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Remote Sellers

On May 30, 2018, Iowa Governor Kim Reynolds signed Senate File 2417 (SF 2417), an extensive state tax reform bill to improve the tax structure in Iowa. This law modernizes and expands the types of businesses required to collect Iowa sales tax and local option sales tax. 

Effective January 1, 2019 marketplace facilitators and remote sellers that exceed a certain amount of revenue or transactions must charge Iowa sales tax, including local option sales tax, the same as retailers with a physical presence in Iowa.

What is a retailer with a physical presence in Iowa?

Generally, a retailer with a physical presence in Iowa is any retailer that has any permanent or temporary place of business, employee or other representative, or property located in Iowa. A retailer with a physical presence in Iowa generally includes retailers required to collect Iowa sales tax prior to Iowa’s tax reform law and the United States Supreme Court’s decision in Wayfair v. South Dakota. Common examples are retailers that have a store in Iowa, send sales representatives to Iowa, or set up a temporary booth to sell items at fairs or trade shows in Iowa. 

What is a remote seller?

Generally, a remote seller is someone that makes retail sales of tangible personal property, services, or specified digital products into Iowa, but does not have a physical presence in Iowa. A remote seller may make sales into Iowa through in a variety of ways including by phone, catalog, or website.

Small Remote Seller Exception

Iowa’s new tax reform law includes a small remote seller exception. Remote sellers must collect Iowa sales tax only if the remote seller:

This small remote seller exception does not apply to retailers with a physical presence in Iowa. Retailers that have or establish a physical presence in Iowa must register for an Iowa sales tax permit and collect Iowa sales tax and applicable local option sales tax, even if their sales volume falls below the threshold of the small remote seller exception.

How does a remote seller know if they are required to collect Iowa sales tax?

Remote sellers that made retail sales of tangible personal property, services, or specified digital products into Iowa in calendar year 2018 that exceed the small remote seller exception should begin collecting Iowa sales tax and any applicable local option sales tax, on January 1, 2019. 

Sellers that make Iowa sales on a marketplace, such as a consignment store, auction, or online marketplace should see the Department's marketplace facilitators guidance. Sellers that only sell products on a marketplace may not need to collect and remit Iowa sales tax. 

How is the Small Remote Seller Exception Computed? 

Iowa’s remote seller law goes into effect January 1, 2019. A remote seller is required to collect and remit Iowa sales tax and applicable local option sales tax starting January 1, 2019 if their 2018 calendar year sales exceeded the small remote seller exception. 

Examples:

Gross revenue of $100,000 or more from Iowa sales during 2018. Seller A is a remote seller that makes retail sales of clothing delivered into Iowa. Seller A has never had a physical presence in Iowa. During calendar year 2018, Seller A received $150,000 in gross revenue from sales of clothing delivered into Iowa. Because Seller A has received $100,000 or more in gross revenue from Iowa sales during calendar year 2018, Seller A must begin collecting Iowa sales tax on January 1, 2019.

Iowa sales in 200 or more separate transactions. Seller B is a remote seller that makes retail sales of sporting goods that are delivered into Iowa. Seller B has never had a physical presence in Iowa. During calendar year 2018, Seller B made 300 separate sales transactions of sporting goods delivered to purchasers located in Iowa. Because Seller B made 200 or more separate sales transactions into Iowa in calendar year 2018, Seller B must begin collecting Iowa sales tax and applicable local option sales tax on January 1, 2019.

What if a Remote Seller Exceeds the Small Remote Sellers Exception for the First Time on or after January 1, 2019?

Many small or newer sellers may not exceed the small remote seller exception until sometime after January 1, 2019. If a remote seller is not already registered to collect Iowa sales tax and exceeds the small remote seller exception for the first time on or after January 1, 2019, the remote seller:

  • should register for an Iowa sales tax permit as soon as it exceeds the small remote seller exception.
  • must collect Iowa sales tax and applicable local option sales tax starting on the first day of the next calendar month that starts at least 30 days from the day the remote seller first exceeded the small remote seller exception. The Department will not hold the remote seller liable for sales tax it did not collect prior to this date.
  • should review the Department's marketplace facilitators guidance if they make sales through a marketplace. 

Iowa consumers will still owe use tax on all taxable purchases made from remote sellers that do not collect Iowa sales tax.

Business Permit Registration

Retailers required to collect sales tax in Iowa must register for a sales tax permit by January 1, 2019. Iowa is one of over 20 states that belong to the Streamlined Sales and Use Tax Agreement. Retailers can register for a sales tax permit in all participating states by completing just one short and simple online application through the Streamlined Sales Tax Registration System. Retailers may choose to register for an Iowa sales tax permit directly with the Iowa Department of Revenue through the Business Tax Registration System

What if a seller sells through a marketplace? 

The Iowa tax reform bill also requires marketplace facilitators to collect Iowa sales tax and applicable local option sales tax on behalf of sellers using their marketplace. Marketplace sellers should review the Department’s marketplace facilitators guidance. Marketplace sellers may not need to register or collect on their own. Or, marketplace sellers may only need to collect Iowa sales tax and applicable local option sales tax on sales they make directly, rather than through a marketplace. Marketplace sellers should review the Department's guidance and contact their marketplace to determine whether the marketplace seller needs to register for an Iowa sales tax permit and collect Iowa sales tax on sales made through the marketplace. 

Definitions

Iowa sales: All retail sales (whether taxable or exempt) and other sales (i.e., wholesale, sale for resale, etc.) of tangible personal property, services, or specified digital products sold into Iowa or for delivery into Iowa. Iowa sales includes all sales made by a remote seller by any means, including sales made through a marketplace.

Gross revenue: The total revenue a retailer generates from Iowa sales.

Separate transactions: Each invoice generated from an Iowa sale is considered a separate transaction. For example, an invoice that has multiple products is considered one transaction. For leases, rentals, and subscriptions, each required periodic payment is a separate transaction. A deposit made in advance of a sale is not a separate transaction.