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Purchases of goods, wares, merchandise, or taxable services are subject to sales tax when purchased by:
- Municipally-owned public utilities that sell gas, electricity, heat, pay television, or communication service to the general public
- City or county relief agencies that are not instrumentalities of government
Note: A relief agency may request a refund from the Department.
For a list of taxable services, see Iowa Sales and Use Tax: Taxable Services.
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Purchases of goods, wares, merchandise, or taxable services are exempt from sales tax when purchased by:
- County governments
- City governments
- Water utility departments
- Municipally-owned solid waste facility that sells its processed waste to another municipally-owned solid waste facility for fuel
- Code chapter 174 county fairs
Type of Payment Determines if Taxable or Exempt
Exempt
- Purchases where payment is made with an official county or city voucher, check, or credit card, or charged directly to the county or city.
Taxable
- Purchases where payment is made by city or county employees with cash, personal checks, or personal credit cards. Tax applies even if the employee will be reimbursed by the city or county.
Registered Vehicles
Purchases by cities and counties of vehicles subject to registration are exempt from Iowa's 5% one-time registration fee.
Note: the exemption does not apply to city or county municipal utilities engaged in selling gas, electricity, heat, pay television or communication service to the general public
Utilities and Communication Services
Purchases by cities and counties of utilities or communication services for resale or processing are exempt from tax; city or county gives an exemption certificate (pdf) to the seller
Example - Purchase for Resale
Municipally-owned electric utility ABC purchases additional electricity from XYZ, a neighboring utility, to meet its summer demand peak. ABC will purchase the electricity for resale tax free.
Example - Processing
ABC purchases electricity from XYZ to operate the generators which produce the electricity ABC sells to the public. ABC will purchase the electricity tax free and provide XYZ an exemption certificate since the purchase is for processing.
Sales by Cities and Counties
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Utilities and Communication Services
The following are subject to sales tax:
- Communication services
- Municipally-operated pay television services
The following are subject to sales tax, unless sold to residential customers:
- Gas
- Electricity
- Heat
Note: local option tax, if applicable, must still be charged even if sold to residential customers.
Sewer and Solid Waste Services
Nonresidential Commercial Customers
Sales by a city or county of sewer service and solid waste collection and disposal services are taxable to nonresidential commercial customers.
Entry Fees for Athletic Events
Fees paid to cities and counties that sponsor athletic events are taxable.
- Team entry fees
- Individual entry fees
- League fees
- Tournament fees
Events include but are not limited to baseball, basketball, softball, volleyball, golf, tennis, racquetball, swimming, wrestling, and foot racing.
Fees for Use of Athletic Facility
Fees paid to a city or county to use an athletic facility for the sport for which it was designed are subject to sales tax.
- Individual fees
- Group fees
- Daily fees
- Season ticket fees
Facilities include but are not limited to golf courses, ball diamonds, tennis courts, swimming pools, and ice skating rinks.
The fee is taxable whether or not the use is for a brief or extended period of time.
Third-party Sales
It may be difficult to determine if a city, county, or third party is the retailer. Therefore, the facts of each situation and the terms of existing contracts must considered.
City or county facility
A city or county that operates a facility through which a third party makes taxable sales is not responsible for the tax on sales by the third party. The third party selling taxable goods or services is the retailer, and, therefore, collects and remits sales tax.
City or county event
If a third party sells at a city or county event, the sales are taxable unless otherwise exempt in the Iowa Code. Third-party sales are not exempt just because they take place at a city or county event.
Fair
Unless otherwise exempt, sales made by third parties at a fair are taxable.
Registered Vehicles
If a city or county sells a vehicle subject to registration, the buyer will pay the 5% Iowa one-time registration fee on the purchase price when the vehicle is registered.
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Athletic Lessons or Instruction
Fees paid to cities and counties for lessons or instructions on playing or improving an athletic sport are not subject to sales tax. This includes, but is not limited to, golf and swimming lesson fees.
Athletic Equipment Rental
Rental fees paid to cities and counties on equipment used to participate in athletic sports are not taxable. Examples include the rental of a golf cart or recreational boat.
