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Learn the fundamentals of sales tax
Do you need to collect sales tax in Iowa?
You’ll need to collect sales tax in Iowa if you have nexus there. There are two ways that sellers can be tied to a state when it comes to nexus: physical or economic. Physical nexus means having enough tangible presence or activity in a state to merit paying sales tax in that state. Economic nexus means passing a states’ economic threshold for total revenue or the number of transactions in that state.
Do you have physical nexus in Iowa?
Iowa considers a seller to have physical nexus if you have any of the following in the state:
- 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
You can click here to read exactly what the Iowa Department of Revenue (Iowa’s taxing authority) has to say about what constitutes sales tax nexus in Iowa in accordance with their tax laws.
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. You can read Iowa’s economic nexus guidance for businesses here and you can read more about economic nexus in every state here.
What about Iowa’s Retailer Use Tax?
Iowa’s Retailer’s Use Tax is a voluntary program for remote sellers who have not yet reached economic nexus requirements in Iowa. This means that if you’re under those thresholds, you do not have to register with the state, collect and remit sales tax. If you’ve already registered for the Iowa Retailer’s Use Tax and are under Iowa’s economic nexus requirements, then you can cancel your registration with the state if you’d like to (it’s a voluntary program). If you have met Iowa’s economic nexus requirements, the state requires that you register for a standard sales tax license. If this applies to you and you are already registered for a Retailer’s Use Tax license, you can cancel your registration and register with the state for a new sales tax permit.
Is what you’re selling taxable?
Services in Iowa may be taxable. You can find a list of taxable services in Iowa here.
Tangible products are taxable in Iowa, with a few exceptions. These exceptions include certain foods and items used in agriculture or manufacturing. You can see a list of tax-exempt items in Iowa here.
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
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.
Collecting Sales Tax
Iowa is a destination-based sales tax state. If your business is based in Iowa, you would charge sales tax at the rate of your buyer’s ship-to location.
However, if you’re not based in Iowa, but have sales tax nexus there, 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.
Read a full explanation of sales tax on shipping in Iowa here.
When are Returns Due?
When you file and pay Iowa sales tax depends on two things: 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.
All you do is 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.