You Shop, You Pay in Iowa
- Dec 27, 2012 | Gail Cole
The Iowa Department of Revenue reminds Iowa taxpayers of their obligation to pay the state's 6% consumer use tax on items purchased outside Iowa or remotely through mail-order catalogs, internet retailers, television shopping programs, or toll-free 800 numbers. Consumer use tax can apply to both individuals and businesses.
If your holiday shopping included a trip out of state and your purchases were charged less than Iowa's 6% tax rate, you may owe consumer use tax on those purchases. For example, neighboring Missouri has a general state sales tax rate of 4.225%. Local taxes can significantly raise that rate, but it all depends on where you shop.
Purchases made via catalog or through online retailers may not have been charged sales tax. Amazon.com, for example, does not collect sales tax on most sales made in Iowa. You may owe Iowa's consumer use tax on those purchases.
Use tax exists in order to maintain fair competition with out-of-state businesses. It was enacted in Iowa in 1937, just three years after the enactment of the state's sales tax, in large part so that Iowa taxpayers would not drive out of state to shop. The advent of mail-order and internet shopping has made avoiding sales tax easier.
The Iowa DOR reminds that "[u]se tax protects Iowa businesses from unfair competition by ensuring tax will be paid even if an out-of-state seller is not required to collect it from the purchaser."