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Can I collect sales tax from customers in different states without violating tax laws in Iowa? What are the requirements?

Sales Tax Collection Requirements in Iowa

In Iowa, any person who meets the following conditions is required to collect and remit sales and use taxes pursuant to sections 423.14 and 423.29, and local option taxes under chapter 423B [1.1]:

  1. A retailer that has gross revenue from Iowa sales equal to or exceeding one hundred thousand dollars for an immediately preceding calendar year or a current calendar year.
  2. A retailer that owns, licenses, or uses software or data files that are installed or stored on property used in this state.
  3. A retailer that uses in-state software to make Iowa sales.
  4. A retailer that provides, or enters into an agreement with another person to provide, a content distribution network in this state to facilitate, accelerate, or enhance the delivery of the retailer’s internet site to purchasers.
  5. A marketplace facilitator that makes or facilitates Iowa sales on its own behalf or for one or more marketplace sellers equal to or exceeding one hundred thousand dollars for an immediately preceding calendar year or a current calendar year.

Collecting Sales Tax from Customers in Different States

If you are selling to customers in different states, you may be required to collect sales tax in those states as well. Each state has its own sales tax laws and requirements, so it is important to research the specific rules for each state where you have customers.

In general, if you have a physical presence in a state, such as a store or warehouse, you are required to collect sales tax on sales made to customers in that state. This is known as having “nexus” in the state. However, some states have expanded their definition of nexus to include other activities, such as making a certain amount of sales or having affiliates in the state.

Iowa Sales or Use Tax Permit

In Iowa, a person shall not engage in or transact business as a retailer making taxable sales of tangible personal property, specified digital products, or furnishing services within this state or as a retailer making taxable sales of tangible personal property, specified digital products, or furnishing services for use within this state, unless a permit has been issued to the retailer under section 423.36 [1.2]. Every person desiring to engage in or transact business as a retailer shall file with the department an application for a permit to collect sales or use tax. Every application for a sales or use tax permit shall be made upon a form prescribed by the director and shall set forth any information the director may require. The applicant must have a permit for each place of business in the state of Iowa. The department may deny a permit to an applicant who is substantially delinquent in paying a tax due, or the interest or penalty on the tax, administered by the department at the time of application or if the applicant had a previous delinquent liability with the department [1.2].

Conclusion

To summarize, if you are selling to customers in different states, you may be required to collect sales tax in those states as well. In Iowa, a person shall not engage in or transact business as a retailer making taxable sales of tangible personal property, specified digital products, or furnishing services within this state or as a retailer making taxable sales of tangible personal property, specified digital products, or furnishing services for use within this state, unless a permit has been issued to the retailer under section 423.36 [1.2]. It is important to research the specific rules for each state where you have customers and consult with a tax professional or contact the state’s department of revenue for guidance if you are unsure about your sales tax collection requirements in other states.

Source(s):
Jurisdiction

Iowa