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Iowa's sales tax ranges from 6% to 7%. Sales tax is only due when a product is sold to the final user. It is a tax on the retailer for the privilege of selling tangible personal property in Iowa. It is not a tax on the purchaser. Therefore, retailers selling taxable goods are responsible for paying sales tax to the State even if the taxes were never collected from their customers!
 
Sales tax rates to use  The sales tax rate you use depends on your location. It is based on a combination of state tax (6%) + county or city LOST tax (up to 1%).

Click here to look up the tax rate by zip code or address.

 
Who must collect sales tax?   Sales tax applies to the sale, rental or lease of tangible personal property.

"final user" If your product will be used in someone else's product or will be resold "as is", you don't collect sales tax. Only the final user pays sales tax, so that objects aren't taxed over and over again.
"tangible" Generally, services are not taxed. For example, even though a CPA gives you a written tax return, the CPA doesn't charge sales tax because (s)he is really providing you a service (doing your taxes). However, services can be taxed if state auditors believe that the true purpose of the transaction was to sell a tangible product, (i.e. disguising sales by calling them services doesn't work). If this happens, the entire charge, including any services made in connection with the sale of the goods is taxable.
 
Most services are taxable  Most services are taxable in Iowa except for services performed in construction or remodeling, done for interstate commerce, purchased for resale or purchased by an exempt organization. For complete information, click here and look under "Services" or call 800 367-3388.
 
Warning  There are many "gray" areas...where you may not be sure if something is a service or a tangible good. Examples include postage or delivery charges. Usually, there are specific regulations you must follow. If you are audited by the Department of Revenue, YOU will be responsible for the tax, even if you never collected it from your customers.
 
Your purchases can be exempt! Rule of thumb: If your customer pays sales tax on your product, you don't have to pay sales tax on items used to make that product. Thus, goods are not double taxed. The sales tax exemption form shows how to handle sales tax exemptions.

The sales tax exemption only applies to items in your product. Office supplies and general things you use to run your business are still taxable. Remember, the government wants everything to be taxed once. If your customer isn't paying sales tax on a specific item, you should be.

 
Providing a non-taxable service? Pay sales tax on your supplies Service businesses that are not taxable cannot get sales tax exemptions for the items they buy to perform their service. They do not charge sales tax on the service and thus do not receive a sales tax exemption when they buy supplies. Note: If you sell an item separately from the service, you are selling a tangible good and should charge sales tax. Remember...all products must be taxed once.
 
Internet sales and purchases, out-of-state items, and leasing: use tax In addition to the sales tax, Iowa has a use tax. The use tax is only the state 5% rate, because local tax (LOST) and school district tax (SILO) cannot be charged on an item subject to use tax.

The use tax is generally owed on property purchased from out-of-state and consumed in Iowa.

 
Your responsibilities
  • Keep records of your sales, purchases made for your business and deductions you declare on your sales tax reports.
  • Separate sales tax for each county where you conducted business
  • File sales tax returns even if you didn't sell anything during the prior period.
  • You are responsible for sales tax, even if your purchaser didn't pay you.
  • Don't spend your collected sales tax to meet operating costs!
  • Contact the Department of Revenue if you move, change ownership, discontinue or sell your business.
 
Pamphlets
Questions?
Click here for information for specific industries.

Click here for the General Sales and Use Tax Guide

Phone the Department of Revenue at 800 367-3388.