Iowa Sales Tax on Services, Installation, etc Iowa: Sales Tax Handbook

Iowa:

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.

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.

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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.

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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.

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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.

Category Exemption Status
Amazon Purchases
Products on Amazon.com TAXABLE
Clothing
General Clothing TAXABLE
Food and Meals
Catering TAXABLE *
Grocery Food EXEMPT
Leases and Rentals
Motor Vehicles TAXABLE *
Tangible Media Property TAXABLE
Manufacturing and Machinery
Machinery EXEMPT
Raw Materials EXEMPT
Utilities & Fuel EXEMPT
Medical Goods and Services
Medical Devices EXEMPT *
Medical Services EXEMPT
Medicines TAXABLE
Newspapers and Magazines
Newspapers EXEMPT
Periodicals TAXABLE
Occasional Sales
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 *
Services
Janitorial Services 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 *
Digital Products EXEMPT
Trade-Ins
General Trade-Ins EXEMPT
Vending Machine Sales
Food TAXABLE *
Merchandise TAXABLE

* See notes in category taxability page for details



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