Businesses and independent online sellers must understand their sales tax obligations in Iowa if they sell products or services in the state. These obligations dictate specific tax filing requirements of businesses and sellers that hold either a physical nexus or meet an economic nexus threshold. Is your business required to remit sales tax payments in Iowa? Use TaxJar’s sales tax guide and calculator to understand your tax obligations and estimate your sales tax liability.
Do you need to collect sales tax in Iowa?
Your business must collect sales tax in Iowa if you have either physical or economic nexus in the state. Physical nexus means that your business has a tangible presence or activity in a state to merit paying sales tax. Economic nexus denotes that your business has met a states’ economic threshold for total revenue or the number of transactions.
Do you have physical nexus in Iowa?
Iowa considers a seller to have physical nexus when the business has met one of these conditions:
- An office, warehouse, distribution house or place of business
- An employee, contractor or other representative in Iowa, either temporarily or permanently
- Installs property it sold in Iowa
- A construction contractor performs a job in Iowa
- Regularly engages in delivery of products to Iowa
The Iowa Department of Revenue discusses in detail what constitutes sales tax nexus in Iowa.
Do you have economic nexus in Iowa?
Effective January 1, 2019, Iowa considers vendors who make more than $100,000 in sales annually in the state in the previous or current calendar year to have economic nexus. This means the state considers these vendors obligated to collect sales tax from buyers in the state.
The Iowa Department of Revenue offers additional insights about economic nexus for businesses to learn more about their tax obligations. TaxJar also guides you through economic nexus in each state.
What is Iowa’s Retailer Use Tax?
Iowa’s Retailer’s Use Tax pertains to sales on goods for sellers who do not yet have economic or physical nexus in Iowa. While the buyer must pay use tax, businesses can elect to collect this tax from the buyer (at the time of sale) and remit the tax on behalf of the buyer.
The Iowa Department of Revenue explains that these payments should be noted as “sales subject to use tax.” If a business meets Iowa’s economic nexus requirements, the state requires that the business register for a standard sales tax license.
Is what you’re selling taxable?
Many services are taxable in Iowa.
Tangible products are taxable in Iowa, with a few exceptions. These exceptions include certain foods and items used in agriculture or manufacturing. Read the list of tax-exempt items in Iowa.
Is SaaS taxable in Iowa?
SaaS is taxable, except when being used for business purposes, then it is exempt. (Source)
How to get a sales tax permit in Iowa
You can register online at the Iowa Department of Revenue. Or visit our registration page to request that TaxJar manage your Iowa registration for you.
You can also fill out an Iowa Business Tax Permit Registration and submit it via mail or fax to:
Registration Services
Iowa Department of Revenue
PO Box 10470
Des Moines, IA 50306-0470
Fax #: 515-281-3906
ATTN: Registration Services.
You need this information to register for a sales tax permit in Iowa:
- Personal identification info (SSN, address, etc.)
- Business identification info (EIN, address, etc.)
- Business entity type (sole-proprietor, corporation, LLC, etc.)
- Date you started sell in Iowa
- Types of products or services sold
It’s free to apply for a sales tax permit, but other business registration fees may apply.
Use the Streamlined Sales Tax™ Registration System (SSTRS)
Iowa is a Streamlined Sales Tax™ Member state. The Streamlined Sales Tax™ Registration System is made up of a group of states that aimed to simplify the process of registering for a tax permit for online sellers. The system allows businesses to apply for a license in any member state, providing a central hub for this purpose.
Businesses also can opt to contract with a Certified Service Provider™ (CSP™ ) through the system. The CSP serves as a sales tax concierge, providing sales tax assistance to businesses in all the states where they are registered through the SSTRS.
Collecting sales tax
Iowa is a destination-based sales tax state. If your business is based in Iowa, you must charge sales tax at the rate of your buyer’s ship-to location.
However, if your business is not based in Iowa, but holds sales tax nexus in the state , you’re considered a remote seller. You would need to collect the same sales tax as an in-state seller would. Additionally, the state rate is charged, plus local option sales tax (if delivery occurs in a local option jurisdiction).
You can look up your local and state sales tax rate with TaxJar’s Sales Tax Calculator.
Should you collect sales tax on shipping charges in Iowa?
As long as you separately state the shipping charges on your bill to your customer, you do not have to charge sales tax on shipping.
But if you include shipping in the price of the product you sell the customer, then shipping is considered part of the taxable transaction and Iowa declares that you must collect sales tax on shipping.
Learn more about f sales tax on shipping in Iowa.
When are returns due?
When you file and pay Iowa sales tax depends on your assigned filing frequency and your state’s due dates.
How often will you file sales tax returns in Iowa?
States assign filers a filing frequency when you register for your sales tax permit. In most states, how often you file sales tax is based on the amount of sales tax you collect from buyers in the state.
In Iowa, you will be required to file and remit sales tax either monthly, quarterly or annually.
Iowa sales tax returns are generally due the 20th or the final day of the month following the reporting period. If the Iowa filing due date falls on a weekend or holiday, sales tax is due the next business day.
Filing sales tax
When it comes time to file sales tax in Iowa, you must do three things:
- Calculate how much sales tax you owe
- File a sales tax return
- Make a payment
How to calculate how much sales tax you owe in Iowa
Calculating how much sales tax you should remit to the state of Iowa is easy with TaxJar’s Iowa sales tax report.
Connect the channels through which you sell – including Amazon, eBay, Shopify, Square and more – and we’ll calculate exactly how much sales tax you collected. All the information you need to file your Iowa sales tax return will be waiting for you in TaxJar. All you have to do is login.
How to file and pay sales tax in Iowa
You have two options when it comes to filing sales tax in Iowa:
- File online – File online at the Iowa Department of Revenue. You can remit your Iowa tax payment through their online system.
- AutoFile – AutoFile – Let TaxJar file your sales tax for you. We take care of the payments, too. You’ll never have to worry about spreadsheets, calculations or filling out complex sales tax returns.
