Iowa: Sales Tax Handbook
What purchases are taxable in Iowa?
The taxability of various transactions (like services and shipping) can vary from state to state, as do policies on subjects such as whether excise taxes or installation fees included in the purchase price are also subject sales tax. This reference is here to help answer your questions about what is and is not subject to the Iowa sales tax.
Contents1.) Taxability of Goods and Services
- General Iowa taxability guidelines
- Are services subject to sales tax?
- Is shipping & handling subject to sales tax?
- Are drop shipped items taxable?
Section 1: Taxability of Goods and Services
What transactions are generally subject to sales tax in Iowa?
Iowa requires tax to be collected on the sale of all "tangible goods". The sale of personal property is also taxable in Iowa. Furthermore, automobile rentals and leases as well as hotel and motel rooms are also taxable. Counties in Iowa have the option to impose a local tax.
Are services subject to sales tax in Iowa?
If your business is part of the service industry, you have no tax obligation in the state of Iowa. However, it is important to note that any business in the service industry that creates or builds a tangible product will be required to pay sales tax. If your business is totally committed to only services, you have not tax requirements; however, if there is a product that is a direct result of a service, you have a tax obligation to Iowa.
You can find a table describing the taxability of common types of services later on this page.Top
Are shipping & handling subject to sales tax in Iowa?
Iowa's tax rules regarding the taxation of shipping is relatively straight forward. If shipping is stated separately on the bill, as its own line item, it is not taxable. However, if shipping is included in the price of the item, it is subject to the sales tax. If both taxable and non-taxable items are being shipped together, the percentage of the shipping charge that relates to the taxable items must be taxed.Top
Are drop shipments subject to sales tax in Iowa?
"Drop shipping" refers to the common business practice in which a vendor, often in a different state, makes a sale of a product which is shipped to the end-user by a third party supplier hired by the initial vendor. In Iowa, drop shipments may or may not be subject to taxation depending on the circumstances.
Section 2: Taxability of Various Items in Iowa
This table shows the taxability of various goods and services in Iowa. If you are interested in the sales tax on vehicle sales, see the car sales tax page instead. Scroll to view the full table, and click any category for more details.
|Products on Amazon.com||TAXABLE *|
|Food and Meals|
|Leases and Rentals|
|Motor Vehicles||TAXABLE *|
|Tangible Media Property||TAXABLE|
|Manufacturing and Machinery|
|Utilities & Fuel||EXEMPT|
|Medical Goods and Services|
|Medical Devices||EXEMPT *|
|Newspapers and Magazines|
|General Occasional Sales||EXEMPT *|
|Motor Vehicles||TAXABLE *|
|Optional Maintenance Contracts|
|General Optional Maintenance Contracts||TAXABLE|
|Parts Purchased for Use in Performing Service Under Optional Maintenance Contracts||EXEMPT|
|Pollution Control Equipment|
|General Pollution Control Equipment||TAXABLE *|
|Transportation Services||EXEMPT *|
|Software and Digital Products|
|Canned Software - Delivered on Tangible Media||TAXABLE|
|Canned Software - Downloaded||EXEMPT|
|Custom Software - Delivered on Tangible Media||EXEMPT *|
|Custom Software - Downloaded||EXEMPT|
|Customization of Canned Software||TAXABLE *|
|Vending Machine Sales|
* See notes in category taxability page for details
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