Online Transactions and Iowa Sales Tax

In today’s business world, more customers are moving to online purchasing as an alternative to in person transactions. Covid-19 has only increased the amount of online shopping consumers are doing. In Iowa, there are laws that both businesses and individuals must be aware of and in compliance with when selling or purchasing online.

Retailers:

» Businesses located in Iowa or out-of state-retailers with nexus in Iowa and selling to Iowa customers online have an obligation to collect and remit Iowa sales tax depending on where the product is being shipped to. If the merchandise is delivered to an Iowa address, both the sales tax rate of 6% and the additional 1% local option sales tax (LOST), if applicable, must be collected from the customer. LOST has been adopted by voters in most cities and unincorporated areas in Iowa and applies if delivery of the tangible personal property occurs within a local option sales tax jurisdiction.

Sales tax and LOST rates searchable by address can be found at:
https://tax-mapper.iowa.gov/.

A spreadsheet listing all jurisdictions may be found at:
https://tax.iowa.gov/documents/status-all-ia-jurisdictions

» Businesses located in Iowa and selling online to customers with a delivery address outside of Iowa will not collect Iowa sales or LOST. The retailer will want to check the laws in the state where the delivery is being made to determine if that state’s sales tax applies to the transaction.

» For out of state businesses with no physical presence in Iowa, beginning July 1, 2019, Iowa requires sales tax plus applicable LOST to be collected and remitted if the company has $100,000 or more of gross revenue from Iowa.

» Marketplace facilitators must collect and remit Iowa sales tax and LOST if they made or facilitated Iowa sales of tangible personal property, services, or specified digital products into Iowa equal to or exceeding $100,000. A marketplace facilitator generally includes businesses that facilitate retail sales by providing infrastructure (listing the product on the marketplace, communicating offer or acceptance of a retail sale, providing the physical or electronic marketplace) or support (customer service, fulfillment or storage services) for retail sales to occur and collecting the sales price, processing payments, or receiving compensation from the retail sales. Marketplace facilitators include consignment stores, auctions, and online marketplaces.

For further information on marketplace facilitators, visit:
https://tax.iowa.gov/marketplace-facilitators.

Consumers:

» If a customer makes a purchase from an out-of-state supplier not collecting Iowa tax and the product is for use in Iowa, the purchaser must pay Iowa use tax. Consumer’s Use tax applies to both individuals and businesses. If out of state purchases are being regularly made from an out of state source not collecting Iowa tax, the purchaser must obtain a consumer’s use tax permit. See https://tax.iowa.gov/consumers-use for more information.

The information in this blog post is intended for general educational purposes only. Nothing should be construed as legal advice. Any oral or written opinion by Iowa Department of Revenue personnel not pursuant to a Petition for Declaratory Order under 701 IAC 7.24 is not binding upon the Department.

 

About America’s SBDC Iowa and the Author
Lisa Casper, Business Tax Counselor for America’s SBDC Iowa, assists small businesses with questions relating to the Iowa tax code. She provides advice on sales and use tax filings, Iowa tax law that affects small businesses, and general services provided by the Iowa Department of Revenue. She also provides business consulting to help small businesses grow and succeed.

America’s SBDC Iowa is an outreach program of Iowa State University’s Ivy College of Business and the Office of Economic Development and Industry Relations. Funded in part through a cooperative agreement with the U.S. Small Business Administration, America’s SBDC Iowa has 15 regional assistance centers located strategically across the state. Since program inception in 1981, the SBDC has helped Iowa businesses and entrepreneurs through no fee, confidential, customized, professional business counseling and practical, affordable training workshops.

For more information on America’s SBDC Iowa programs or services, visit www.iowasbdc.orghttps://www.facebook.com/AmericasSBDCIowa, or @IowaSBDC on Instagram and Twitter.

 

Thoughts from Todd – We’re In This Together

Originally posted in Siouxland Magazine.

Wow, what year we are having! COVID-19 has affected not only everyone in the United States, but over 180 other nations as well. It seems like we can’t go 5 minutes without hearing more bad news about the impact of the virus on our daily lives. 

As a state, we have been basically shut down for 13 weeks – a very long time. Many businesses have had to learn some hard lessons on what to do and what not to do. Most have had to adapt to new ways of doing sales. Others have had to pivot entirely, changing the focus of their business to a new service or product line. Many, but not all will overcome this time of trial and be able to prosper. I think we should try to learn from this and remember a few things.

First, this virus is not the fault of anyone in our state. Our state is getting through this the best we can. Iowans always help their neighbors. Now is a great opportunity to practice that. Who do you know who could use some help and support? If you are able, do it.

Second, if you have a friend who is a business owner and struggling; but you know someone who isn’t and in similar industries, introduce them. They may be able to help each other in this time of distress.

Third, success right now is different for a lot of people. I know of one business who had their best month ever in April, after 20 years of business. For others, success may be surviving until they can open up at 100% again. It is not the same for everyone.

Fourth, not everyone is going to make it. This shut down was not anyone’s fault and some are going to have to close after this. Two months or more of no revenue will do that to a business. Those who will close will be suffering a very hurtful experience. It hurts to close a business. Give them some slack as they try to sort it out.

Finally, when we open up 100% I want to encourage everyone to support your local business and business owners. I wish each of you the best as we come out the other side of this and hope you all come out better than before.

 

About America’s SBDC Iowa SBDC and the Author

Todd Rausch, Regional Director for the Western Iowa Tech SBDC in Sioux City, has been in the position since 2013. He is a veteran and has a passion for helping small businesses succeed.

America’s SBDC Iowa is an outreach program of Iowa State University’s Ivy College of Business and the Office of Economic Development and Industry Relations. Funded in part through a cooperative agreement with the U.S. Small Business Administration, America’s SBDC Iowa has 15 regional assistance centers located strategically across the state. Since program inception in 1981, the SBDC has helped Iowa businesses and entrepreneurs through no fee, confidential, customized, professional business counseling and practical, affordable training workshops.

For more information on America’s SBDC Iowa programs or services, visit www.iowasbdc.org, https://www.facebook.com/AmericasSBDCIowa, or @IowaSBDC on Instagram and Twitter.