The answer to that question is not a simple one. The State of Iowa has detailed rules about which types of businesses should collect sales tax.
Obviously, if you have a retail store you are required to collect sales tax on the sale of items to the general public. There are a few customers/entities that are not required to pay sales tax. The Iowa Department of Revenue website states:
“Services provided to the following entities are exempt from sales and use tax: Iowa private nonprofit educational institutions, the federal government, Iowa governmental subdivisions, Iowa government agencies, certain nonprofit care facilities, nonprofit museums and nonprofit legal aid organizations. However, services provided to most nonprofit entities, churches and religious organizations are usually taxable.”
But what if you offer a service rather than a product to your customers, or what if you offer both a product and a service?
Some services are taxable and some are not. The State of Iowa has a list of taxable services that gives some help in determining if the service you offer is subject to sales tax. This can be found on the Iowa Department of Revenue website at www.iowa.gov/tax/educate/78524.html
As you review the list of taxable services, you will find that almost all repair type services are taxable. New home construction labor is not taxable, but if you move a house to a new location, the moving cost is taxable. There are some other interesting services that you may not have thought about that are listed as taxable. If you offer any kind of service, it is worth your while to review this list.
What if you should have been collecting sales tax but have not been doing so? The Iowa Department of Revenue has a program that can assist you in getting past due taxes paid under their voluntary disclosure program. There are several requirements to meet in order to be eligible for the program but most of them are not overly burdensome. If you meet the requirements, there are some benefits available to you such as penalty reduction or elimination for the tax periods in question.
If you have a question on the issue of sales tax collection or remittance to the State of Iowa, please call us at 515-282-0200.Information provided by Tim Tarbell, CPA MBA, Tarbell & Company PLC, 2130 Grand Ave., Des Moines, 515-282-0200.