Sewer and Solid Waste Services
Residential Customers
Sales by a city or county of sewer service and solid waste collection and disposal services to residential customers are exempt from sales tax.
Utilities and Communication Services
The following are exempt from sales tax when sold to residential customers:
- Metered gas
- Propane
- Heating oil
- Kerosene
- Metered electricity
- Heat
Note: local option tax, if applicable, must still be charged even if sold to residential customers.
Merchandise Sales
Food and drinks at athletic events
City or county sales of food or drink to anyone watching or participating in any athletic sport are not taxable. This includes concessions sold at city-owned swimming pools and golf courses.
Office equipment and furniture
Sales by auction or other means of office equipment and furniture are not taxable.
Leaf bags
Sales of leaf bags directly to the customer by a city or county are exempt from sales tax.
However, the same leaf bags are taxable when sold by a store for a percent of the sales. If the store sells the bags but turns all the proceeds back to the city or county, they are exempt.
Stickers for leaf bags
Stickers required to be placed on a bag to make it eligible for pickup are not taxable when sold by the city, county, or retail store.
Facility or Park Rental
Fees paid to cities and counties for the use of facilities and parks are not taxable as long as the area is not a specific athletic facility.
Hiking and Camping
Fees paid to cities and counties for the use of a campground or hiking trail are not subject to tax.
Repair Work
Payments to cities and counties that provide service to the public for repair of city or county property are not subject to tax.
Sales to the U.S. Government or the State of Iowa
Sales by cities and counties to agencies or instrumentalities of federal, state, county, or municipal government are not subject to tax.
County Fairs
Sales by county fairs organized under chapter 174 of the Iowa Code are not subject to tax.
Exempt sales include but are not limited to:
- Admissions to the fair
- Admissions to grandstand shows
- Parking fees
- Concessions
- Any other sales of tangible personal property or taxable services by the organization conducting the fair
Sales to American Indians
Sales to American Indians with delivery on the reservation are not taxable.
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Tax Liability
A city or county is responsible for remitting tax to the Department even if it fails to collect the tax from its customer.
The city or county may contact the purchaser to recover the sales tax it failed to collect. The unpaid tax is considered a legal debt.
Sales Tax Permits
Sales tax permits must be obtained for each location at which taxable sales occur.
Filing and Paying
The Department offers online filing Iowa sales tax and withholding deposits and returns. The systems provide the option to pay electronically. Semimonthly filers are required to pay electronically.
The Department does not provide paper forms.
Statute of Limitations
The sales tax statute of limitations for assessing a tax or applying for a refund is three years. Sales tax records should be kept for at least that long.
Use Tax
The use tax is usually imposed when property purchased out-of-state on which Iowa tax has not been paid is brought into Iowa for use here. The exemptions that apply to the sales tax also apply to the use tax.
There is no local option use tax.
Electricity loss through “line loss” is not subject to tax.
Local Option Sales Tax
Most cities and unincorporated areas have a 1% local option tax.
Jurisdictions and Rates
See Local Option Sales Tax Lists and Rates
Election and Collection Information
See Iowa Local Option Sales Tax (LOST) - Common Questions
Additional Local Option Sales Tax Information
See Iowa Local Option Tax Information
Local Hotel and Motel Tax
A city or county may impose a hotel / motel tax at a rate not to exceed 7%.
Jurisdictions and Rates
See Hotel Motel Quarterly Distributions
Election and Collection Information
See Iowa Lodging Tax - Common Questions
Additional Hotel and Motel Tax Information
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Designated exempt entities, including cities and counties, may issue special exemption certificates to contractors and subcontractors that allow them to purchase, or withdraw from inventory, building materials for the governmental construction contract free from sales tax.
This special exemption certificate also allows a manufacturer of building materials to consume materials in the performance of a construction contract with a designated exempt entity without owing tax on the fabricated cost of those materials.
These exemption certificates are obtained and issued only by exempt entities who register their projects through the online system developed by the Department.
See Construction Contracts with Designated Exempt Entities.
Questions?
If you have questions, please contact Taxpayers Services by email or by phone at 515-281-3114 or 1-800-367-3388.
