Sales Tax Updates in Iowa

Tax Professionals' Resource
February 12, 2013 — 1,576 views  
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The state of Iowa imposes a sales tax of 6% on the gross receipts of tangible personal properties sold in Iowa. This sales tax is applied to a string of services performed in the state, including tickets and admission charges, amusement games, utility and communication services, room rentals at motels, hotels, and inns, optional warranty or service agreements and contracts, photographic, engraving, or printing services, and trash and solid waste collection.

Iowa county and municipal governments may also charge an additional sales and use tax of up to 1%.

Retailers doing business in the state can obtain a sales tax permit at no fee from the Iowa Department of Revenue and Finance. Sales taxes can also be paid on a non-permit basis in the event of temporary or itinerant business transactions in the state. Only sellers with a physical presence in the state of Iowa are responsible for paying the state sales tax. A physical presence would be defined as having a retail facility, an office or warehouse space, and any employees or frequent delivery vehicles within the state.

The state of Iowa has made it mandatory that the sales tax is shifted to the purchaser. This sales tax is stated separately on the purchaser's receipt. This tax cannot be absorbed by local Iowa sellers. State law has made it illegal for sellers to directly or indirectly market or promote absorbing the sales tax. It is a requirement that the sales tax is added to the sales price and no exceptions can be made.

There are many specific items, for instance, certain prescription drugs, which are exempt from Iowa sales tax. Properties or services purchased within state lines for the purpose of resale are also not subject to any Iowa sales or use tax. Either the seller or the Iowa Department of Revenue and Finance can provide the Iowa resale exemption certificate. A certificate issued by the seller should have the seller's name, the purchaser's name, address, and the nature of their business, a description of the purchase, an explanation as to why the purchase is exempt, and the state's sales tax ID or the state issued registration. This certificate must also be signed and dated by the buyer.

Complementing the Iowa sales tax is the excise or use tax. The use tax is applicable anytime tangible personal properties, or taxable services, are bought out-of-state for use within state lines.

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