Iowa Hotel/Motel Tax

 

Summary of Taxation of Hotels Rooms – 
State Excise Tax, Local Hotel/Motel Lodging Tax, and Sales Tax Information

The following is a summary of the taxation of room rentals.

  • Contracts made directly with Iowa state / local governmental entities and schools will be subject to both the 5% state excise and local hotel/motel taxes.

  • Contracts made directly with the federal government are exempt from both the state 5 percent excise tax and local hotel/motel tax throughout these various periods. However, rooms rented to federal government employees who are paying with cash, personal check, or personal credit card are subject to tax. This is true even if the employees will be reimbursed by the federal government.

    • When the same person rents lodging for more than 90 consecutive days, the rental is exempt after the 90th day, whether the rental is a room, apartment, or sleeping quarter at any place where sleeping accommodations are furnished to transient guests.
      • Tax is due and not refundable for the first 90 days of an extended rental.
      • “Person” applies to an individual as well as any legal entity.
    • Renting of sleeping rooms in dormitories at all universities and colleges located in Iowa.
    • Renting of a room to the guest of a religious institution located on real property exempt from tax as the property of a religious institution, if the reason for renting the room is to provide a place for a religious retreat or function and not a place for transient guests generally.
    • When the lodging is furnished to family and friends of a patient at a hospital, as defined in Iowa Code section 135B.1(3), by a nonprofit lodging provider (tax-exempt under Internal Revenue Code section 501(c)(3)) during the patient’s time of medical need and the length of the stay is based upon the needs of the patient, family, or friends.
      • The nonprofit lodging must maintain an established lodging facility for family and friends of a hospital patient during the patient’s time of medical need.
      • Lodging furnished to family or friends of a patient at a hospice or other health care facility is not eligible for this exemption. The language used in the new exemption requires the lodging to be furnished to family and friends of a patient at a “hospital,” which has specific meaning in Iowa law.
    • The state 5% excise tax on room rental
    • Any local hotel / motel tax, which can be imposed at a rate up to 7%
    • The state 6% sales tax and any local option sales tax (LOST) 

    These exemptions apply to conference and banquet room rental in hotel and motels, as well as to freestanding conference centers and restaurant banquet rooms.

    There may be other items or services included or associated with the banquet or conference room rental that are subject to the state 6% sales tax, plus any applicable LOST.  Examples of taxable items or services that may be included or associated with room rental include prepared foods, alcohol, soft drinks, candy, security services, and the rental of furnishings or equipment.

    If the facility bills a lump sum for the room rental and taxable items or services, the state 6% sales tax, plus any LOST, applies to the entire bill.  If taxable items and services are separately stated from the room rental on the invoice, the state 6% sales tax, plus any LOST, only applies to the sales price of the taxable items and services.

  • House File 760 was enacted by the Iowa General Assembly and signed into law by Governor Reynolds during the 2020 legislative session. Lodging providers and entities who rent lodging for extended periods of time will want to note, starting July 1, 2020, rentals are only exempt to the extent they last more than 90 days. The first 90 days is not exempt from the tax even if the rental is for more than 90 days.

    Example. A railroad company operates a rail line that runs through Dubuque on a regular basis. The company reserves blocks of rooms at a hotel in Dubuque for employees who travel with a train when the train stops in or around Dubuque. The railroad company’s rental agreement with the hotel books rooms for six months at a time. The hotel must collect hotel and motel tax from the railroad company for the first 90 days of rental of each room for each agreement.