Iowa Sales and Use Tax Guide

The Department is actively reviewing and updating this page following Governor Reynolds’s signature of SF 2367 on June 17, 2022. This banner will be removed when all updates are complete.


This is intended as a general guide, and is not an all-inclusive discussion of Iowa sales and use tax law.

  • Obtaining a Permit

    Retailers that sell taxable tangible personal property, services, and products must obtain a sales tax permit. Learn more about permit requirements or if you need a tax permit.

    If a person makes retail sales from more than one location, each location from which taxable sales of tangible personal property, specified digital products, or services will occur shall be required to hold a permit.

    To obtain a permit, apply through the Department's Business Registration System.

    Temporary Businesses / Event Sponsors

    The Department does not issue temporary tax permits. A permanent tax permit allows you to conduct taxable sales or perform taxable services in Iowa at any time during the year. When you attend a temporary event, such as a craft show, you only need to provide the event sponsor with your name and address, along with your permanent tax permit number.

    Sponsors of flea markets, craft shows, antique shows, and other temporary events may be liable for the sales tax, penalty, and interest of the retailers selling at the event.

    Not sure you need a permit? Contact Taxpayer Services by email or call 1-800-367-3388 or 515-281-3114.

    Read Special Events – Sales/Use Tax Permits

  • Use Tax Permits

    When a taxable service, tangible personal property, or specified digital product is used in Iowa, but no Iowa sales tax was collected on the sale of the product, Iowa use tax is usually due. 

    The use tax rate is the same as the state sales tax rate.

    Retailer’s Use Tax Permit

    Remote sellers and marketplace facilitators whose Iowa sales volume is below the amount required to collect sales tax may use a retailer's use tax permit. 

    Physical Nexus

    Businesses located outside of Iowa that have representatives or employees in Iowa to maintain, establish, or further their market share within the state have nexus. Delivery into Iowa by company trucks also establishes nexus.

    Consumer’s Use Tax Permit

    Persons regularly purchasing taxable goods or services for their own use in Iowa from an out-of-state source not collecting Iowa tax must obtain a consumer’s use tax permit.

    See Iowa Consumer's Use Tax.

    Direct Pay Permit

    Some qualified purchasers, users, and consumers of tangible personal property or taxable services may remit the tax directly to the Department rather than to their suppliers. Learn more about Direct Pay Permits.

    To apply for a direct pay permit you must register for a Direct Pay permit on GovConnectIowa

  • Iowa is a member of the Streamlined Sales Tax Governing Board (SSTGB), a multi-state effort to encourage businesses in all states to collect and remit sales tax in every state in which they make taxable sales.

  • If a corporation, association, or partnership fails to pay sales and use taxes, the officers or partners are personally liable for the tax, interest, and penalty.

    A person selling a business must file final tax returns and pay all taxes due. However, the new owner should withhold a sufficient amount of the purchase price to pay any unpaid tax, interest, and penalty in case the seller fails to pay the final tax due. If the new owner intentionally fails to do this, he or she is personally liable for the tax.

  • State Sales and Use Tax

    The state sales tax rate and use tax rate are the same. The rate is 6%.

    View the Sales Tax Rate Chart (79-106)

    Local Option Sales Tax

    In addition to the state tax, most local jurisdictions impose the local option sales tax. The rate is 1%.

    Within a county, some cities may have the local option tax, some may not. Also, the unincorporated rural area of a county may or may not have the tax. A jurisdiction may enact the tax on January 1 or July 1.

    For more information, including lists of jurisdictions with the local option tax, see Iowa Local Option Tax Information.

    Hotel and Motel Tax

    Certain cities and counties in Iowa have adopted a local option hotel and motel tax on the renting of sleeping rooms in any hotel, motel, inn, public lodging house, rooming house, tourist court, mobile home, bed and breakfast, or in any place where sleeping accommodations are furnished to transient guests for rent. This is in addition to the 5% state excise tax on lodging.

    The rate of local hotel and motel tax can range from 1 to 7%. Jurisdictions and rates are updated January 1 and July 1 of each year.

    The 5% state excise tax and local hotel and motel tax are reported and remitted on the quarterly sales tax return. No permit other than an Iowa sales tax permit is required to collect and report these taxes.

    Motor Vehicle Fee for New Registration


    Sales of vehicles subject to registration are exempt from sales tax, but are subject to a 5% fee for new registration.

    See Iowa Vehicle Purchase and Lease Information and Forms.


    A leased vehicle is subject to the fee for new registration if:

    • It has a gross vehicle weight rating of less than 16,000 pounds and
    • It is to be leased for a period of 12 months or more

    The 5% fee is computed on each lease transaction based on the lease price. The lease price includes the number of months of the lease multiplied by the monthly lease payments, plus certain adjustments.

