Total Range for 2025
| Base state sales tax rate | 6% | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate |
| Local rate range | 0%-2% | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate |
| Total rate range | 6%-8% | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate |
| Economic sales nexus threshold | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate | |
| Transactions threshold | N/A | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate |
| Sales tax return filing due date | Last day of following month | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate | Base state sales tax rate |
The base state sales tax rate in Iowa is 6%, but since the local rates range from 0-2% the total sales tax range is 6-8%.
How to calculate your sales tax rate
Use our online sales tax calculator to determine the combined state and local sales tax rate for each location where you have a physical or economic nexus. Just enter your state and ZIP code to get your sales tax rate.
Example of using the sales tax rate in a tax calculation:
- Jeans cost $40, Des Moines has a 1% local tax.
- State sales tax (6%): $40 x 6% = $2.40
- Total sales tax (including local): $2.40 + ($40 x 1%) = $2.80
- You pay $2.80 in sales tax.
Nexus: Why do you need to collect sales tax in Iowa?
If you’re selling goods and services in Iowa then sales tax might apply! To determine your obligation, you need to understand “nexus,” which ties businesses to states for tax purposes.
Two types of nexus exist:
- Physical Nexus: Having a physical presence, like an office, warehouse, or employees in Iowa, triggers this type. If you do, you likely need to collect sales tax.
- Economic Nexus: This kicks in when your sales within Iowa exceed a certain economic threshold. Even without a physical presence, surpassing this threshold requires collecting sales tax.
Services
- Generally, services in Iowa are not taxable unless specifically mentioned in state law
Goods
- In Iowa, sales of tangible personal property are taxable unless exempt by law.
- This means most physical goods you sell will be subject to sales tax.
Freight/Shipping
- The cost of freight and shipping can be included in the taxable amount if the destination is in Iowa.
Clothing
- Clothing is taxable in Iowa unless there is a sales tax holiday
Electronics
- Electronics are subject to sales tax
SaaS
- SaaS is taxable unless it’s being used for business purposes, in which case it is exempt.
Digital Products
- Digital products, including images and electronic games, are typically taxable unless they are purchased by a commercial enterprise and used exclusively by or provided to that enterprise.
Software
- Specified digital products, which can include downloadable software, are taxable in Iowa.
How to register for sales tax in Iowa
You can register for a sales tax permit in Iowa through two methods:
- Online: The Iowa Department of Revenue offers an online registration system through GovConnectIowa. This is the faster and preferred method. https://tax.iowa.gov/businesses/business-permit-registration
- Paper Application: You can also register by mail by completing the Iowa Business Tax Permit Registration form (Form 78-005). This form can be downloaded from the Iowa Department of Revenue’s website.
Before You Register:
- Make sure you have your Federal Employer Identification Number (FEIN) obtained from the IRS.
- If you are a corporation, partnership, LLC, or association, have each business owner’s full name and Social Security Number (SSN) ready.
After Registering:
- You can typically begin collecting sales tax immediately after submitting your application online. The system will provide a copy as your temporary proof of registration.
- You’ll receive a formal letter with your account number, IDR ID, and filing/payment instructions within a business day (electronically) or up to 6 weeks by mail.
How to collect sales tax in Iowa
Here’s how to collect sales tax in Iowa:
- Determine the Correct Tax Rate:
- Iowa is a destination-based state for sales tax. This means you charge the sales tax rate applicable to your customer’s shipping address, not your business location.
- The state sales tax rate in Iowa is currently 6%. However, many localities in Iowa have additional local option taxes that are added on top of the state rate.
- Collect the Tax at Checkout:
- Once you know the applicable tax rate, you need to collect it from your customer at the time of sale.
- Most point-of-sale systems or e-commerce platforms can automatically calculate and add the sales tax based on the customer’s shipping address.
- Keep Accurate Records:
- It’s crucial to maintain accurate records of all your sales transactions, including the sales price, the amount of sales tax collected, and the customer’s shipping address. These records are essential for filing your sales tax returns.
Nexus: Why may you need to collect sales tax in Wyoming?
To obtain a sales tax permit in Iowa, first gather essential business information, including the business name, address, contact details, Employer Identification Number (EIN) or Social Security Number (SSN), business entity type, owner or officer details, and the date of the first sale in Iowa. Then, apply for the permit online through the Iowa Department of Revenue’s eFile & Pay website by registering for an account and completing the application.
Alternatively, you can submit a paper application using Form 78-005. Once approved, you’ll receive your Iowa sales tax permit and permit number to use for tax collection and reporting.
When are Iowa’s sales tax returns due?
The due date for your Iowa sales tax returns depends on your filing frequency, which is determined by the Iowa Department of Revenue based on your estimated sales tax collections. Here’s a breakdown:
- Filing Frequencies: Iowa has three filing frequencies for sales tax returns: monthly, quarterly, and annually.
- Due Dates: Generally, sales tax returns are due on the 20th or the last day of the month following the reporting period. Annual filers (those with the lowest sales tax liability) have their returns due on January 31st of the following year.
- Weekends and Holidays: If the due date falls on a weekend or holiday, the return is due on the next business day.
Is anyone exempt from sales tax in Iowa?
In Iowa, there are generally two categories of exemptions for sales tax:
Exempt Customers: Certain types of customers may not be required to pay sales tax when they purchase goods or services in Iowa. Here are some examples:
- Government Agencies: Federal, state, and local government agencies are typically exempt from paying sales tax on purchases made for official government business.
- Certain Non-Profit Organizations: Qualifying non-profit organizations may be exempt from sales tax on purchases used exclusively for their charitable or educational purposes.
- Merchants Purchasing for Resale: Businesses that hold a valid resale certificate can purchase goods without paying sales tax upfront, as they will collect it when they sell the items.
Exempt Goods and Services: Some specific goods and services are not subject to sales tax in Iowa. These include:
- Most Non-Prepared Food Items: Groceries and other food items for home consumption are generally exempt. (Note: Prepared restaurant meals are taxable.)
- Prescription Drugs and Medical Supplies: These are exempt to help make healthcare more affordable.
- Educational Services: Educational services provided by public and private non-profit schools are typically exempt.
