Iowa Sales Tax Exemptions / Tax Free Items Iowa: Sales Tax Handbook

Iowa:

What purchases are exempt from the Iowa sales tax?

While the Iowa sales tax of 6.00% applies to most transactions, there are certain items that may be exempt from taxation. This page discusses various sales tax exemptions in Iowa.

Sales Tax Exemptions in Iowa

In Iowa, certain items may be exempt from the sales tax to all consumers, not just tax-exempt purchasers.

Any items which are used in the construction and agriculture are considered to be exempt. In addition, any equipment which is used for farming or for building does not require a sales tax to be levied. Items used for advertising such as envelopes and promotional materials are not considered to be subject to tax fees.

Many states have special, lowered sales tax rates for certain types of staple goods - such as groceries, clothing and medicines. Restaurant meals may also have a special sales tax rate. Here are the special category rates for Iowa:


Clothing

  6.%

Groceries

  EXEMPT

Prepared Food

  6.%

Prescription Drugs

  EXEMPT

OTC Drugs

  6.%

These categories may have some further qualifications before the special rate applies, such as a price cap on clothing items. Groceries are generally defined as "unprepared food", while pre-prepared food may be subject to the restaurant food tax rate.

Candy and soda may be included or excluded from any preferential tax rate depending on whether or not the state considers them to be a "grocery":


Is candy taxable in Iowa? Candy is NOT considered a grocery in Iowa
Is soda taxable in Iowa? Soda is NOT considered a grocery in Iowa

Are services, shipping, installation, etc taxable in Iowa?

The taxability of transactions involving services, shipping, and installation of tangible goods can be slightly complicated with various laws applying to slightly different situations. To learn more about how these transactions, and other more complicated situations, are subject to the Iowa sales tax see the Iowa sales taxability FAQ page.


Other tax-exempt items in Iowa

This table lists a number of additional categories of goods and services that are exempt from Iowa's sales tax. For a list that also shows taxable items, see the list of taxable and nontaxable items in Iowa.

Category Exemption Status
Food and Meals
Grocery Food EXEMPT
Manufacturing and Machinery
Machinery EXEMPT
Raw Materials EXEMPT
Utilities & Fuel EXEMPT
Medical Goods and Services
Medical Devices EXEMPT *
Medical Services EXEMPT
Newspapers and Magazines
Newspapers EXEMPT
Occasional Sales
General Occasional Sales EXEMPT *
Optional Maintenance Contracts
Parts Purchased for Use in Performing Service Under Optional Maintenance Contracts EXEMPT
Services
Transportation Services EXEMPT *
Software and Digital Products
Canned Software - Downloaded EXEMPT
Custom Software - Delivered on Tangible Media EXEMPT *
Custom Software - Downloaded EXEMPT
Digital Products EXEMPT
Trade-Ins
General Trade-Ins EXEMPT

* See notes in category taxability page for details



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Source: http://www.salestaxhandbook.com/iowa/sales-tax-exemptions