Iowa Governor Kim Reynolds recently signed Senate File 2417, an extensive state tax reform bill that will greatly impact the tax structure in Iowa. This legislation contains changes to modernize and expand the types of businesses required to collect Iowa sales tax. These changes mirror several of the changes that were challenged in South Dakota v. Wayfair. In this case, the U.S. Supreme Court recently ruled that a retailer does not have to have a physical presence in a state before the retailer can be required to collect sales tax in that state.
The Iowa Department of Revenue (IDOR) released an overview of how the legislation will impact marketplaces and remote sellers that exceed certain sales or transaction thresholds, requiring them to charge sales tax the same as Iowa main street businesses. Below are highlights from the IDOR communication:
- Iowa includes an exception for small sellers, which will require only retailers to collect Iowa sales tax if the retailer sells $100,000 or more in products and/or services or makes 200 or more separate sales transactions. The Iowa tax reform bill also requires marketplaces to collect Iowa sales tax on behalf of sellers using the marketplace.
- The parts of the tax reform bill that expand Iowa sales tax collection to marketplaces and remote sellers take effect on January 1, 2019. Sales tax liability will not be incurred for transactions before this date.
- Retailers need to be registered prior to January 1, 2019 in Iowa. Iowa is a member of the Streamlined Sales and Use Tax Agreement. Retailers can register now by completing just one short and simple online application through the Streamlined Sales Tax Registration System (SSTRS) or may register to collect directly with the Iowa Department of Revenue through the Business Tax Registration System.