Iowa Sales Tax Guide
Chapter 3: Getting registered to collect Iowa sales tax
The first step toward proper management of Iowa sales tax involves getting registered with the Iowa Department of Revenue. We get a lot of questions regarding this and recognize it may be the most difficult hurdle for small businesses to overcome. Registering to collect sales tax in Iowa means you've acknowledged your legal responsibility to collect and consequently file and remit sales tax to the state.When do I need to register to collect sales tax in Iowa?
There are two ways to think about this question. The first involves a topic called "nexus". Nexus, in the tax world refers to a company's connection to a state. While this connection is typically that of a physical nature (warehouse in the Iowa, inventory in Iowa, etc.), nexus is not limited to a physical presence. There are many nexus triggers we won't delve into here and, more importantly, nexus is often determined by a combination of events rather than a single event.
If it is determined you have nexus in Iowa, the Iowa Department of Revenue has the legal right to require you to collect, file, and pay sales tax.
If you've determined you have nexus in Iowa, the second question involves a topic we call "materiality". In short, you'll want to ask yourself whether the amount of sales tax you are required to collect and remit to the Iowa Department of Revenue is enough to put you at an unacceptable level of penalty and interest risk. As everyone's level of risk tolerance is different, this is a question that can only be answered by you, the business owner.
Prior to selling taxable goods or offering taxable services in Iowa, a business that has established nexus within the state is required to register for an Sales Tax Permit.What triggers nexus in Iowa?
Nexus is a complex topic that, depending on your situation, may require the in-depth knowledge of a qualified tax professional. That being said, there are a few common business events and situations that are known to trigger nexus in Iowa. The most common include the following:
- Opening an office in Iowa
- Storing inventory in a warehouse in Iowa
- Having remote employees located in Iowa
Businesses may register for an Iowa Sales Tax Permit online by visiting the Iowa Department of Revenue and following the instructions provided.
It is also possible to get registered for a Sales Tax Permit by completing and mailing in a Iowa Business Tax Registration (78-005), but this approach is not recommended. Form based registration is being phased out in favor of online registration. It’s fast, free, and more reliable than mailing in a completed paper form.What information is required to register for a Iowa Sales Tax Permit ?
When applying for a Iowa Sales Tax Permit, there are a number of pieces of information that may be required. These include, but are likely not limited to:
- Business name
- Business entity type
- Description of business activities
- Date business activities began or will begin
- Business address and mailing address
- Business contact information
- The North American Industry Classification System (NAICS) code that best matches your business
- Federal Employer Identification Number (FEIN)
- Your name, Social Security Number (SSN), driver license number, personal address, and personal contact information of owner/sole proprietor
- List of business officers, partners, managing members, and/or trustees
- Employment information (date of hire, number of employees, payroll amounts, payroll agent’s PTIN, if applicable)
The cost to register for a Iowa Sales Tax Permit is currently $.Do I need a Federal EIN in order to register in Iowa?
The Iowa Department of Revenue requires businesses requesting a new Sales Tax Permit to supply a valid Federal EIN number during the initial registration process. You can apply for an EIN number online by visiting the IRS website.Which Iowa governement agencies do I need to register with in order to get a new Sales Tax Permit?
We recommend you contact the Iowa Department of Revenue to verify which government agencies you will be required to register with. Potential agencies include the following:
- Iowa Department of Revenue
- Iowa State Employment Agency
- Iowa State Department of Labor
- Iowa Local Tax Jurisdictions
Yes! Iowa Sales Tax Permit registration is unique to the state of a business. The Iowa Department of Revenue requires all registered businesses to have current business owner name and contact information on file.