Water Service Excise Tax

In 2018, the Iowa legislature passed a new law, SF 512, effective July 1, 2018, which creates a Water Service Excise Tax (WET). Prior to the enactment of this law, the sale of water was subject to the 6% state sales tax. The WET exempts the sale of water service from state sales tax, but imposes a 6% excise tax on the sale of water service.

Some entities that make sales of water service and other goods or services will now have to separately collect and remit the 6% excise tax on water service sales in addition to state sales tax on other goods or services. For example, if an entity that sells both sewage and water services is currently collecting and remitting state sales tax on sewer charges to nonresidential commercial customers, they will continue to collect this portion as sales tax plus any applicable local option sales tax. However, the entity will no longer collect state sales tax on the sale of water service, but will collect the WET on the sales of water service.

NOTE: Beginning July 1, 2018 - water utilities must separately collect and remit WET under a new permit number.
Beginning January 1, 2019 - the sale of water service and WET must be separately itemized on bills and receipts.

Watch this site for periodic updates to information regarding WET. To receive information about WET, sign up online. After providing your email, choose the Water Service Excise Tax option under the Tax Information drop down. You also can subscribe to other tax information at the same time. Email us if you have questions not answered below.