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Most businesses starting in Iowa that are 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 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 find out 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 “nexus” (significant presence in the state) such as a retail store, office or warehouse where products are produced, stored and/or delivered
- 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
- An online business located in Iowa is selling taxable products to Iowa residents
- An out-of-state business selling to Iowa residents and one of the
- Total sales of tangible personal property to Iowa residents is $100,000 or more; or
- Having 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, with the exception of canned software (pre-made software), isn’t taxable, unless it is 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, 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 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 makes a sale of 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, in which case 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 occurred.
Sales tax on purchases for resale
A business is able to 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 in many cases require the reseller to fill out the Iowa Sales Tax Exemption Certificate (Form 31-014) to document the items being purchased are for resale.
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.