INDUSTRY SPECIFIC GUIDE
Expanding Business Opportunity in Iowa
Are you wanting to expand your business to Iowa? Well guess what? You’re in the right place! IASourceLink has written this guide to better help business owners and managers answer those vital questions you may have when looking to sell your products or hire employees within our state. IASourceLink is the product of a partnership between the University of Northern Iowa’s John Pappajohn Entrepreneurial Center and the Iowa Economic Development Authority. Our team sourced the information found within this guide from the various state agencies relevant to expanding your business to Iowa.
How do I register my business?
To register your business as a foreign entity operating in Iowa, you would need to register with the Secretary of State. This can be done by filing as a Foreign Cooperative Associations (499), Foreign Cooperative Associations (501A), Foreign Limited Liability Companies (489), Foreign Limited Partnerships (488), Foreign Nonprofit Corporations (504), Foreign Professional Corporations (496C), Foreign Professional Limited Liability Companies (489), or Foreign Profit Corporations (490). Each of these registrations cost at around $100 for initial filing, and may require additional reports and filings on an annual basis. If you need help determining the best entity type for your business, please speak with your legal counsel or tax professional. Our team cannot make these types of suggestions to our readers.
So you’ve decided the entity type that best suits your company, what now? You have two options. The first option is to mail your completed form(s) to the address listed on your form(s), or, you can submit, pay, and manage everything online using the Fast Track Filing service. Simply create an account and follow the instructions on your screen to submit your application for registration and pay any associated fees. If you have questions about filing online, you can call 1-888-767-8683 or email [email protected].
How to collect and remit sales & use tax?
If your company makes taxable sales in the state of Iowa, you will likely be subject to Iowa Sales and/or Use Tax. As a company not based in Iowa, you may have a few differences when it comes to sales and use tax, though. Found in the out-of-state business guide, there is a section that discusses Nexus, Remote Sellers, Filing Frequencies, and more. To obtain a sales or use tax permit, click to learn about the GovConnectIowa portal and all forms and fees associated with obtaining your permit. To determine if the products / goods you are selling are taxable in Iowa, navigate to the very bottom of the Sales and Use Tax Guide. If you need to provide an exemption form to a supplier or other relevant entity, here you go. A list of county names and numbers can be found online as well.
What is Nexus?
Businesses located outside of Iowa frequently have representatives or employees in Iowa to maintain, establish, or further their market share within the state. The activities of these persons may create an Iowa tax filing requirement (nexus) for these businesses. To determine if your company would have nexus in Iowa, you can fill out and submit this questionnaire to the department, or speak with your tax or legal advisor.
What are Remote Sellers?
Generally, a remote seller is someone that makes retail sales of tangible personal property, services, or specified digital products into Iowa, but does not have a physical presence in Iowa. A remote seller may make sales into Iowa through a variety of ways including by phone, catalog, or website. Remote sellers must collect Iowa sales tax only if the remote seller has $100,000 or more in gross revenue from Iowa sales.
What is a Marketplace Facilitator?
Marketplace facilitators include consignment stores, auctions, and online marketplaces. If you are selling your products through a marketplace facilitator, more often than not, the facilitator will collect and remit taxes on your behalf. It’s always important to read seller agreements with the marketplaces you use (for example Amazon, Etsy, etc.), and contact their team for guidance if you aren’t sure what your responsibilities are.
Filing frequencies & local option sales tax
Filing frequency information can also be found on the department’s website. This is also relevant to hiring employees (see employee section below). Local option tax is determined on a per city / jurisdiction level. More information about local option tax can be found on this informational page.
For specific information about Iowa Sales and Use Taxes, withholding taxes, and other relevant tax related questions, please contact the Iowa Department of Revenue by sending a message or by calling 515-281-3114. If the department cannot answer your question(s), please speak with your tax or legal advisor.
What requirements are there to hire employees in Iowa?
As defined by the IRS, independent contractors provide services for your company with little or no direction from you. An employee is someone who performs services for you and you are in control of what will be done and how it will be done. If you aren’t sure if you have an employee or independent contractor, you can find more information on IWD’s website, which is also where Unemployment Insurance in Iowa is managed. Note: Unemployment Insurance does not apply to contractors in Iowa.
If you have questions about registering an account with IWD as a new business, here is a helpful fact sheet that details your next steps. To report new hires, you can do so on the Iowa DHS website’s portal. If the employee needs to obtain a license to perform their duties / tasks, see licensing section below. To learn about withholding tax, you can do so here, and find filing frequencies online as well. To obtain a tax withholding permit for your employees, you can easily file for one using the GovConnectIowa platform.
Specific questions about hiring employees and employer requirements should be directed towards the Iowa Workforce Development team by sending a message or by calling 866-239-0843. Again, if you cannot get a clear answer from these agencies, it is always best to obtain guidance from a tax or legal professional.
Are there any special business licensing requirements I need to consider?
This question completely depends on the type of business you run, the products and services you sell (and how and where you sell them), and if you have employees. Iowa does not have a “general business license”. The state regulates individual industries, so your company may not need to obtain any additional licensing, other than tax permits and overall registration with the state.
We have a helpful article that describes this in greater detail, however, we will summarize here. If you were opening a handyman service, you wouldn’t need to obtain a special license for offering general repairs and maintenance around someone’s home. As soon as you decide to take on a job that requires major construction, you may need to obtain a contractor license to do this. Because you aren’t from Iowa, you may not know what types of businesses need a license because of the general nature of the business (handyman for our example), and which ones only require licensing if you offer additional services or goods (large construction projects).
IASourceLink is home to the Business License Information Center – a collection of 450 business licenses offered by all Iowa government agencies. It’s free to search through and available 24/7.
If you have any questions relating to expanding your business to Iowa, please do not hesitate to contact our team by emailing [email protected] or by calling or texting (319) 273-5444.
Frequently Asked Questions
I just need a temporary sales tax permit
- Iowa does not have a temporary sales tax permit. The cost to obtain a permit is free, and is “good” until either you or the department close it.
Do I need to register and pay taxes if I am only selling into Iowa via my website or marketplace?
- If you are classified as a “Remote Seller” and make taxable sales of more than $100,000 annually, you must collect and remit Iowa sales tax (if a taxable product or service).
How do I find a brick and mortar location to expand my business into?
- We have a helpful section on our Start a Business Guide that discusses finding a location for your business and some things to consider.
My employees will be selling door-to-door, do I need a special license for this?
- There isn’t a statewide “door-to-door” license needed for employees or business owners. Most cities have some kind of language/code/requirement for solicitors and peddlers. Make sure you contact the city/cities your employees will be selling in for more details.
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NOTICE: The information included on this website is to be used only as a guide. It is not intended to cover all provisions of the law or every taxpayer's specific circumstances.
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