Iowa: Sales Tax Handbook
What constitutes sales tax nexus in Iowa?
One of the more complicated aspects of Iowa sales tax law is sales tax nexus, the determination of whether a particular sale took place within the taxation jurisdiction of Iowa, and is thus subject to state (and possibly local) sales taxes.
If a vendor's transactions are determined to have nexus in Iowa, the vendor must register for a Iowa sales tax license and collect appropriate sales taxes from the buyer for all transactions with nexus in the state. On this page, we have compiled some of the most commonly needed facts about what constitutes sales tax nexus in Iowa.
Sales Tax Nexus in Iowa
The state of Iowa deems you obligated to pay sales tax if you sell tangible personal property or taxable services wiyhin the stateÂ. Tangible personal property and taxable services can be defined using five parameters:
1. A place of business--this can include an office, warehouse, or distribution house
2. A temporary or permanent employee
3. An installation of any property sold in Iowa
4. A contractor who completes a job in the state
5. A regular delivery route within state lines
Your business must only fall within the guidelines of one, not all of these parameters to be considered required to pay sales tax in the state of Iowa.
For additional details on sales tax nexus law in Iowa, see the nexus information page from the Department of Revenue at https://www.legis.iowa.gov/docs/ACO/IAC/LINC/12-03-1997.Rule.701.30.1.pdf
Taxation of Internet-Based Sales in Iowa
NOTE: 2018 Supreme Court Ruling Regarding Online Sales Taxes
In the 2018 Supreme Court case South Dakota vs. Wayfair Inc, Et Al., the court overturned a previous ruling that required a merchant to have physical nexus in order for a state to collect sales tax. This means that any state is now free to enforce collection of sales taxes on out-of-state online merchants. The information provided here may be subject to change, and many states are expected to begin collecting online sales taxes following this ruling.
Generally, Iowa does not charge sales tax on Internet-based transactions determined to have nexus within the state. This means that purchases from Amazon.com and other Internet-based retailers may be sales-tax-free.
The nexus status and taxability of Internet-based sales, by vendors and/or consumers within Iowa, have been the subject of hot debate in recent years. You can learn more on our introduction to Internet-based sales taxes.
Does my business have tax nexus in Iowa?
The folks at the sales tax compliance company Avalara are an approved Iowa sales tax partner, and you can use their free Iowa nexus wizard tool to determine whether or not your business has nexus, and is therefore required to pay Iowa sales taxes. If you're interested in automating your sales tax collection and filing process, click here to get more information.
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