If you purchase taxable items to use in your business in Iowa from out-of-state suppliers and do not pay sales tax, you will need to pay use tax to Iowa. See sales and use tax guide for more information.
Register for a permit if the sale of goods or services are taxable.
This is a combined registration form, which means you can register for one or more of the following:
Keep a copy of the form. You may begin to collect tax immediately; your proof of registration is your copy until we send you your permit number in about 4-6 weeks. The sales tax permit itself is free of charge.
A sales tax permit is not a license to buy tax-free. It is a license to collect tax. For your exempt purchases, you must use exemption certificates; see below.
Learn about Iowa's local option tax.
Local option tax is in addition to the state rate. Iowa's state sales tax rate is 6% as of July 1, 2008.
For more information about the "regular" local option tax, consult the Local Option Questions.
You will give a completed Exemption Certificate (31-014) to each supplier when you buy goods and services for resale or other exempt purposes. Similarly, you will also need to obtain exemption certificates from your customers when they purchase goods or services from you for resale or other exempt purposes. Keep these for your records.
Continue to learn more about Iowa taxes and keep up with changes in the law.
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Apply for a federal identification number (FEIN) with the Internal Revenue Service. You can apply for an FEIN online or you can use form SS-4 (pdf); this will become your state number for withholding tax purposes.
Have each employee fill out a Federal W-4 (pdf) and an Iowa W-4 (44-019) (access by filtering by Withholding Tax, search keyword W-4 and current year). These forms provide the information necessary to determine how much federal income tax and state income tax to withhold from your employees' paychecks.
Iowa Withholding Tax explains how withholding works including the Iowa Withholding Tax Tables which are necessary to calculate how much Iowa income tax to withhold. The Internal Revenue Service will send you similar information for federal purposes.
Will your workers be independent contractors, not employees?
Your tax liabilities change if your workers are independent contractors. The Internal Revenue Service (IRS) establishes the criteria for determining if a worker is an employee or an independent contractor. If you have employees and not independent contractors, you must act as a withholding agent on both the federal and state levels.
If you want the IRS to determine whether or not a worker is an employee, file IRS Form SS-8 (pdf) (Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding) with the IRS.
To talk to an IRS tax specialist, call 800-829-1040.
Employers' Council of Iowa: Works in conjunction with Iowa Workforce Development to offer guidance, support, training, and other resources to small and medium sized businesses.
