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Iowans Call for Internet Sales Tax

  • Feb 5, 2016 | Gail Cole

 Iowa: Is there a way to tax remote sellers?

Expanded sales and use tax nexus provisions took effect in Iowa on June 11, 2013. Have they helped level the playing field between brick-and-mortar retailers located in Iowa and out-of-state retailers selling to Iowa residents?

Not according to the executive vice president of the Shenandoah Chamber and Industry Association. During a recent legislative coffee, Gregg Connell called for an “Amazon law” that would require Amazon and other Internet sellers to collect and remit Iowa sales tax. He said he’d like to see Iowa join the more than two dozen states that mandate sales tax collection from retailers like Amazon. He’s tired of the 7% sales tax break given to Jeff Bezos (Amazon’s CEO) and similar remote sellers.

Expanded nexus

A business has to have nexus with a state in order to have to collect and remit sales tax. Historically, nexus has been based on physical presence.

Nexus provisions were expanded in Iowa in 2013 under H.F. 625, whereby a retailer is presumed to maintain a place of business in Iowa if any person with substantial nexus in Iowa (other than a common carrier) does any of the following:

  • Sells a similar line of products as the retailer under the same or a similar business name
  • Maintains an office, distribution facility, warehouse, storage place, or similar place of business in Iowa to facilitate the delivery of property or services sold by the retailer to customers
  • Uses trademarks, service marks, or trade names in Iowa that are the same or substantially similar to those used by the retailer
  • Delivers, installs, assembles or performs maintenance services for the retailers customers
  • Facilitates the retailer’s delivery of property to Iowa customers by allowing them to take delivery of property sold by the retailer at an office, distribution facility, warehouse, storage place, or similar place of business maintained by the person in Iowa.
  • Conducts any other activities in this state that are significantly associated with the retailer’s ability to establish and maintain a market in Iowa for the retailer’s sales.

See also rule 701-30.1(1) and Situations Creating Sales Tax Nexus/E-Fairness.

Yet the Iowa legislation omits an affiliation (or click-through) requirement and therefore it does not impact Amazon, which does not have a physical presence in Iowa and does not currently collect Iowa sales tax. Participants of Amazon’s Associates Program are also exempt. Participants must withdraw if they become residents of Arkansas, Maine, Missouri, Rhode Island or Vermont because those states have enacted nexus laws that create a sales tax obligation for associates. Residency in Iowa isn’t a problem.

According to Rep. Cecil Dolecheck, who attended the legislative coffee, the decreasing sales tax revenue is concerning but “the proposed online tax is a federal issue” — not a state issue. He also pointed out that Iowans should always pay use tax when they purchase taxable goods from out-of-state sellers not required to collect Iowa sales tax.

At the same time, he believes, “[S]omething must be done in the future, as it’s getting more difficult for local merchants to survive in the age of Internet sales.” (KMA Land).

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.