Iowa Sales Tax Guide for Businesses
- Sales Tax Rate
- Local Taxes
- Department of Revenue
- Tax Line
We wrote this guide for online sellers who want to know if they even have to bother with sales tax in Iowa, and if so, how best to tackle the sales tax situation in the Hawkeye State.
After reading this, you’ll know:
- Do you or don’t you need to collect Iowa sales tax?
- Which customers do you collect from?
- How much do you collect?
- What do you do with all the sales tax you’ve collected?
- Way more than you probably ever wanted to know about Iowa sales tax!
Do you have sales tax nexus in Iowa?
Good news! You only have to begin thinking about Iowa sales tax if you have sales tax nexus in Iowa.
“Sales tax nexus” is just a fancy way of saying “significant presence” in a state.
Iowa considers a seller to have sales tax nexus in the state 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.
Is what you’re selling even taxable?
You’ve probably read this far because you realized you have sales tax nexus in Iowa. Your next step is to determine if what you’re selling is even taxable.
Services in Iowa are generally not taxable. So if you’re a freelance writer or a plumber, you’re in luck and you don’t have to worry about sales tax. But watch out – if the service you provide includes creating or manufacturing a product, you may have to deal with the sales tax on products.
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.
So if you sell musical instruments, then charge sales tax to your Iowa customers.
But if you’re a piano teacher, don’t charge sales tax to your Iowa customers.
If you have sales tax nexus in Iowa and your products are taxable, your next step is to register for a sales tax permit.
How to Register for a Sales Tax Permit in Iowa
Sellers with sales tax nexus in Iowa must apply for an Iowa sales tax permit.
Don’t skip this step! Many states consider it unlawful to collect sales tax in their name without a permit. Go here for more on how to register for a sales tax permit in Iowa.
How to Collect Sales Tax in Iowa
So you’ve determined that you have sales tax nexus in Iowa and what you’re selling is taxable. And you’re all set and registered for your Iowa sales tax permit.
The next step is to determine how much sales tax to collect.
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.
Example: You live and run your business in Iowa City, IA where the sales tax rate is the 6% state rate with no added local rates, but you sell to a customer in Dubuque, IA. The sales tax rate in Dubuque is made up of the 6% Iowa sales tax rate plus the 1% Dubuque County rate for a total of 7%. Since Iowa is a destination-based sales tax state you would charge your buyer the 7% sales tax rate due to where they are located.
But if you are not based in Iowa but happen to have sales tax nexus there for some reason, you are considered a “remote seller.” Remote sellers are only required to collect “use tax.” (Use tax is similar to sales tax, but collected by out-of-state sellers.) Iowa’s use tax rate is a flat 6%.
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.
|9||West Des Moines||61,255||Polk||6.00%|
|13||Cedar Falls||40,566||Black Hawk||7.00%|
|17||Mason City||27,704||Cerro Gordo||7.00%|
Caption: Top 20 Most Populous Cities in Iowa and their Sales Tax Rates
When are Iowa Sales Tax Returns Due?
Iowa sales tax returns are always due the last day of the month following the reporting period. You’ll be assigned a sales tax filing frequency when you apply for your Iowa sales tax permit.
To break it down:
2016 Iowa Monthly Sales Tax Filing Due Dates
If you collect more than $6,000 but less than $60,000 tax per year ($500 - $5,000 per month), you’ll file Iowa sales tax monthly. (If you collect more than $60,000 per year you’ll be put on a semi-monthly plan.)
|Taxable Period||Due Date|
|January||February 22, 2016*|
|February||March 21, 2016*|
|March||May 2, 2016*|
|April||May 20, 2016|
|May||June 20, 2016|
|June||August 1, 2016*|
|July||August 22, 2016*|
|August||September 20, 2016|
|September||October 31, 2016|
|October||November 21, 2016*|
|November||December 20, 2016|
|December||January 31, 2017|
*indicates a due date pushed back due to a weekend or holiday
2016 Iowa Quarterly Sales Tax Filing Due Dates
If you collect more than $120 but less than $6,000 tax per year ($30 - $1,500 per quarter; $10 - $500 per month) then you’ll file a quarterly return.
|Taxable Period||Due Date|
|Q1 (Jan - Mar)||May 2, 2016*|
|Q2 (Apr - Jun)||August 1, 2016*|
|Q3 (Jul - Sep)||October 31, 2016|
|Q4 (Oct - Dec)||January 31, 2017|
2016 Iowa Annual Sales Tax Filing Due Dates
If you collect less than $120 in tax in Iowa per year then you’ll file annually.
|Taxable Period||Due Date|
|Year 2016||January 31, 2017|
Click here for a chart of Iowa sales tax filing due dates in 2016.
How to File Sales Tax in Iowa
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
We’ll walk you through these steps.
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 payment through their online system. AutoFile - AutoFile your sales tax return. TaxJar will file your sales tax return for you for just $19.95/filing.
- Late Filing Penalty – 10% of tax due
- Late Payment Penalty – 5% of tax due
Other penalties for fraud or serial offenses include higher penalties and even criminal charges.
And that’s it. You’ve mastered Iowa sales tax filing! Now that sales tax is out of the way, you can get back to what you do best – running your business.
Iowa Sales Tax Holidays
Iowa has announced one sales tax holiday in 2016:
August 5-6, 2016: “Back to School Sales Tax Holiday”
Check here for more information about Iowa’s sales tax holiday including how to handle sales tax holidays as an online seller.
Iowa Sales Tax Resources
For more about Iowa sales tax, check out the Iowa section of the TaxJar blog.