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Gambling: Games of Skill or Chance and Raffles


The gross receipts from almost all gambling activities conducted in Iowa are subject to state sales tax and local option sales tax, if any. See below for gambling activities exempt from sales tax.

Churches and Charitable Organizations

Gambling activities conducted by churches and by most charitable organizations are taxable. It does not matter how the proceeds are used.


A group holds a chili supper or sells T-shirts or has a rummage sale to raise money for educational, religious, or charitable purposes. It does not collect sales tax on the proceeds from these fundraisers. However, if the group holds a raffle or sponsors a bingo night to raise money for the same purposes, the proceeds are subject to sales tax.


The following gambling activities are exempt from sales and local option taxes:

  • Gambling activities conducted by county and city governments. (Exempt under Iowa Code section 423.3(32)). 
  • Gambling activities held by the Iowa State Fair, Iowa state fair authority, or Iowa state fair foundation (organized under Iowa Code chapter 173), including gambling activities that occur outside of the annual scheduled fair event. (Exempt under Iowa Code section 423.3(35)). 
  • Gambling activities held by a fair (as defined in Iowa Code section 174.1(2)), including gambling activities that occur outside of scheduled fair events. (Exempt under Iowa Code section 423.3(23)).
  • Raffles held by a licensed qualified organization at a fair as defined under Iowa Code section 99B.1 and pursuant to the requirements specified in Iowa Code section 99B.24. (Exempt under Iowa Code section 423.3(62)).
  • Raffles—whether or not they are conducted at a fair event—where the proceeds are used to provide educational scholarships by a qualifying organization representing veterans as defined in Iowa Code section 99B.27(1)(b). (Exempt under Iowa Code section 423.3(97)).

Permits Required

Any individual or group conducting gambling activities in Iowa must:

Note: A gambling license may not be required for certain “very small raffles” (contact the Department of Inspections and Appeals for details). Even if a gambling license is not required for a “very small raffle,” Iowa sales tax is still due and the organizer must apply for a sales tax permit.

Sales Tax

Individuals or groups conducting gambling activities must report and pay sales tax and local option tax, if any, on the gross receipts (not net receipts) of all gambling activities.

Local Option Sales Tax

Most cities and rural areas of Iowa have the 1% local option sales tax in addition to the state sales tax. Local option sales tax applies if the event takes place in one of these jurisdictions. 

See Iowa Local Option Tax Information for more information and lists of jurisdictions that have local option sales tax.

Tax Included in Price

Usually, tax is included in the price of the gambling activity. To determine the gross receipts on which the tax is based, the tax must be backed out of the total sales.


A group sells raffle tickets for $1 each; the price includes sales tax. One thousand tickets are sold for a total of $1,000. The prize cost is $200. The $200 cannot be deducted from the $1,000 before calculating the sales tax due.

The state sales tax rate is 6%; in this example, there is a local option tax of 1% for a total of 7%. The group will divide the $1,000 by 1.07 = $934.58. Therefore, gross receipts from the raffle are $934.58 and the total sales tax due is $65.42.

If local option tax does not apply, the gross receipts are divided by 1.06.

Sales Tax Return Filing Frequency

How often a sales tax return is filed depends on the estimated amount of sales tax that was entered on the Iowa Business Tax Registration form.

See Filing Frequencies and Return Due Dates.

Sales Tax Exemption for Purchase of Non-Cash Prizes

Property purchased for use as a prize to players in any game of skill, game of chance, raffle, or bingo game is not subject to Iowa sales tax. The winner of the prize is not obligated to pay the sales tax either.

This exemption includes the purchase of a motor vehicle subject to registration. Upon showing proof to the county treasurer that the vehicle was won, the one-time registration fee will not be charged.

Note: Winners of gift certificates must pay sales tax when they make purchases using the gift certificates.

Income Tax

The amount or value of a prize is subject to income tax. Winners report this income on their income tax returns.

Withholding Tax on Cash Prizes

Iowa income tax must be withheld by the group or individual conducting the gambling activity on prizes of more than $600. The withholding rate is 5%.

The group or individual must register with the Iowa Department of Revenue as a withholding agent.