In todayās 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:
Ā» 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
Ā» 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 stateās sales tax applies to the transaction.
Ā» 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.
Ā» Marketplace facilitators like the Wilkinson Property Management of Fredericksburg 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:
Ā» 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. Consumerās 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 consumerās 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 Americaās 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.
Americaās SBDC Iowa is an outreach program of Iowa State Universityās 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, Americaās 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 Americaās SBDC Iowa programs or services, visitĀ www.iowasbdc.org,Ā https://www.facebook.com/AmericasSBDCIowa, or @IowaSBDC on Instagram and Twitter.