Iowa removes transaction threshold for out-of-state sellers
- Sales and Use Tax
- May 7, 2019 | Gail Cole
On January 1, 2019, Iowa began requiring certain out-of-state sellers and marketplace facilitators to collect and remit sales tax. Now, a new law is tweaking Iowa's remote sales tax policy.
Under Senate File 2417, enacted in May 2018, retailers and marketplace facilitators with no physical presence in Iowa are required to register with the Iowa Department of Revenue and collect and remit tax on their Iowa sales starting January 1, 2019, if, in the current or preceding calendar year, the remote seller/marketplace meets either of the following thresholds:
- $100,000 or more in gross revenue from Iowa sales, or
- 200 or more separate sales transactions into Iowa
Retailers with a physical presence in Iowa must collect and remit tax on all taxable Iowa sales, even if they don’t meet either of the above thresholds.
Transactions threshold eliminated
Under newly enacted Iowa House File 779, the 200 sales transactions threshold test is eliminated as of July 1, 2019. Thus, from January 1 through June 30, 2019, economic nexus is based on $100,000 sales or 200 transactions. Yet starting July 1, 2019, a remote seller or marketplace facilitator is required to collect and remit Iowa sales tax only if its gross revenue from Iowa sales exceeds $100,000 in the current or preceding calendar year.
This should provide relief to the smallest sellers, those who make more than 200 transactions in Iowa but earn less than $100,000 in gross revenue from those sales.
Remote retailers that only sell through collecting marketplaces aren’t required to obtain a sales tax permit or file Iowa sales tax returns — the marketplace takes care of that for them. However, retailers that also sell through other channels (e.g., their own ecommerce store or a non-collecting marketplace) are required to obtain a sales tax permit, collect and remit sales tax, and file returns if their total sales into the state exceed the $100,000 threshold.
Almost one year after states were granted the right to tax remote sales by the United States Supreme Court ruling in South Dakota v. Wayfair, Inc., states are still working out the kinks. Several, like Iowa, are eliminating the transaction threshold to protect the smallest remote sellers from sales tax collection.
For now, dealing with such changes creates extra work for businesses with fewer than $100,000 sales but more than 200 transactions in Iowa. In the long term, however, this should alleviate the burden of sales tax compliance for the smallest sellers.