Register for Federal, State and Local Taxes
Taxes… YUCK! Unfortunately, as a business owner, this is a subject you cannot avoid. If you make taxable sales within Iowa, or even outside its borders, you more than likely will have to collect and remit sales and use tax. Because you are self employed, you might be subject to self employment tax. If you have employees, you will need to pay unemployment taxes. All of this can seem very overwhelming to a new business owner. Because of that, it’s always a good idea to speak with a tax professional or legal advisor when setting up your company.
If you operate a business in Iowa and/or the United States as a whole, 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 (IDR) which is for both State and Local taxes. Refer to the tax section of our Get Your Business Online Guide for more information about sales tax outside of Iowa.
Internal Revenue Service (IRS)
What’s an Federal Employer Identification Number (FEIN)?
An FEIN is essentially the social security number for your business. Having an FEIN isn’t completely required, however. If you want to separate yourself from the business when you incorporate, separate your business federal taxes from your personal ones easier, or if you just want to prevent potential fraud and the stealing of your social security number, it is definitely recommended you get an FEIN. Again, speak with a tax or legal advisor about this!
How do I get a FEIN?
FEIN’s are free to obtain through the IRS, 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:
Iowa Department of Revenue (IDR)
Depending on your business type, you may be subject to collecting and paying state 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 4-6 weeks, but you can begin collecting tax immediately once you submit your registration form(s) if you choose. Speak with a tax or legal advisor about what you need to begin collecting and remitting state and local taxes.
Self Employment Taxes
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 find 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.
If you have employees in the state of Iowa, you will need to pay unemployment taxes to the Iowa Workforce Development (IWD). To learn more about IWD, as well as unemployment taxes, make sure you visit their website, or speak with your tax or legal advisor.
Frequently Asked Questions
Do you have questions about setting up your online store? You should consider checking out our Resource Navigator. It houses the contact information of 400 of our most helpful partners from across the state who provide free to low-cost assistance to Iowa entrepreneurs and small business owners.
Q: How do I get a temporary sales tax permit?
A: There are no temporary event tax permits (craft shows, farmers markets, etc).
Q: I can’t find my Business eFile Number to log into my IDR account, what do I do?
A: 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.
Q: My business is located outside of Iowa, do I need to pay sales tax in Iowa?
A: This depends on the amount of sales you make within the state. Learn more about out of state businesses on IDRs website.
Q: Will my sales tax permit expire?
A: No. Your permit, after approval, will remain in effect until you or the department cancels it.
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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.