    See Iowa Vehicle Purchase and Lease Information and Forms.

    Automobile Rental Tax

    The rental of automobiles for a period of 60 days or less is subject to an automobile rental tax of 5%. This is in addition to the state sales tax and any applicable local option tax.

    The tax applies to vehicles designed to carry nine or fewer passengers. It does not apply to delivery trucks designed to carry cargo or to motorcycles or motorized bicycles.

    The automobile rental tax is reported and remitted on the quarterly sales tax return. No permit other than an Iowa sales tax permit is required to collect and report this tax.

    See Vehicle Rental - Sales, Use, and Automobile Rental Tax 

  • The basis for Iowa sales tax is the sales price of tangible personal property or taxable services.

    • “Sale price” means the total amount of consideration for which personal property or services are sold, leased, or rented. "Purchase price" means the same as sales price.
    • "Consideration" includes cash, credit, property, and services.
    • Sales price also includes any charges by a seller for any services necessary to complete a sale.
      • This includes credit card processing or transaction fees on taxable sales.
      • A credit card processing fee does not fall under any of the exceptions to the definition of sales price. A credit card processing fee is included in the total amount of consideration paid for goods or services. Additionally, Iowa Admin. Rule 701-212.2 states: "[w]hen interest and other types of additional charges are added as a condition of a sale in order to obtain title rather than as a charge to obtain credit where title to goods has previously passed, such charges will be subject to tax even though they may be separately stated." The credit card fee is an additional charge to customers in order to receive the goods or services.
      • A credit card processing or transaction fee on a nontaxable sale is not itself subject to tax.
    • Excluded from a transaction’s sales price are certain charges:
      • Discounts
      • Interest, finance, or carrying charges
      • Other taxes
      • Charges for items that are separately contracted for, itemized on a receipt, and are not representative of a taxable sale, such as a delivery or installation service charge

    Sales of tangible personal property in Iowa are subject to sales tax unless exempted by state law.

    Sales of services are exempt from Iowa sales tax unless taxed by state law.

    The retailer must add the tax to the price and collect the tax from the purchaser. The retailer cannot indicate that the sales tax is being “absorbed.”

    A retailer may include the tax in the price, but must post a notice or make a statement on the invoice that the purchase price includes the sales tax. This is typically done when selling alcoholic beverages or admissions to movie theaters or sporting events.

    Sales tax is applied and due when the first use of taxable services occurs, or potentially could occur or when taxable goods are delivered, not when payment is received from the customer.

  • It is important to file the return and pay the tax by the due date to avoid penalty and interest. A return must be filed with zeros if a business does not have sales to report.

    File and Pay Online

    Iowa sales and use tax returns are filed electronically through GovConnectIowa. Learn more.

    Due Dates

    If a due date falls on a weekend, federal holiday, or legal holiday as defined in Iowa Code section 4.1(34), the taxpayer has until the following business day to file the return and remit payment to the Department. If filing on paper, the postmark date is accepted as the filing date.

    See Filing Frequencies and Return Due Dates.

  • When applying for a permit, a retailer estimates the amount of sales tax to be collected. Local option tax collections are not included in the amount. The filing frequency is based on the estimate.

    See Filing Frequencies and Return Due Dates.

    Changing the filing frequency

    The filing frequency may need to be changed if tax collections increase or decrease substantially over multiple filing periods. Retailers can request the change online or by using form 92-033, Request for Change, Correction or Cancellation of Tax Permit. In addition, the Department may change the filing frequency.

    Returns must be filed as usual until the filing frequency is changed. The change is usually effective at the beginning of the next year or quarter.

  • Goods Consumed (line 2)

    “Goods consumed” are items originally purchased tax free for resale or to be incorporated into a product for resale, but they were used in the course of business or for personal use instead. You are also allowed to include on this line occasional taxable purchases that you make where sales tax is not collected by your supplier. Normally these purchases would be reported on a consumer’s use tax return.


    A hair salon purchases bottles of shampoo to be sold out of a display case. The salon did not pay sales tax to its supplier since it intended to resell the shampoo. However, several bottles were used by the salon in the performance of their service. The shampoo that was used is goods consumed. The salon must report the price it paid to its supplier on the goods consumed line of the return and pay tax on it.


    A clothing store purchases suits tax free for resale. The owner of the store needs a new suit. The suit removed from inventory is goods consumed. The price the owner paid to the supplier must be reported, and the tax must be paid.

