Press Release - Sales Tax Rate Increase

June 9, 2008

INCREASE IN STATE SALES TAX AFFECTS SALES TAX RETURNS

On July 1, the state rate for Iowa sales tax will increase from 5 percent to 6 percent. The School Local Option Sales Tax (SILO) will no longer exist as a separate tax. The additional 1 cent replaces the SILO tax. Its revenue will be distributed to school districts and used for property tax relief. All Local Option Sales Taxes (LOST) will remain in effect.

The change will be the most obvious to businesses, according to the Iowa Department of Revenue.

“We are making every effort to educate businesses about the changes,” said Mark Schuling, Director of the Department. “Every business that has an Iowa sales tax permit will be receiving a letter in June. They need to be aware that the quarterly sales tax return is changing.” Businesses will see the changes when they file their July-September return in October.

Some sales and services will remain at 5 percent. Businesses making these sales will complete an additional schedule when filing their returns.

Even though SILO as a separate tax will no longer exist, businesses will continue to report sales by county. This will allow proper distribution to school districts.

The Department encourages businesses to sign up to receive free e-mail news. To do so, go to www.state.ia.us/tax and subscribe to the business tax category of “eLists.” Questions may be directed to Taxpayer Services at 1-800-367-3388 or idr@iowa.gov.

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