This is intended as a general guide, and is not an all-inclusive discussion of Iowa sales and use tax law. Iowa law imposes both a sales tax and a use tax. There is no local option use tax.
Both sales tax and use tax are applied to the sales price from sales of tangible personal property, specified digital products, and taxable services. The difference between the two taxes is the circumstances under which the taxes are imposed. Sales tax is imposed on the sales price of the sale of tangible personal property, specified digital products, or taxable services at the time the sale takes place. The seller of the goods or services is responsible for collecting, reporting, and remitting the sales tax.
The tax is imposed when the first use of a service occurs, or potentially could occur, in Iowa, or when the tangible personal property or specified digital product is delivered in Iowa. Use tax is most often imposed after the sale takes place and only on goods and services on which sales tax was not collected. In many cases, these are purchases made from an out-of-state supplier not collecting Iowa sales tax on goods or services that are for use in Iowa. Ordinarily, the retailer is responsible for collection of the tax, but if the retailer is not required by law to collect the tax or the retailer fails to do so, the purchaser is then responsible for remitting use tax.
The purchaser becomes responsible for remitting use tax when the purchaser takes ownership or control of the good or service. Anyone β individuals and businesses β who makes these types of purchases is required to pay use tax. Businesses should review all purchases to determine if the vendor collected the proper tax.
Businesses that fail to do so may find themselves with a use tax liability, plus penalty and interest, for not reporting the use tax in a timely manner.