    Example (not goods consumed)

    A person who makes craft items to be sold at craft shows does not pay sales tax to suppliers for materials. These materials are incorporated into the craft items to be sold. They are not goods consumed and should not be reported on line 2.

    Exemptions (line 4)

    "Exemptions" are sales made by you on which tax was not required to be charged. Exemptions not the same as deductions on income tax returns. Business expenses are not included as exemptions on the sales/use tax return.

    The following should be included on line 1, gross sales, and then exempted on line 4 of the return.

    Interstate Commerce:

    Sales made where delivery occurred outside Iowa.

    New Construction:

    Sales of taxable services performed on or in connection with new construction, reconstruction, alteration, expansion, or remodeling of a building or structure. (This does not include sales to contractors who have a special “exempt entity” exemption certificate. These sales are shown in the “Other” category.)

    Industrial Machinery, Equipment, and Computers:

    Sales of exempt industrial machinery, equipment, and computers. This includes qualifying items used directly and primarily in a manufacturing process and computers used by a commercial enterprise.


    Sales of items that will be resold in their present form by the purchaser.


    Sales of items that will be incorporated into another item for resale by the purchaser.

    Residential Utility:

    Sales of metered gas, electricity, and fuel used as energy in residential dwellings. (You do not need exemption certificates to support this exemption.) Note: These sales are subject to local option tax.

    Sales Tax Holiday:

    Sales of qualifying clothing and footwear during the annual sales tax holiday. (You do not need exemption certificates to support this exemption.) The annual tax holiday is the first Friday and Saturday in August.


    Any exempt sales made during the period that do not fall into any of the previous categories. Keep a record of this category, including a brief description of the item.

    Local Option Sales Tax (LOST)

    Filers complete a separate section of the return to report local option sales tax. Everyone with sales reported on line 5 of the quarterly sales tax return must complete the Local Option / Sales Entry Schedule, even if no local option tax is due.

    See Q&A on completing the local option section of the return.

    Tax Included in the Price

    If sales tax is included in the selling price of the item or service, the tax needs to be backed out to arrive at the true gross receipts on line 1.

    If only the state sales tax of 6% applies, divide the gross receipts by 1.06 as shown in the example below. If a 1% local option tax applies, divide by 1.07.

    For example: A retailer includes the 6% sales tax in the price of all goods and services. In this example, assume local option sales tax does not apply. The taxable gross receipts are $17,250. Divide $17,250 by 1.06. The result - $16,273.58 - is the amount to be written on line 1 of the return.

  • If you fail to file a return on time or if you fail to pay the tax due, penalty or interest may apply .

    Interest accrues from the due date until paid. The interest accrues every calendar month or a fraction of the month. Interest rates change yearly.

  • Failure to post a bond when required may result in the revocation of an existing permit or denial of a permit application.


    The Department may require a bond of an applicant if:

    1. The applicant or an active officer of the corporation has held a previous permit and has an unfavorable filing and remittance record for prior tax obligations, or
    2. The applicant or an active officer of the corporation has held a previous permit and has experienced prior collection problems, or
    3. The Department has knowledge that the applicant may be financially unable to remit the tax by the date due.

    Existing Permit Holders

    Existing permit holders may be required to post a bond under the following conditions:

    • Quarterly Filers - two or more delinquencies in a 24-month period
    • Monthly Filers - four or more delinquencies in a 24-month period
    • Semimonthly Filers - eight or more delinquencies during a 24-month period
    • If the retailer has made recurring tax payments with returned checks

    Bond Amount

    When the Department requires a bond, the minimum amount is determined as follows:

    • Quarterly Filers: The bond equals the sales tax liability typically filed in three filing quarters.
    • Monthly Filers: The bond equals five months of sales tax liability.
    • Semimonthly Filers: The bond equals three months of sales tax liability.
    • Annual Filers: The bond equals one year of tax liability but no less than $100.

    The Department may require a larger amount if necessary. No bond is less than $100. The Department accepts cash, cashier’s checks, certificates of deposit, and surety bonds; personal checks are not accepted.

  • Records must include the normal books of account ordinarily maintained by a person engaged in business activity. This includes all bills, receipts, invoices, cash register tapes, or other documentation. These may be maintained in an electronic format.

    Records are required to be maintained for at least three years. In the event of an audit, the Department may request records for a longer period of time if returns have never been filed.

  • The Department may audit a return anytime within three years. However, the period for audit is unlimited if a return was filed falsely or fraudulently with the intent to evade tax, or if no return was filed.

    Permit holders have the right to contest an assessment, denial of a refund claim, or any other Department action, except licensing. Appeals must be filed with the Department’s hearing officer within 60 days of the assessment notice date or denial of the refund claim. If a proper appeal is not filed, the Department may either require a proper appeal or dismiss the appeal for failure to comply. If an appeal is not filed timely, the Department assumes that the permit holder does not oppose the assessment.

