SALES TAX 101 for IOWA

By December 3, 2018 Iowa

The 10 Basics Every Iowa Business Should Know About SALES TAX

What is Sales Tax in Iowa?

Sales tax in Iowa includes most tangible items and certain services.

Are All Goods and Services Taxable?

No

How Do I Know What’s Taxable and What’s Not?

This link can help you determine what is taxable and what isn’t in Iowa. https://tax.iowa.gov/iowa-sales-and-use-tax-guide#questions

Who Pays Sales Tax?

Consumers pay sales tax.  Merchants do not pay sales tax out of their own pockets.  It’s commonly referred to as a pass through tax.

What Am I Responsible For?

You are required to collect sales tax, hold it secure and send it to the State on-time and in-full.

When Is My Sales Tax Payment Due in Iowa?

Iowa Sales Tax due dates vary based on the month and the filing frequency of the business. Filing frequency is determined by the amount of tax remitted. Click here for a list of due dates.

How Do I Know How Much Sales Tax to Charge? 

The sales tax rate in Iowa is 6% but can be as much as 7% in some municipalities. Find more information here.  The final and definitive answer is always the sales tax rate posted on the State Department of Revenue website.  Rates posted on the web are often not up-to-date and incorrect. It’s always the merchant’s responsibility to charge the correct sales tax rate.

Who Gets the Sales Tax Money?

In Iowa all state and local sales tax is paid directly to the State.

How Do I Manage Tax Exempt Sales?

Tax exempt organizations such as schools and religious organizations are often exempt from sales tax. They are required to give you copy of their “TAX EXEMPT CERTIFICATE” at the time of the sale and you are required to keep this certificate on file. Failing to do so may result in you paying the sales tax out of your own pocket if you have a sales tax audit.

What if I Forget to Pay or Spend the Money and Can’t Pay?

Iowa has severe penalties for missing tax payments. You can find the penalties for late payments here. If sales tax goes unpaid, states will seize the assets of the business or owner and auction them off to pay the debt.  In extreme cases owners will be prosecuted and sent to jail. Even if the business closes, sales tax is a personal liability that will follow the owner until paid.

Iowa Department of Revenue

TAX RATE: The Iowa state sales tax rate is currently 6%. Local municipalities can add up to 1% to that rate.

Iowa Sales and Use TAX HELP: (515) 281-3114

This resource page is for informational purposes only.  If you have further questions regarding sales tax please contact DAVO support at 888-659-8432 or consult your tax adviser.

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