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Iowa's state sales tax rate was 5% through June 30, 2008.
Beginning July 1, 2008, it is 6%. The school local option tax no longer exists as a separate tax. The "regular" local option tax continues.
1. Sales Tax Holiday: What is the Sales Tax Holiday?
2. Machinery, equipment and computers: Are they exempt from sales tax?
3. Construction: Do contractors pay Iowa sales tax?
4. Churches and nonprofit organizations: Are they exempt from tax?
5. No return: What should I do if I don't receive my sales tax return?
6. Filing frequency: How often do I file a sales tax return?
7. Registering: How do I apply for a tax permit?
8. Special Events: Temporary Sales Tax Permit
9. Agriculture: Do farmers pay sales tax on the purchases they make?
10. Filing late: Will I be charged penalty and interest if I don't file on time?
11. "Regular" local option tax: What is it?
12. Services: Which services are taxable in Iowa?
13. Tax help
14. Tax Rates: US map of tax rates for gasoline, sales, and cigarette taxes (pdf)
15. Payment vouchers: What to do if you don't receive them
16. Confidentiality Laws: Are Department employees required to abide by any confidentiality laws?
1. What is the Sales Tax Holiday?
Tax is not due on the sale or use of certain articles of clothing or footwear if the sales price of the article is less than $100.00 and the sale takes place during a period beginning at 12:01 a.m. on the first Friday in August and ending at 12:00 midnight of the following Saturday.
Eligible purchases of clothing and footwear are exempt from local option sales tax as well as Iowa state sales tax.
Clothing means any article of wearing apparel and typical footwear intended to be worn on or about the human body.
Clothing does not include watches, watchbands, jewelry, umbrellas, sporting equipment, and any special clothing or footwear designed primarily for athletic activity or protective use and not usually considered appropriate for everyday wear.
A manufacturer’s coupon does not reduce the sales price of an item. Therefore, a manufacturer’s coupon cannot be used to reduce the selling price of an item to less than $100.00 in order to qualify for the exemption. However, store coupons and discounts reduce the sales price of an item. Therefore, a store coupon or discount can be used to reduce the sales price of an item to less than $100.00 in order to qualify for the exemption.
For more detailed information or for additional information on gift certificates, rain checks, layaway sales, rentals, mail order sales, etc., please go to our Sales Tax Holiday page.
2. Are machinery, equipment and computers exempt from sales tax?
Check out our publication written especially for manufacturers.
To find out if computers are exempt, go to our computers booklet.
3. Do contractors pay Iowa sales tax?
A contractor is considered to be the consumer of building materials and supplies purchased for use in a construction contract, and is, therefore, responsible for paying sales tax at the time the purchases are made, or use tax if the purchases were made tax free.
Suppliers that sell to building contractors must charge sales tax on the purchase price of the items. Suppliers should not usually accept sales tax exemption certificates from contractors. Contractors are not allowed to make purchases for resale merely because they have a sales tax permit number.
However, designated exempt entities awarding construction contracts may issue special exemption certificates to contractors and subcontractors, allowing them to purchase, or withdraw from inventory, materials for the contract free from sales tax. Learn more.
In some cases, a contractor may sell supplies and materials over the counter. This contractor is referred to as a contractor-retailer and may purchase supplies and materials tax free. The contractor-retailer provides the supplier with a valid sales tax exemption certificate. The contractor-retailer then charges customers sales tax when the items are resold at retail. If the contractor-retailer takes items from inventory for use on a contract, the cost of those materials will be reported as "goods consumed" on the sales tax return and tax is paid at that time.
Suppliers that sell to owners who are building their own structures must charge sales tax on the selling price of the materials, supplies and equipment. Owners are considered final consumers and their purchases are taxable.
Labor is not subject to sales and use tax if performed on or in connection with new construction, reconstruction, alteration, expansion or remodeling of a building or structure.
More information is available in our contractors publication.
4. Are churches and nonprofit organizations exempt from tax?
Nonprofit entities, churches and religious organizations are not automatically exempt from paying state sales taxes on taxable goods and services. This is true even if these entities are exempt from the payment of state and federal income taxes. State sales tax must be paid unless some other general sales tax exemption applies. Local option sales tax must also be paid on purchases made in jurisdictions which impose the tax.