    See The Appeals Process.

  • A refund can be made only to the person who actually paid the tax, which in most cases is the customer.

    The customer may request a refund of tax paid in error on IA 843 Claim for Refund. Claims for refund should be filed with the Department within three years of the date the tax payment was due.

    Racks, Shelving and Conveyor Equipment

    Racks, shelving, and conveyor equipment purchased by certain warehouses and distribution centers may be eligible for a refund of the sales tax paid on their purchase price. Businesses approved under the New Jobs and Income Program (NJIP), the Enterprise Zone Program (EZ) and New Capital Investment Program (NCIP) may qualify for a sales tax refund. Contact the Iowa Economic Development Authority to determine if your warehouse or distribution center qualifies for a sales tax refund through one of these programs.  

  • A seller must obtain a properly completed Iowa Sales Tax Exemption Certificate from any purchaser claiming exemption from sales and use tax.

    Iowa Sales Tax Exemption Certificate, 31-014

  • Unless otherwise noted, the tax rate for all taxable items shown below is:

    • 6% state tax, plus
    • Local option tax, if applicable

    911 Surcharge


    • The surcharge for “enhanced” 911 emergency telephone service

    The surcharge can be no more than $1 per month per telephone access line.



    • Envelopes used primarily for advertising
    • Advertising and promotional materials, such as:
      • Seed catalogs
      • Brochures
      • Leaflets
      • Return envelopes, and
      • Other similar materials which are stored in Iowa before being sent for use out-of-state


    See Farmers Guide to Iowa Taxes (78-507)



    • Tax collected by the Iowa Department of Transportation at the time of registration in Iowa

    The purchase of an aircraft does not qualify for exemption as a “casual sale.”

    Tax Rate

    • 6% state use tax
    • NO local option sales tax


    • If registered out-of-state
    • Exempt only to aircraft used in Interstate Federal Aviation Administration certified air carrier operations:
      • Sale or rental of aircraft (scheduled operation only)
      • Sale or rental of any tangible personal property permanently affixed to any aircraft that is a component part of aircraft (scheduled or nonscheduled operations)
      • Rendering, furnishing, or performing of services in connection with repair, remodeling, or maintenance of aircraft (scheduled or nonscheduled operations)

    All-Terrain Vehicles (ATVs)


    • ATVs, including off-road vehicles and off-road motorcycles, if delivery is taken in Iowa or if purchased out-of-state for use in Iowa. ATVs do not qualify for exemption as a “casual sale.”

    If sold by an individual, the county will collect the tax upon registration.


    • ATVs used primarily in agricultural production. Prior to 7-1-15, ATVs were required to be directly and primarily used in agricultural production to qualify for exemption.

    American Indians

    See the Government Entities section below for additional information regarding sales to tribal governments.


    • Purchases by persons who are not American Indians where delivery takes place on the settlement or reservation and
    • Purchases by American Indians where delivery occurs off the settlement or reservation


    • Sales to American Indians where delivery occurs on the American Indian settlement or reservation

    Amusement / Tickets or Admissions


    • Places of amusement
    • Fairs
    • Athletic events
    • Amusement devices
    • Games of skill*
    • Games of chance*
    • Raffles*
    • Bingo games*
    • Card game tournaments*
    • Commercial amusement enterprises
    • Fees for participation in any game or other form of amusement
    • Musical devices
    • Weighing machines
    • Shooting galleries
    • Billiard and pool tables
    • Bowling alleys
    • Pinball machines
    • Slot-operated devices
    • Vending machines of all types
    • Devices or systems where prizes are awarded

    * A state gambling license may be required. Call the Iowa Department of Inspections and Appeals at 515-281-6848.


    • Athletic events of elementary and secondary schools
    • State and county fairs
    • Entry fees if the admission charge is subject to tax

    Athletic Fees / Facilities


    • Private club fees paid for participating in athletic sports, fitness centers, or commercial recreation - this generally includes any special assessments
    • Fees paid to cities and counties for participating in any athletic sport.

    Boat Sales

    Taxable if:

    • Delivery is taken in Iowa
    • Purchased out-of-state for use in Iowa

    A boat does not qualify for exemption as a “casual sale.”

    If sold by an individual, the county will collect the tax upon registration.

    Casual Sales


    • This exemption does not apply to vehicles subject to registration, ATVs, off-road motorcycles, off-road utility vehicles, aircraft, or watercraft.

