If you operate a business in Iowa, you will more than likely have to collect and pay taxes. There are two places where these taxes will be paid: The Internal Revenue Service (IRS) which is Federal, and the Iowa Department of Revenue (DOR) which is for both State and Local taxes.
Internal Revenue Service (IRS)
Obtaining a Federal Employer Identification Number
To pay Federal taxes, you will need to obtain a Federal Employer Identification Number (FEIN or EIN). Think of this as your business's social security number. This is free to obtain, and can take anywhere from 4-6 weeks to receive a copy of your EIN in the mail. Want to skip the wait? You can obtain your number immediately if you apply online! Still have questions? Check out these helpful links below:
Regardless of whether you have a few employees, or just yourself, you are more than likely classified as self employed. Being self employed, you will need to understand employment taxes. This could include Federal Income Tax, Social Security & Medicare, Additional Medicare Tax, Federal Unemployment Tax, and Self Employment Tax. There are available tools from the IRS to help you determine how much you could owe in employment taxes, as well as determine employment tax due dates.
Located within the Self-Employed Individuals Tax Center, there are plenty of resources available. Here you can learn tips to finding a tax professional to assist you with your various returns, as well as access nine interactive lessons designed to help new small business owners learn their tax rights and responsibilities. The IRS Video Portal contains video and audio presentations on topics of interest to small businesses, individuals and tax professionals.
IOWA Department of Revenue (DOR)
Depending on your business type, you may be subject to collecting and paying Sales Tax, Automobile Rental Tax, Hotel/Motel Tax, Consumer’s Use Tax, Retailer’s Use Tax, Withholding Tax, or even Water Service Excise Tax. Most people need to obtain a Sales or Use Tax permit, but if you aren’t sure you can learn if you need one or not. Ideally, you will file for this permit after you have obtained your Federal Employer Identification Number. Make sure to have your Social Security number handy!
After you have obtained your Iowa Tax Permit (also known as a Business eFile Number or BEN), either online or by paper, you can learn about paying your collected taxes on the eFile & Pay system, as well as filing frequencies and due dates. Remember, receiving your permit in the mail can take anywhere from four to six weeks, but you can begin collecting tax immediately once you submit your registration form(s) if you choose.
Frequently Asked Questions & Additional Resources:
- Permits remain active until you or the DOR cancels it.
- There are no temporary event tax permits (craft shows, farmers markets, etc)
- Iowa’s Sales/Use Tax rate is 6%, and the Local Option tax rate is 1%. Learn where this tax is applicable within Iowa.
- IASourceLink has hosted many tax webinars with members from the Iowa Department of Revenue’s team over the years.
- You will give a completed Exemption Certificate to each supplier when you buy goods and services for resale or other exempt purposes. Similarly, you will also need to obtain exemption certificates from your customers when they purchase goods or services from you for resale or other exempt purposes. Keep these for your records.
- If you lose or cannot find your Business eFile Number (BEN), Send an email to firstname.lastname@example.org and provide the business name of your tax permit, Iowa tax permit number (if applicable), requestor's name, requestor's ten-digit phone number, and requestor's email address. The Iowa Department of Revenue will mail you a copy of your Business eFile Number (BEN), your permit number and instructions on how to file and remit taxes.
- Are you an out of state business looking to work within Iowa?
- There is a complete guide to Iowa Sales and Use Tax on the DOR website, as well as more tailored guides for industries like: