't worry though! The state will let you know when your due dates change. :) 

Keep an eye out for notices in your mail from the State of Iowa so that you don't miss any shift in deadlines.

 

What if an Iowa sales tax filing date falls on a weekend or holiday?

The deadline is moved to the next business day, typically the Monday following the weekend or the day after the holiday. Where possible, we always suggest filing well before the holiday, of course ;). 

 

 

How do I file an Iowa sales tax return?

Paper: Complete form 32025 (PDF) and mail to the address on the form.

Electronic: File form 32025 online and submit payment via EFT.

  

 

How do I correct an Iowa sales tax return?

Correct the return via the Efile-Pay website. Only quarterly and annual filers may amend a return; monthly and semi-monthly returns cannot be amended. File carefully! :o 

 

 

What happens if I don’t collect sales tax?

If you were required to collect sales taxes and failed to do so for whatever reason, that’s a big no-no! Ultimately the business will be held liable for the due tax. Always be sure to collect sales tax at the point of sale. Attempting to collect after the fact will be time consuming and most likely unsuccessful.

 

Protip: You are still responsible for remitting sales taxes even if you failed to collect them. 

 

 

What happens if I file or pay my sales tax return late?

Iowa's Department of Revenue has two different types penalty rates that can be applied to taxes that are due. Whichever is the highest penalty is the one which will apply, of course:

  1. Failure to file a return on time -- 10%
  2. Failure to pay the due tax on time -- 5%

More information about penalties can be found on the Iowa DOR’s penalty page.

 

 

Do I need to file a return if I don’t collect any sales tax in Iowa?

Yes, Iowa requires businesses file a “Zero-Tax” return even when they have no sales during a taxing period.

 

 

If I close my business, do I need to file a final sales tax return?

Yes, Iowa requires businesses to file a “Final sales tax” return when closing their doors.

 

 

Does the Iowa Department of Revenue offer a discount for filing on time?

No! For dessert, you get more broccoli 🥦, and be grateful :p 

 

*****

 

Now that we covered all your bases for filing and paying sales taxes in the state of Iowa, you should hopefully feel more at ease about the process.

 

Some things to remember:

  • Due dates are important. If anything, file and pay your taxes early.
  • There are three payment plans for filing and paying your sales taxes depending on how much you collect in sales tax on average in a month.
  • You can file and pay your taxes electronically or by mail
  • If you need to amend a return, you may do so electronically or by paper.
  • If you don’t collect sales tax and you were supposed to, you (not the buyer) is liable to pay the sales tax to the state of Iowa.
  • You will have to pay late fees if you fail to file your tax return on time and/or if you fail to make your tax payment on time.
  • Even if you collect no sales tax, you still need to file a return.
  • You need to file a “Final sales tax report” when you close your business.

 

Now, you are ready to file and pay your sales tax in Iowa. If you have any more questions, feel free to contact us.

  

Click here if you think sales tax is boring. Book a meeting.


 

Please note: This blog is for informational purposes only and the information is accurate as of 7/2/2019. If you want legal advice on sales tax law for your business, please contact a Sales Tax professional. Keep in mind that sales tax regulations and laws are subject to change at any time. While we strive to keep our blog current, this blog possibly may be out of date by the time you review it. 

Tags: Sales Tax, Iowa