    The Casual Sale Exemption Applies If:

    1. It is a sale of a nonrecurring nature, and
    2. The seller at the time of the sale is not engaged in selling goods or taxable services for profit; or if the seller is so engaged, the casual sale must be outside the regular course of business


    Two separate selling events outside the regular course of business within a 12-month period


    Three separate selling events within a 12-month period are considered recurring. Tax applies beginning with the third separate selling event.

    When a sale event is planned and occurs consistently over a span of years, the sale is recurring and not casual, even though only one sale event occurs each year.

    Outside the Regular Course of Business

    Sales of capital assets such as equipment, machinery, and furnishings are usually considered to be outside the regular course of business, and the casual sale exemption applies as long as the sales are nonrecurring.

    Selling Property Used in the Course of Business

    In addition to the casual sales exemption provisions mentioned above, when a retailer sells all or substantially all of the tangible personal property held or used in the course of business, the casual sale exemption also applies when the following circumstances exist:

    • The trade or business is transferred to another person(s), and
    • The transferee(s) engages in a similar trade or business.

    Services Performed by Students

    The casual sale exemption also applies when the following circumstances exist:

    • The owner of the business is the only person performing the services; and
    • The owner of the business is a full-time student; and
    • Total gross receipts from the services do not exceed $5,000 for a calendar year.

    Communication Service


    • Sale of intrastate communication
    • Prepaid telephone calling cards and prepaid authorization numbers
    • Intrastate fax services
    • Services of transmitting messages, night letters, day letters, and all other messages of similar nature
    • Sales from coin-operated telephones
    • Telegrams and similar charges
    • Charges for directory assistance if the service is intrastate


    • Sale of interstate communication

    Computers and Software


    • Computer hardware (see also exempt section below)
    • Software delivered in physical or digital form
    • Services arising from or related to installing, maintaining, servicing, repairing, operating, upgrading, or enhancing specified digital products
    • Software as a service


    • Computers and computer peripherals used by a manufacturer, or in the processing or storage of data or information by an insurance company, financial institution, or commercial enterprise

    See Tax Guidance as it relates to computers

    Conditional Sales / Installment Sales

    A conditional sales contract allows the purchaser to use the item purchased, but title to the property does not pass to the buyer until a condition has been met – usually full payment of the purchase price. Therefore, an installment sale is a conditional sales contract.


    • The full contract price at the time the purchaser takes delivery of the property


    • Interest and finance charges when separately stated and reasonable in amount
    • The periodic payments made under the contract

    Conference and Banquet Rooms


    • The rental of conference rooms and banquet rooms are exempt from state tax, local option tax, and local hotel and motel tax.

    Construction Contractors

    See Iowa Contractors Guide (78-527)

    Construction Contracts with Designated Exempt Entities

    See Construction Contracts with Designated Exempt Entities


    Exempt when:

    (1) sold to retailers or manufacturers for the purpose of packaging or facilitating the transportation of tangible personal property sold at retail or to further transfer the property to the customer in association with the maintenance or repair of fabric or clothing, or

    (2) sold to be used directly and primarily in agricultural, livestock, or dairy production:

    • Containers
    • Labels
    • Cartons
    • Pallets
    • Packing cases
    • Wrapping paper
    • Twine
    • Bags
    • Bottles
    • Shipping cases, and
    • Other similar articles

    Coupon Books and Gift Certificates/Cards


    • Tax is due at the time the coupon or certificate is redeemed by the customer


    • Coupon books and gift certificates are exempt from tax at the time they are purchased

    Credit card fees

    A credit card processing or transaction fee is subject to tax when charged on taxable sales. For further discussion, see the “sales price” section above.

    Discounts, Rebates and Coupons

    See Iowa Sales Tax on Discounts, Rebates, and Coupons (78-628)

    Finance Charges


    • Finance charges included in the selling price as a condition of sale


    • Interest or other types of charges that result from selling on credit or under installment contracts if separately stated and reasonable in amount



    • Orders taken by an Iowa florist and communicated to a second florist in Iowa

    The “sending florist” is responsible for collecting the tax.


    • Orders taken by an Iowa florist and communicated to a second florist located outside Iowa for delivery to a point outside Iowa


    See Iowa Sales Tax on Food (78-516)

    Freight, Shipping, and Handling Charges


    • Inbound freight or freight-in charges do not fall within the definition of delivery charges, and are taxable when added to the price of a taxable retail sale. An example of when “freight-in” charges might appear is a situation where a purchaser wishes to buy a product from a retailer, but that retailer doesn't have the item in stock and must order the product. If the retailer prices the product at a certain amount, plus the shipping costs associated with obtaining the product by ordering from their supplier, those associated costs (freight-in) are not exempt delivery charges even if separately stated. These charges reflect the costs a seller may incur to secure possession of the product from their supplier. Exempt delivery charges constitute the costs necessary to transfer the product from the seller to the purchaser.


    • If separately invoiced or separately stated on the bill



    • Dyed diesel, unless used for agricultural production or other exempt purpose
    • LPG (propane), unless used for manufacturing or other exempt purpose or to power a registered vehicle


    • Clear diesel and other motor fuel and special fuel if:
      1. The fuel is consumed for highway use, in watercraft, or in aircraft,
      2. The Iowa fuel tax has been imposed and paid, and
      3. No refund or credit of fuel tax has been made or will be allowed


    A state gambling license may be required. Call the Iowa Department of Inspections and Appeals at 515-281-6848.

    See Iowa Tax on Gambling

    Gifts by Retailer


    • Tangible personal property purchased exempt from tax for the purpose of resale and later given away or donated

    The retailer includes the purchase price of the item under “goods consumed” on the sales tax quarterly return.

    Government Entities


    • Sales to any municipally-owned public utility engaged in selling gas, electricity, or heat to the general public
    • Sales made by the State of Iowa
    • Sales of utilities and fees for participating in athletic sports made by a county or city


    • Sales to the federal government
    • Sales to a tribal government, defined by Iowa Code section 216A.161 as “the governing body of a federally recognized Indian tribe.”
    • Sales to any tax-certifying or tax-levying body of the State of Iowa, or governmental subdivision, including:Sales by a county or city – except for utilities and fees charged for participating in athletic sports
      • State Board of Regents
      • State Department of Human Services
      • State Department of Public Health
      • State Department of Transportation
      • Any municipally-owned solid waste facility which sells all or part of its processed waste as fuel to a municipally-owned public utility
      • Regional transit systems, and
      • All divisions, boards, commissions, agencies, or instrumentalities of state, federal, tribal, county or municipal government which have no earnings going to the benefit of an equity investor or stockholder

    See Iowa Tax Responsibilities of Cities and Counties (78-526)

    See Construction Contracts with Designated Exempt Entities

    Gratuities / Tips


    gratuities that are mandatory charges and automatically added to the bill


    gratuities given voluntarily by the customer



    • Heating or cooling office space
    • Repair labor


    If used to produce flowering, ornamental or vegetable plants in commercial greenhouses or other places for sale:

    • Fuel used for heating or cooling of production areas
    • Electricity used in production
    • Machinery and equipment used directly and primarily in production
    • Auxiliary attachments
    • Replacement or repair parts
    • Water used for production



    • Internet sales of taxable goods delivered in Iowa
    • Items delivered to the purchaser electronically or digitally


    • Internet access fees

    Interstate Commerce


    delivery to a buyer in Iowa or the buyer’s agent (other than a common carrier) in Iowa

    Exempt under certain circumstances:

    • Services performed on property delivered into interstate commerce, and
    • Tangible personal property delivered into interstate commerce

    Delivery into interstate commerce is made when the seller uses his or her own vehicles to deliver the goods out of Iowa or directly assigns goods to a common carrier for shipment out of Iowa.

    Janitorial / Building Maintenance / Cleaning Services


    Janitorial / Building Maintenance / Cleaning Services are taxable.


    Services performed in a private residence, including an apartment or multiple housing unit, and the person paying for the services is an occupant of the residence.



    laundering, dry cleaning, pressing, and dyeing


    the use of self-pay washers and dryers

    Layaway Sales


    taxable products purchased on layaway

    Tax is reported during the period in which delivery of the layaway occurs, usually when the final payment has been made.

    Lease and Rental


    • Equipment and tangible personal property
    • Receipts from the rental of certain motor vehicles subject to registration with a gross weight of 13 tons or less when the lease or rental contract is for a period of 60 days or less
    • Recreational vehicles
    • Lease or rental of film, tapes, discs, records, and other media to the ultimate user, unless the ultimate user will be broadcasting it to the public

    Tax Rate

    • 6% state tax, plus
    • Local option tax, if any, plus
    • Automobile rental tax, when applicable


    • Tangible personal property purchased for leasing
    • Film, tapes, discs, records, and other media which can be seen, heard, or read if the sale is to a person regularly engaged in the leasing or renting of these items


    See Iowa Hotel and Motel Tax Guidance.

    Manufacturing and Processing

    The Department maintains an in-depth guide to sales and use tax on manufacturing and processing. Please see that guide for more information.


