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How To Register For An Iowa Business Tax Permit

How To Register For An Iowa Business Tax Permit

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How To Register For An Iowa Business Tax Permit

When starting a business in Iowa, several registrations must be completed. The most common is the Iowa business tax permit, which is sometimes referred to as a retailer certificate, seller’s permit, sales tax permit, sales and use tax number, or sales tax registration.

Keep reading to learn who needs a business tax permit, what kinds of products and services are taxable, how to register, and what you need to do for reporting.

Related: Guide to starting a business in Iowa

Who needs a sales tax permit in Iowa?

A business must register for a sales tax permit in Iowa when:

  • A business has a sales tax nexus. Nexus means having a physical presence in the state, such as having a physical location like a retail store or office or using a warehouse or fulfillment center to store inventory.
  • Hiring Iowa employees (including remote employees, sales representatives, or agents)
  • Occasionally selling items at craft shows, fairs, seminars, conventions, etc. in Iowa
  • A business located in Iowa is selling taxable products and services to Iowa residents
  • A remote seller sells over $100,000 in physical goods or has over 200 transactions annually to residents in Iowa

What products and services are taxable in Iowa?

Physical Products

There are a few exceptions, but almost all physical products are taxable when sold at retail in Iowa. Common examples include:

  • General merchandise like furniture, appliances, and clothing
  • Titled or registered items like vehicles

Certain medical devices, along with manufacturing machinery and equipment, are tax-exempt.

Digital Products

Digital products, except canned software (pre-made software), aren’t taxable unless delivered electronically or digitally.

Services

Most services aren’t taxable in Iowa, however, there are a few exceptions, some of which include:

  • Short-term lodging
  • Automobile rental
  • Tickets or admissions to places of amusement, fairs, athletic events, etc
  • Alteration and garment repair
  • Camera repair
  • Home repair (new construction, expansion, or remodeling of a building or structure are exempt)
  • Carpet and upholstery cleaning and repair
  • Dry cleaning
  • Exterminators
  • Farm implement repair
  • Furniture repair and cleaning
  • Household appliance, television, and radio repair
  • Commercial janitorial and building maintenance or cleaning
  • Jewelry and watch repair
  • Landscaping, lawn care, and tree trimming and removal
  • Massage unless performed by a licensed massage therapist
  • Motorcycle, scooter, and bicycle repair
  • Painting, papering, and interior decorating
  • Pet grooming
  • Photography
  • Plumbing
  • Swimming pool cleaning and maintenance
  • Tanning salons
  • Vehicle, motorcycle, or bicycle repair
  • Auto detailing
  • Towing

See the full list of taxable services in Iowa.

How to register for a sales tax permit in Iowa

A sales tax permit can be obtained by completing the Iowa Business Tax Permit Registration online with the Iowa Department of Revenue.

Information needed to register includes:

Sales tax reporting

How is sales tax collected?

When a business sells a taxable product or service, the business charges the appropriate sales tax rate to the customer. This tax is collected by the business, which is then sent to the Iowa Department of Revenue.

How much is sales tax in Iowa?

The sales tax rate is 6%.

In addition to the statewide tax, some areas in Iowa have the ability to add what’s called a Local Option Tax. This additional tax adds 1% to the statewide tax rate that must be collected by businesses. In addition to the Local Option Tax on sales of products and some services, there is also a Local Option Tax added for hotel and motel accommodations that can be as high as 7%. See the list of Local Option Tax jurisdictions and rates.

When are Iowa sales tax returns due?

The Department of Revenue will determine a filing frequency based on the expected volume of sales tax collected, which will be monthly, quarterly, semiannually, or annually. Generally, a business collecting over $6,000 annually of sales taxes ($100,000 in sales) will file monthly.

Filings are due on the 20th day of the month following the reporting period unless the 20th falls on a weekend or federal holiday, which would move to the next business day.

Even if the business had no sales during the reporting period, a filing indicating no sales is still required.

Iowa Business Tax Permit FAQs

How much does an Iowa business tax permit cost?

There is no cost for a business tax permit in the state of Iowa.

How long does it take to get an Iowa business tax permit?

When filing for an Iowa business tax permit online, you will receive a Business eFile Number (BEN), and you can begin collecting sales tax immediately. It may take up to 6 weeks to receive all official paperwork from the state.

Do you have to renew your Iowa business tax permit?

The Iowa business tax permit is a one-time registration, and no renewals are needed. Be mindful that if any information about the business changes, such as the mailing address, additional locations, or change in ownership, those changes need to be updated with the Department of Revenue.

Is a business license the same thing as a sales tax license?

No – A business license and a sales tax permit serve different purposes and are not the same.

A business license authorizes you to conduct business within a particular locality, ensuring compliance with local regulations. Conversely, a sales tax permit enables your business to legally collect sales tax on sales, which you then remit to the state government.

Generally, businesses require both a license and a permit to operate legally and handle taxes correctly.

Related: What business licenses are needed in Iowa

How do I get a wholesale license in Iowa?

A business can purchase items to resell without paying state sales tax. The tax liability is passed from the wholesaler or distributor to the retailer, who will then charge sales tax to the end-user of the item.

Wholesalers and distributors will require a sales tax number and complete the Iowa Sales Tax Exemption Certificate (also referred to as a wholesale license, seller’s permit, or resale certificate) to document that the items being purchased are for resale.

If you have questions about the sales tax permit, the Iowa Department of Revenue has a guide to sales taxes in Iowa or can be contacted by calling 800 732-8866 or 217 782-3336.

How To Register For An Iowa Business Tax Permit

How To Register For An Iowa Business Tax Permit

4 Responses

  1. I am starting an online business based in Iowa and already have a sales tax permit for another small business. Do I need a separate sales tax permit for the online business? Also, does Iowa require any other licenses or permits for an online business. It will be selling patio and yard decor through a dropshipper.

    1. You may want to go into your Department of Revenue account and make sure everything is accurate for what the new business is doing, but as long as you are operating your new business under the name and business structure of the already existing business, you can use the same sales tax permit.

      There are a few “if’s” to your answer, but if you were to start a new LLC, a new sales tax permit would be needed, but if the name of a sole proprietorship were to change, you should be able to update the name.

      Hope this helps, but if you have more details or more questions, please let me know.

      Thanks!
      Greg

  2. I am wanting to start an online business. Do I need to get a tax number before doing that? Also , what if I don’t do well and decide that I am no longer going keep this business, but may do something in the future, how do I let the state know.

    1. Hi Susan – A Sales Tax Permit is needed to operate an online business in Iowa. There may be a few other things to register for as well. Check out this guide for setting up a business in Iowa – https://startup101.com/iowa/

      If you plan to put the business on hold, you can continue filing sales tax reports, but if you decide to close the business, you can cancel your Sales Tax Permit by filing the Business Tax Cancellation permit (Form 92-034) https://tax.iowa.gov/forms/iowa-business-tax-cancellation-92-034

      You may need to do a few other things to officially close the business, but that would depend on which business structure you chose (sole proprietorship, partnership, corporation, or LLC.

      Hope this helps. Let me know if you have any other questions!

      Greg

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