Sales/Use Tax Basics – Tips from the Iowa Department of Revenue
Have you noticed the sales tax rate you are charged may sometimes be 6% and other times 7%? The differing rates occur because many cities and counties in Iowa impose a 1% local option sales tax (LOST), in addition to the state sales tax of 6%.
Some Information about LOST
- LOST generally applies to the same sales that are subject to state sales tax.
- LOST applies when taxable goods are delivered in a jurisdiction imposing the tax.
- LOST applies when the first use of taxable services occurs, or potentially could occur, in a jurisdiction imposing the tax.
- Retailers do not need a permit from each LOST jurisdiction. The State of Iowa sales/retailer’s use tax permit is the only permit required, because LOST is reported and paid to the State of Iowa along with the state tax.
Another thing you may have wondered about is why some out-of-state businesses charge Iowa sales/use tax and others don’t. This is due to something called “nexus.” A retailer from outside Iowa has nexus in the state by having some type of presence in Iowa. Out-of-state retailers with nexus are required to collect Iowa tax. Those without nexus aren’t required to, but can collect Iowa tax voluntarily. Even if a retailer doesn’t collect tax, the purchase may still be subject to Iowa consumer’s use tax.
Some Examples of What Creates Nexus
- An office, warehouse, or other business property in Iowa
- A representative located in Iowa permanently or temporarily
- Installation of products in Iowa or service work performed in Iowa
- Delivery of products by your own trucks in Iowa
The Department encourages you to learn more about these issues, by using the following resources:
- Iowa Sales/Use Tax Basics Part 2 webinar – 7/22/15The Iowa Department of Revenue has partnered with the Center for Business Growth and Innovation at the University of Northern Iowa to provide free tax webinars to small business owners on IASourceLink.
- On the Department’s website:
- Sign up for e-mail updates through IDR eLists
- Follow IDR on Twitter
- Like Us on Facebook – www.facebook.com/iowadepartmentofrevenue
- E-mail Taxpayer Services at [email protected]
- Call Taxpayer Services at 515-281-3114 or 1-800-367-3388
Content contributed by Greg Stokke, Iowa Department of Revenue