    Exempt for human use and consumption:

    • Certain medical devices when sold or rented to the ultimate user
    • Oxygen equipment and oxygen; prescriptions not required
    • Insulin, hypodermic syringes, and diabetic testing materials
    • Prescription drugs dispensed by a registered pharmacist or licensed physician, surgeon, dentist, or podiatrist

    See Medical Clinics and Related Businesses - Iowa Sales and Use Tax Information. (78-609)



    • Newspapers
    • Free newspapers
    • Shoppers’ guides

    Nonprofit Organizations


    Tangible personal property or services purchased and used by churches and most other nonprofit organizations


    • Sales to any Iowa private nonprofit educational institution used for educational purposes
    • Sales to nonprofit hospitals (licensed under Iowa Code chapter 135B) for use in the operation of the hospital
    • Sales to nonprofit hospices
    • Sales to nonprofit private museums
    • Sales of building materials to Habitat for Humanity in Iowa
    • Proceeds from fundraising activities that are used for educational, religious, or charitable purposes if the profits from the sales are used by or donated to one of the following:
      • An entity that is exempt from federal income tax under Internal Revenue Code section 501(c)(3);
      • A government entity (including public schools); or
      • A private nonprofit educational institution

    See Iowa Tax Issues for Nonprofit Entities, which includes the full list of nonprofit entities that qualify for exemption.

    See Construction Contracts with Designated Exempt Entities

    Optional Warranty Contracts


    • Optional service or warranty contracts that furnish taxable labor or materials
    • Computer software maintenance contracts that provide the taxable transfer of tangible personal property
    • Additional charges for parts and taxable labor in addition to that covered by a warranty or maintenance contract – only parts and not labor will be subject to tax where a nontaxable service is performed if the labor charge is separately stated

    Partially Taxable:

    computer software maintenance contracts that provide technical support services and the taxable transfer of tangible personal property, and no separate fee is stated for either the performance of the service or the transfer of the property, then tax is imposed on 50% of the sales price of the contract


    • Residential warranty contracts
    • Computer software maintenance contracts that provide technical support services only and do not provide any materials
    • Preventive maintenance contracts which require only the visual inspection of equipment and no repair is included

    Portable Toilet Rentals and Servicing


    The rental of a portable toilet is the sale of tangible personal property, the sales price of which is subject to sales tax.

    Waste removal exempt if separately itemized:

    When a portable toilet rental company also sells waste removal services and itemizes that service separately on an invoice, the waste removal service is not subject to tax: sewage sludge is excluded from the definition of “solid waste,” the removal of which is otherwise taxable under Iowa Code section 423.2(7). However, if the rental company does not separately itemize the waste removal service and the portable toilet rental in a contract to provide such products and services, the entire sales price is taxable as a bundled transaction under Iowa Code section 423.2(8).

    Printers and Publishers


    Sales and rentals to printers and publishers of numerous supplies used to complete a finished printed product for retail sale.


    Exempt if purchased by the sponsor:

    Tangible personal property to be given as a prize to a player in games of skill, chance, bingo, or raffle



    Electricity or steam or any taxable service purchased and used in the actual processing of tangible personal property intended to be ultimately sold at retail

    Tangible personal property sold for processing when it:

    • By means of fabrication, compounding, manufacturing, or germination becomes an integral part of other tangible personal property intended to be ultimately sold at retail.
    • Is a chemical, solvent, sorbent, or reagent, which is directly used and consumed, dissipated, or depleted in processing tangible personal property intended to be sold ultimately at retail, even if it does not become a component or integral part of the finished product. Similar items are also exempt when consumed in the maintenance or repair of fabric or clothing.
    • Is consumed as fuel in creating heat, power, or steam for processing, including grain drying, in maintenance of the quality of the product being manufactured, for providing heat or cooling for livestock buildings or for generating electric current, or consumed in self-propelled implements of husbandry engaged in agricultural production, such as fuel used in a farm tractor used to plant corn



    Taxable services performed on railroad rolling stock


    • Personal property used or to be used as railroad rolling stock or as materials or parts thereof
      • Locomotives
      • Railroad cars
      • Maintenance–of–way equipment which is used to transport persons or property

      Fuel and lubricants used in railroad rolling stock



    rent-to-own contracts are taxable as conditional / installment sales



    tangible personal property and services purchased for resale

    The purchaser should provide the seller a properly completed Sales Tax Exemption Certificate.

    Resale of tangible personal property

    Tangible personal property is for resale when sold to retailers, wholesalers, jobbers, or any person who is not the ultimate user or consumer of the property and who holds the property for the purpose of selling it to another.

    Resale of a service

    An example of a service sold for resale is when an auto repair shop subcontracts a job to another auto repair shop.