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Except for dyed diesel, cities and counties must pay the Iowa fuel tax on their purchases of fuel.
Cities and counties are allowed to purchase dyed diesel fuel for use in their off-road vehicles. If allowed under federal law, cities and counties may also purchase dyed diesel for use in on-road vehicles. Dyed diesel is not subject to fuel tax.
Fuel Tax Refunds
Cities and counties
A city or county may apply for a refund of fuel tax.
Political subdivisions
A political subdivision may obtain a refund of fuel tax.
An entity is a political subdivision if it has:
- A specific geographic area, and
- Public officials elected at public elections, and
- Taxing power, and
- A general public purpose or benefit, and
- Been granted the above by the State of Iowa
Public schools are a qualifying political subdivision.
If an entity does not meet all of the above criteria, it does not qualify for a refund permit number as a political subdivision.
Urban Transit Systems
Urban transit systems are eligible for fuel tax refunds.
Urban transit systems are bus systems that:
- Transport passengers without discrimination,
- Primarily on the streets of cities, and
- Meet the requirements of the Iowa Department of Transportation
- Also included is a company operating a taxicab service under contract with an Iowa urban transit system
Regional Transit Systems
Regional transit systems can request fuel tax refunds.
A regional transit system is a public transit system:
- Serving one county, or
- All or part of a multi-county area, whose boundaries correspond to the regional planning areas designated by the governor or approved by the Iowa Department of Revenue
Other Entities That May Apply for an Iowa Fuel Tax Refund
- Contract carrier that has a contract with a public school for the transportation of students
- Benefited fire district if the fuel is used for public purposes
Instrumentalities
Many non-qualifying entities, referred to as “instrumentalities,” receive funds from cities and counties. However, because they do not qualify as political subdivisions, they cannot file for refunds unless the fuel is used for non-highway purposes.
For example, a nonprofit group may receive partial funding from a city or county. However, if that group does not meet the above criteria, it cannot apply for fuel tax refunds because it is not a political subdivision of the city or county.
Apply for a refund permit number
To obtain a refund, register for a refund permit number in GovConnectIowa as an “Other Political Subdivision.” A governmental agency is allowed to designate another governmental agency as an agent for filing and receiving a refund.
File refund claims
Claims for refund may be filed any time after a $60 minimum refund amount has been accumulated. Once the $60 minimum has been met, the claim for refund must be filed within three years.
Claims are filed using GovConnectIowa. Cities and counties who apply for a permit will receive information on filing when their refund permit number is issued.
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Iowa Retail Cigarette / Tobacco Permits are issued by cities and counties.
Retailer Applies for Permit
The Retail Cigarette / Tobacco Permit Application (70-014) is available online: Retail Cigarette/ Tobacco Permit Application (pdf)
File the application
The retailer files the application with the local jurisdiction: city clerk or county auditor.
City/County Issues Permit
The permit is not online. It is available as a Word file. Cities and counties may request the Word file by emailing IDRCigarette@iowa.gov.
City/County Sends Copy of Application
The city or county sends a copy of the completed application to the Iowa Department of Commerce within 30 days.
- Email: iapledge@iowaabd.com (preferred)
- Fax: 515-281-7375 (if difficulties are encountered with the fax, call 515-281-7434)
- Mail: Iowa Department of Commerce, Division of Alcoholic Beverages, 1918 SE Hulsizer Road, Ankeny, IA 50021
The original application is kept by the issuing authority. The original permit should be given to the permit holder.
ONLY copies of applications from retailers that have vending machine locations should be sent to the Iowa Department of Revenue.
What to Charge for a Retail Cigarette/Tobacco Permit
The city or county keeps the permit fee. The price of a retail permit depends on two things:
- the location of the business and
- the month issued
Prices are as follows:
Location Jul-Sep Oct-Dec Jan-Mar Apr-Jun Outside of city limits $50.00 $37.50 $25.00 $12.50 City of less than 15,000 $75.00 $56.25 $37.50 $18.75 City of 15,000 or more $100.00 $75.00 $50.00 $25.00 Questions and Instructions