Purchases made for resale are exempt from all sales tax.
In other words, a nonprofit corporation, church or other religious organization is treated the same as any other private citizen for sales and use tax purposes when purchasing goods and taxable services at retail.
However, sales of items to any Iowa private nonprofit educational institution used for educational purposes are exempt. Sales from fund-raising activities are exempt from sales tax to the extent that the proceeds are used for educational, religious or charitable purposes. However, the gross receipts from games of skill, games of chance, raffles, and bingo are always subject to sales tax.
More information is available in our publication for nonprofit entities.
5. What should I do if I don't receive my sales tax return?
Iowa sales tax is filed and remitted electronically through eFile & Pay. The Department does not mail returns.
6. How often do I file a sales tax return?
Filing statuses
The Department determines how often sales tax returns are due based on the estimated amount of sales tax collection that the retailer entered on the permit application. These returns are due as follows:
- ANNUALLY if you remit less than $120 tax a year,
you will file one return for the calendar year.- QUARTERLY if you remit more than $120 but less than $6,000 tax per year ($30 - $1,500 per quarter), you will file a quarterly return at the end of each calendar quarter.
- MONTHLY if you remit more than $6,000 but less than $60,000 tax per year ($500 - $5,000 per month), you will file deposits for each of the first two months of the calendar quarter; there is no monthly deposit for the third month of the quarter. For the third month, you will file the quarterly return with the payment for the balance of tax due for that quarter.
- SEMI-MONTHLY if you remit more than $60,000 tax a year (more than $5,000 per month; more than $2,500 semi-monthly), you are required to file deposits twice each month and a quarterly return electronically through eFile & Pay. The first deposit of the month is for the 1st through the 15th and is due by the 25th of the month. The second deposit is for the 16th through the end of the month and is due the 10th of the following month. A deposit is not required for the final semi-monthly period of each quarter. For that last semi-monthly period, a quarterly return is filed including totals for all three months of the quarter and it is due on the last day of the month following the end of the quarter.
7. How do I apply for a tax permit?
Anyone making a retail sale in Iowa must obtain a sales or use tax permit from the Iowa Department of Revenue. Selling without a permit is a serious misdemeanor. The permit is available at no charge. You can apply for your Iowa permit online.
8. How do I obtain a temporary sales tax permit?
Sponsors of flea markets, craft shows, antique shows and other temporary events must verify that the exhibitors are licensed to collect sales tax. Sponsors must obtain an Iowa sales tax permit number or a written good faith statement from each vendor. Sponsors may be responsible for sales tax not collected by the vendors if they do not obtain the proper information from vendors.
Special events (temporary sales tax permit) application (for sponsors only)
Sponsors of special events are responsible for notifying the Department of the event and providing a list of the vendors to the Department.
Exhibitors may obtain temporary permits if they are not in business regularly. To obtain a temporary permit, call 563-386-6484, ext. 1.
Vendors that have regular sales tax permits may remit the sales tax and any local option tax collected under their regular number and on their usual sales tax return.
9. Do farmers pay sales tax on the purchases they make?
Certain purchases by farmers may be exempt from the Iowa sales and/or use tax. If you claim exemption on any purchase, you must be able to show that you are entitled to it by providing a valid exemption certificate to the seller of the property. A separately completed exemption certificate is not necessary for each similar exempt purchase; if the retailer chooses, a "blanket exemption certificate" on file with a given retailer is sufficient. The certificates (pdf) may be obtained on this site.
Machinery and equipment
Generally, self-propelled implements, implements customarily drawn or attached to a self-propelled implement, or grain dryers used directly and primarily in agricultural production and not subject to registration as a vehicle are exempt.
Also exempt are auxiliary attachments which improve the performance, safety, operation or efficiency of the farm machinery or equipment.
Certain purchases of non-self-propelled machinery or equipment are exempt from the Iowa sales tax if they are used directly and primarily in dairy or livestock production.
Vehicles
A 5 percent one-time registration fee is imposed on the purchase prices of vehicles subject to registration and on any implement customarily drawn by or attached to a registered vehicle. This includes camping trailers and livestock trailers.
