Iowa Sales
Tax Rate

The 6 percent state rate, local option sales tax, taxable services, food rules and economic nexus.

Iowa sales tax is 6 percent on taxable retail sales in 2026. Many cities, counties and unincorporated areas also impose a 1 percent local option sales tax, commonly called LOST, so a taxable sale in an adopting jurisdiction can commonly be taxed at a combined 7 percent rate. Iowa use tax is also 6 percent, but Iowa does not impose a local option use tax.

Iowa taxes retail sales of tangible personal property, specified digital products and specifically listed taxable services. Remote sellers can be required to collect Iowa tax after reaching $100,000 in gross revenue from Iowa sales. Location matters because local option tax depends on where the taxable property or digital product is delivered or where a taxable service is first used.

Iowa Sales Tax Rate in 2026

The statewide Iowa sales tax rate is 6 percent. An additional 1 percent local option sales tax applies in many jurisdictions that have adopted LOST.

The local rate can change by jurisdiction. Iowa updates local option tax lists around January 1 and July 1 effective dates. On July 1, 2026, new LOST jurisdictions included Coralville, Iowa City, North Liberty, Oxford and Shueyville.

What Is Taxable in Iowa?

Iowa generally taxes tangible personal property and specified digital products unless an exemption applies. Services are different because Iowa taxes services only when they are specifically listed as taxable under state law.

Taxable services include a range of activities such as certain repair, alteration, financial, transportation and personal services. A business should confirm the specific service category rather than assuming every service is taxable or exempt.

Iowa Sales Tax on Food

Most qualifying food and food ingredients are exempt from Iowa sales tax. Several categories remain taxable even when they are sold for human consumption.

• Alcoholic beverages
• Candy
• Dietary supplements
• Prepared food
• Soft drinks
• Certain vending-machine sales
• Tobacco products

Prepared food rules can depend on whether the seller heats the food, combines ingredients, provides eating utensils or sells food for immediate consumption. A food item that is exempt as a grocery product can become taxable when sold as prepared food.

How Iowa Local Option Sales Tax Works

Iowa LOST is a 1 percent local sales tax imposed in jurisdictions that have adopted it. It generally follows the state sales tax base, which means transactions subject to state sales tax are commonly subject to LOST when delivered in a participating jurisdiction.

Location is important. For tangible personal property and specified digital products, delivery location generally determines whether LOST applies. For taxable services, the local tax can depend on where the service is first used or could first be used.

Not every city or unincorporated area in the same county necessarily has the same LOST status, so businesses should use the current Iowa jurisdiction list instead of assuming a countywide 7 percent combined rate.

Iowa Sales Tax vs. Use Tax

Iowa sales tax is collected by the retailer on taxable Iowa retail sales. Iowa use tax applies when taxable property, digital products or taxable services are purchased for use in Iowa and sales tax was not properly collected.

The state use tax rate is 6 percent. Iowa does not add the 1 percent local option sales tax to use-tax transactions because there is no local option use tax.

Who Needs an Iowa Sales Tax Permit?

A business that makes taxable retail sales in Iowa generally needs to register for an Iowa sales and use tax permit. A business that makes only exempt retail sales and no taxable retail sales can fall outside the permit requirement until it begins making taxable sales.

Businesses can register through GovConnectIowa. Iowa also participates in the Streamlined Sales Tax Registration System, which can help sellers register in multiple participating states.

Iowa Economic Nexus for Remote Sellers

A remote seller must collect Iowa sales tax after meeting the state's $100,000 gross revenue threshold for Iowa sales. The threshold calculation is broad and can include taxable sales, exempt sales, wholesale sales, resale transactions and marketplace sales.

A seller that crosses the threshold during the current year generally begins collection on the first day of the next calendar month that starts at least 30 days after the threshold is exceeded. Collection then continues for the remainder of that year plus the following calendar year, subject to later threshold testing.

Marketplace Facilitators in Iowa

Marketplace facilitators can be required to collect Iowa sales tax and applicable local option sales tax on taxable sales made through their marketplace. Iowa does not generally allow the marketplace facilitator and marketplace seller to choose which party will collect tax when the facilitator is responsible.

A marketplace seller that sells only through a marketplace where the facilitator collects Iowa tax may not need its own Iowa sales tax permit. Sellers that also make direct sales should separately evaluate whether those direct sales create collection and filing obligations.

Sales Tax Exemptions in Iowa

Iowa provides exemptions for particular products, services, purchasers and uses. Sellers should document exempt transactions rather than treating them as ordinary taxable sales with tax removed manually.

• Qualifying food and food ingredients
• Certain sales for resale
• Certain manufacturing or agricultural purchases
• Specified nonprofit or government purchases
• Transactions supported by a valid Iowa exemption certificate
• Other exemptions specifically listed in Iowa law

Iowa Sales Tax and Income Tax Are Different

Sales tax is a transaction tax while Iowa individual income tax applies to taxable income. A business can have Iowa sales tax obligations even when a particular transaction has little connection to employee payroll.

For state income tax questions, taxable income or resident filing rules, use the Iowa income tax guide rather than treating sales tax as an income-tax deduction.

Why Sales Tax Does Not Belong on an Iowa Pay Stub

Ordinary Iowa sales tax is not an employee payroll deduction. Payroll withholding and retail sales tax are separate systems.

After genuine payroll figures are calculated, businesses can make pay stub records using accurate employer, employee, earnings and deduction information. An Iowa pay stub generator can organize payroll records, but it should not add retail sales tax as though it were employee withholding.

Methodology and Accuracy

This guide reflects current Iowa Department of Revenue sales and use tax guidance, local option sales tax updates and remote seller rules available as of August 25, 2026. Iowa local option jurisdictions can change on January 1 or July 1, so businesses should verify the current jurisdiction list for the delivery or service location before finalizing tax.