    Resale of property connected with a service

    Property that is resold in connection with a service is exempt when all of the following occur:

    1. The provider and the user of the service intend that a sale of property will occur, and
    2. The property is transferred to the user in a form or quantity which is capable of any fixed or definite price value and is actually sold to the customer in conjunction with the performance of the service, or the property is entirely consumed in connection with the performance of an auto body repair service purchased by the ultimate user, and
    3. The charge for the property is listed separately on the bill, unless the property is entirely consumed in connection with the performance of an auto body repair service purchased by the ultimate user.


    1. An investment counselor purchases envelopes. These envelopes are used to send out monthly reports to the investment counselor’s clients regarding their accounts. Tax is due at the time the investment counselor purchases the envelopes if the clients are not billed for these items. Each envelope is transferred to a client in a form or quantity which is capable of a fixed or definite price value. However, there must also be an actual sale to the client (customer) of an item of personal property in order that there be a “resale” of the item.
    2. A jeweler purchases materials such as main springs and crystals to be used in the performance of a service. These items are purchased by the jeweler for resale where they are transferred to the customer in a form or quantity capable of a fixed or definite price value and each item is actually sold to the customer as evidenced by a separate charge.
    3. An accounting firm purchases plastic binders used to cover reports issued to its customers. The firm must pay sales tax on the binders when purchasing them since they are not being sold to their customers.




    • Sales of services are not subject to Iowa sales tax unless specifically taxed by state law.
    • Services performed on or in connection with new construction, reconstruction, alteration, expansion, or remodeling of a building or structure
    • Services used in reconditioning or repairing tangible personal property normally sold in the regular course of the retailer’s business and which is held for sale by the retailer

    Snowmobiles and Watercraft


    • If delivery is taken in Iowa
    • If purchased out-of-state for use in Iowa

    Snowmobiles and watercraft do not qualify for exemption as “casual sales.”

    If sold by an individual, the county will collect the tax upon registration.

    Solar Energy Equipment


    • Iowa law allows an exemption from sales tax for the sale of “solar energy equipment.” Iowa Code section 423.3(90) defines solar energy equipment as “equipment that is primarily used to collect and convert incident solar radiation into thermal, mechanical, or electrical energy or equipment that is primarily used to transform such converted solar energy to a storage point or to a point of use.” This includes but is not limited to panels, inverters, solar roof tiles or shingles, and energy transmission devices. It does not include a battery or other storage point, equipment used for safety or security of the equipment such as fencing, or equipment not used to collect, convert, or transmit solar energy. It also does not include materials used to manufacture, install, or construct solar energy equipment, such as racking to install or mount solar energy equipment or pads or foundations to support a solar energy equipment installation.

      While not defined in this exemption, the Department typically interprets “primary use” as requiring equipment be used in the prescribed manner for more than half of its use. This will likely not be an issue for this exemption since once the equipment is installed, it is likely not used for any other purpose.

      There are no limitations or qualifications for the type of purchaser claiming an exemption for the purchase of solar energy equipment.

    Tangible Personal Property


    unless a specific exemption has been written into the law


    Trade-ins may reduce the taxable price of a transaction when:

    • Tangible personal property is traded toward the purchase price of other tangible personal property and
    • The trade-in is the type of item that is sold in the retailer’s regular course of business and
    • The item traded-in is to be ultimately sold at retail.

    Transportation Services


    • Armored car services
    • Personal transportation services, including:
      • Taxis
      • Driver services
      • Ride sharing services
      • Rides for hire
      • Limousine services
      • Bus services
      • Shuttle services
    • Certain car and airplane rentals

    Tax Rate

    • 6% state tax, plus
    • Local option tax, if any, plus
    • Automobile rental tax, when applicable


    • Airline
    • Railroad

    For more information about personal transportation service, see additional guidance.


    Generally, the sales, furnishing, or service of gas, electricity, water, heat, pay television and communication services, including the sale of these items by municipal corporations, are taxable.

    Residential Energy

    • Exempt from state sales tax
    • Local option tax, if any, applies

    Sewage / Solid Waste and Disposal Services

    Taxable when billed to nonresidential commercial operations.

    Vending Machines and Other Coin-Operated Devices


    • Candy, candy-coated items, candy products, and
    • Certain beverages

    An operator who places vending or other coin-operated machines in different locations needs only one permit. This could be a sales tax permit for in-state retailers or a retailer’s use tax permit for out-of-state retailers.

    Tax Rate applied at location of machine

    • 6% state tax, plus
    • Local option tax, if any

    Wind Energy Conversion


    materials used to manufacture, install, or construct property used to convert wind energy to electrical energy

  • (updated 3/3/22)

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