Most businesses starting in Iowa selling a product or offering certain services will need to register for a Business Tax Permit. This is commonly referred to as a sales tax permit and sometimes as a seller’s permit, sales & use tax license, sales tax number, or sales tax registration.
The sales tax permit is obtained through the Iowa Department of Revenue as a part of applying for an Iowa Business Tax Number.
Check out the rest of this guide to determine who needs a sales tax permit, what products and services are taxable, how to register for a permit, and reporting requirements.
Who needs a sales tax permit in Iowa?
A business must register for a sales tax permit in Iowa when:
- A business has sales tax nexus. Nexus means having a physical presence in the state, such as having a physical location like a retail store or office or using a warehouse or fulfillment center to store inventory.
- Employees for a business (including sales representatives or agents) are working in Iowa
- Occasionally selling items at craft shows, fairs, seminars, conventions, etc. in Iowa
- A business located in Iowa is selling taxable products and services to Iowa residents
- A remote seller meets one of the following scenarios:
- Making total sales of tangible personal property to Iowa residents is $100,000 or more; or
- Shipping 200 or more transactions to Iowa residents.
What products and services are taxable in Iowa?
There are a few exceptions, but almost all physical products are taxable when sold at retail in Iowa. Common examples include:
- General merchandise like furniture, appliances, and clothing
- Titled or registered items like vehicles
Certain medical devices, along with manufacturing machinery and equipment, are tax-exempt.
Digital products, except canned software (pre-made software), aren’t taxable unless delivered electronically or digitally.
Most services aren’t taxable in Iowa, however, there are a few exceptions, some of which include:
- Sort-term lodging
- Automobile rental
- Tickets or Admissions to places of amusement, fairs, athletic events, etc
- Alteration and garment repair
- Camera repair
- Home repair (new construction, expansion, or remodeling of a building or structure are exempt)
- Carpet and upholstery cleaning and repair
- Dry cleaning
- Farm implement repair
- Furniture repair and cleaning
- Household appliance, television, and radio repair
- Commercial janitorial and building maintenance or cleaning
- Jewelry and watch repair
- Landscaping, lawn care, and tree trimming and removal
- Massage unless performed by a licensed massage therapist
- Motorcycle, scooter, and bicycle repair
- Painting, papering, and interior decorating
- Pet grooming
- Swimming pool cleaning and maintenance
- Tanning salons
- Vehicle, motorcycle, or bicycle repair
- Auto detailing
See the full list of taxable services in Iowa.
How to register for a sales tax permit in Iowa
Information needed to register includes:
- Federal Employer Identification Number (FEIN), or SSN if a sole proprietorship with no employees
- Business name, address, and phone number
- Date business activities began or will begin
- Mailing address and contact information
- Type of business entity: Sole Proprietorship, Partnership, Corporation, Limited Liability Company (LLC)
- Names and addresses of owners/officers/members
- Employee information
How much does a sales tax permit cost in Iowa?
There is no cost for a sales tax permit in the state of Iowa.
How long does it take to get an Iowa sales tax permit?
Upon filing online, you will receive a Business eFile Number (BEN), and you can begin collecting sales tax immediately. It may take up to 6 weeks to receive all official paperwork from the state.
Do you have to renew your Iowa sales tax permit?
The sales tax permit is a one-time registration, and no renewals are needed. Be mindful that if any information about the business changes, such as the mailing address, additional locations, or change in ownership, those changes need to be updated with the Department of Revenue.
Sales tax reporting
How is sales tax collected?
When a business sells a taxable product or service, the business charges the appropriate sales tax rate to the customer. This tax is collected by the business who then sends it to the Iowa Department of Revenue.
How much sales tax is charged?
The sales tax rate is 6%.
In addition to the statewide tax, some areas in Iowa have the ability to add what’s called a Local Option Tax. This additional tax adds 1% to the statewide tax rate that must be collected by businesses. In addition to the Local Option Tax on sales of products and some services, there is also a Local Option Tax added for hotel and motel accommodations that can be as high as 7%. See the list of Local Option Tax jurisdictions and rates.
When are Iowa sales tax returns due?
The Department of Revenue will determine a filing frequency based on the expected volume sales tax collected, which will be monthly, quarterly, semiannually, or annually. Generally, a business collecting over $6,000 annually of sales taxes ($100,000 in sales) will file monthly.
Filings are due the 20th day of the month following the reporting period, unless the 20th falls on a weekend or federal holiday, which would move to the next business day.
Even if the business had no sales during the reporting period, a filing is still required indicating no sales.
Sales tax on purchases for resale
A business can purchase items to resell without paying state sales tax. The tax liability is passed from the wholesaler or distributor to the retailer, who will then charge sales tax to the end-user of the item.
Wholesalers and distributors will require a sales tax number and complete the Iowa Sales Tax Exemption Certificate (also referred to as a resale certificate) to document the items being purchased are for resale.
In addition to registering for a sales tax permit, there may be other business licenses needed before starting a business in Iowa. Learn what business licenses are needed in Iowa.
If you have questions about the sales tax permit, the Iowa Department of Revenue has a guide to sales taxes in Iowa or can be contacted by calling 800 732-8866 or 217 782-3336.