Summary of Taxation of Room Rentals
Hotels and Motels –
State Excise Tax, Local Hotel / Motel 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
Prior to 7-1-08: Contracts made directly with Iowa state / local governmental entities and schools were exempt from the 5% state excise tax (previously sales tax) on room rental, but were not exempt from the local hotel / motel tax.
From 7-1-08 to 6-30-09: Contracts made directly with Iowa state / local governmental entities and schools are exempt from both the 5 percent state excise and local hotel / motel taxes.
Beginning 7-1-09: 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
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.
Also exempt from state excise and local hotel / motel taxes during all periods
- Room rental contracts for periods of more than 31 consecutive days. To qualify for this exemption, the renter must contract to rent for a single period of more than 31 days and cannot accumulate these days.
- Renting of sleeping rooms in dormitories and in memorial unions 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.
All conference and banquet room rental is exempt from the following Iowa taxes:
- 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.