Farm tractors, combines and other such vehicles are exempt because they meet all three of the following requirements: they are used directly and primarily in agricultural production, they are self-propelled, and they are not subject to registration.
Real property
The purchase of machinery and equipment which will become real property after installation (that is, a substantially permanent part of the farm property) is usually taxable. In general, machinery or equipment is real property if its removal after installation is difficult or if removal substantially lessens the value of the machinery or the location where it was placed.
Exceptions to this general rule exist for certain items. For example, drainage tile is exempt from tax.
Also exempt for livestock or dairy production, aquaculture production, or the production of flowering, ornamental, or vegetable plants are:
- auger systems
- curtains and curtain systems
- drip systems
- fans and fan systems
- shutters
- inlets and shutter or inlet systems
- refrigerators
Parts & Supplies
Replacement parts used in the operation of eligible farm machinery or equipment are exempt from sales tax.
Oil filters, spark plugs, gas filters, and tires are examples of exempt replacement parts.
Do not confuse replacement parts with supplies, most of which are taxable.
Oil and grease used in the routine maintenance of a tractor, for example, are not considered parts; they are considered supplies. They are taxable.
For more information, go to our farmers guide.
10. Will I be charged penalty and interest if I don't file on time?
A penalty of 10% will be added to the tax due if the return is not filed by the due date and at least 90% of the correct tax is not paid by the due date.
If the return is filed timely and the tax is not remitted, a penalty of 5% will be added to the tax due if at least 90% of the correct tax is not paid by the due date.
The interest rate may change yearly. Interest must be added to delinquent tax at a per month rate, beginning on the due date of the return and accruing each month until you make full payment of all tax, penalty and interest due.
11. What is the 'regular' local option sales tax (LOST)?
Through June 30, 2008, Iowa's state sales tax rate was 5%.
Beginning July 1, 2008, the state rate is 6%.
Local option tax is in addition to the state rate.Local option sales tax has been adopted in many cities and unincorporated areas in Iowa. Local option sales tax is imposed on the gross receipts from sales of tangible personal property. Tax applies if "delivery" of the tangible personal property occurs within a local option sales tax jurisdiction.
Local option sales tax is imposed on a taxable service if the service is rendered, furnished, or performed within a local option sales tax jurisdiction.
It is important to understand that WHERE the service is performed determines if the local option tax is charged.
Out-of-state retailers with a physical presence or nexus in Iowa who make deliveries into Iowa must collect Iowa sales tax. If these deliveries occur in a local option jurisdiction, local option sales tax also applies.
See the Q&A on this tax.
12. Which services are taxable in Iowa?
Many services are taxable. Persons performing these services at retail must charge Iowa sales tax.
For a list of taxable services, click here.
13. Does the Department provide tax help?
Tax classes
Tax specialists are based across the state to provide seminars, give speeches to groups, and work directly with practitioners and businesses.
To arrange a tax class, call or e-mail the office nearest to you from the following list, or call Taxpayer Services in Des Moines at 1-800-367-3388.
Sioux City - Call Mary Forristal at 712-258-2807, or e-mail
Cedar Falls - Call Wayne Brown at 319-266-6678 x22, or e-mail
Davenport - Call Terry O'Neill at 563-386-1785, or e-mail
Des Moines - Call Opal Current at 515-242-6091, or e-mail
Cedar Rapids - Call Don Burr at 319-362-2167, or e-mail
14. US map of tax rates for gasoline, sales, and cigarette taxes
15. What do I do if I don't receive my payment vouchers?
The payment voucher packet contains all the tax periods needed for the year. If you do not receive the payment vouchers, please call us at (515) 281-3363 for new vouchers or e-mail the Department. Please be sure to provide the tax I.D. number, business name and address, tax period, your Business eFile Number, your name and telephone number and other pertinent information.
You may also print your payment voucher from the eFile & Pay system. Your computer must have Internet Explorer version 5.5 or newer and Acrobat Reader version 6.0.1 or newer.
Payment vouchers are not available on the Tax Fax system or on the Web site.
Payment vouchers are NOT tax returns.
16. Are Department employees required to abide by any confidentiality laws?
Yes. Please refer to this confidentiality statement for more details.