Iowa Sales Tax on Food

Relevant Statute and Rules

Iowa Code section 423.3(57); Iowa Administrative Code rules 701—220.2, 220.3, and 220.4.

General Listing

Sales of the following types of food and food ingredients are generally exempt from Iowa sales tax, unless taxable as prepared food. 

This list is intended to provide a general understanding of the types of food and food ingredients that are exempt. This list is not a complete list.

• Baking ingredients, including baking powder, baking soda, and cornstarch
• Bread and flour products
• Bottled water, unless sweetened and taxable as a soft drink
• Cereal and cereal products, unless taxable as candy in the form of a bar
• Cocoa and cocoa products, unless taxable as candy
• Coffee and coffee substitutes, unless taxable as a soft drink
• Dietary substitutes and specialty foods
• Eggs and egg products
• Fish and fish products
• Frozen foods
• Fruits / fruit products / fruit juices containing more than 50% fruit or vegetable juice
• Grains and legumes, including beans, pasta, and rice
• Margarine, butter, and shortening
• Meats and meat products
• Milk and milk products, including packaged ice cream products
• Snack foods, unless taxable as candy
• Spices, condiments, extracts, and artificial food coloring
• Sugar, sugar products, and sugar substitutes, unless taxable as candy
• Tea
• Trail mix
• Vegetables and vegetable products

Unique Categories of Exempt Foods

Most products can easily be classified either as food or food ingredients or as nonfood items. However, certain items may be difficult to categorize. The following guidelines apply to some of the more unique categories of exempt foods. This list is not a complete list.

• Ice  If specifically labeled for nonfood use, ice is taxable; otherwise, it is exempt from tax.

• Specialty Foods  This category includes special foods, such as diabetic and dietetic, enriched or fortified foods, infant formulas, and certain foods commonly referred to as health food items or dietary replacements. This category includes Slim Fast, Carnation Instant Breakfast, Sustacal, Ensure, and Boost. Sales of these items are exempt.

  NOTE: If the product is primarily used as a food or in preparing food, the sale is exempt. If used primarily for medicinal purposes as either a therapeutic agent or deficiency corrector, the sale is taxable.

• Snack Foods  Sales of some common snack foods are generally exempt from sales tax. Typical examples are nuts, potato chips, popcorn, corn chips, and pretzels.

  NOTE: Sales of other items that are often considered snack foods, including candy and soft drinks, are subject to sales tax.

• Food Ingredients  Certain food ingredients that are incorporated into foods are exempt. An example is pectin, commonly used as a base in making jams and jellies. Other examples are lard and vegetable oils.
• Food Baskets  Food basket sales are exempt if the value of the exempt food items is equal to or greater than the value of the taxable items. The basket and other decorative items are usually taxable. If these types of items are the most expensive part of the food basket, the entire food basket is taxable. Iowa Code section 423.2(8)(d)(4).

General Listing

This list is intended to provide a general understanding of the types of food and food ingredients, and other items commonly sold alongside food, that are subject to Iowa sales tax. This list is not a complete list.

• Alcoholic beverages
• Candy
• Cosmetics
• Dietary supplements
• Health aids
• Household aids
• Paper products
• Pet foods and supplies
• Soaps and detergents
• Soft drinks and certain other beverages, including those with 50% or less fruit or vegetable juice
• Tobacco products
• Toiletry articles
• Utensils
• Vitamins and minerals

Alcoholic Beverages

Alcoholic beverages are beverages that are suitable for human consumption and contain one-half of one percent or more of alcohol by volume. For more information about the taxation and regulation of alcohol in Iowa, see Alcohol Laws.

Cannabis Products

The presence of cannabis, including cannabidiol (CBD) and tetrahydrocannabinol (THC), in an item does not by itself determine whether the item is subject to sales tax. However, items for human consumption that contain cannabis are generally taxable as candy, dietary supplements, prepared food, soft drinks, or another taxable category. 

Dietary supplements, Vitamins, and Minerals

Dietary supplements:

• Contain one or more specified ingredients; and
• Are intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid form, or if not intended for ingestion in such a form, are not represented for use as the sole item of a meal; and
• Are required to be labeled as a dietary supplement, identifiable by the “supplement facts” box found on the label.

Note: Sales of prescription drugs are exempt from tax.

Garden Seeds and Plants

The taxability of seeds and plants used to produce food depends on how those seeds and plants will be used. Examples of seeds and plants used to produce food include tomato and green pepper seeds and plants; fruit trees; food-producing roots, bushes, and bulbs, such as asparagus roots and onion sets; and seeds and plants used to produce spices for use in cooking foods.

• Sales of seeds and plants used to produce food are subject to sales tax if the primary user/consumer of the produce is the buyer. For example, the sale of zucchini seeds and plants that the buyer will use to grow zucchini for people in their household to eat is subject to tax.
• Sales of seeds and plants that themselves are used for human consumption are exempt from sales tax, unless taxable as candy. For example, sales of edible chia seeds, poppy seeds, and sunflower seeds are exempt when sold for human consumption.
• Sales of seeds and plants that will be consumed by pets or wildlife are taxable. For example, bird seed, dog treats, and rodent feed are taxable.
• Sales of seeds and plants used to produce food for commercial agricultural production are exempt. For example, a commercial produce grower or truck gardener may make exempt purchases of seeds and plants used primarily to grow food for sale. When making exempt purchases of plants and food used to produce food, the purchaser should provide the seller with a completed Iowa Sales/Use/Excise Tax Exemption Certificate (31-014). 
• Pumpkins are exempt from Iowa sales tax.
• Inedible decorative gourds are taxable.
  Note: SNAP benefits can be used to buy seeds and plants that grow food for the buyer’s household to eat. When SNAP is used to purchase seeds and plants that grow food, the items are not taxed. More information is available from the Iowa Department of Health & Human Services.

Health Aids

Sales of products used primarily as health aids or therapeutic agents without a prescription are generally taxable. These include aspirin, cough drops or syrups, cold remedies, antacids, and all patent medicines or other products used as health aids. Sales of any other product used primarily for medicinal purposes without a prescription are taxable.

Tobacco

Taxable tobacco products are cigarettes, cigars, chewing or pipe tobacco, or any other item that contains tobacco.

The sale of glass and metal devices used with tobacco may be subject to a 40% device tax in addition to sales tax. A “device” is any equipment or product, made in whole or in part of glass or metal, that is designed for use in inhaling through combustion tobacco, hemp, other plant materials, or a controlled substance. “Device” does not include a vapor product or a tobacco smoking product made of briar, meerschaum, clay, or corn cob and not having a surface, aperture, or other feature consisting of metal or glass. For more information about the taxation and regulation of devices in Iowa, see Glass and Metal Devices.

Relevant Rule

Iowa Administrative Code 701—220.3

Candy is taxable. Candy is a preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts, or other ingredients or flavorings in the form of bars, drops, or pieces. Candy does not contain flour and does not require refrigeration.

Taxable Candy Examples

• Preparations normally considered to be candy
• Fruits, nuts, or other ingredients in combination with sugar, chocolate, honey, or other natural or artificial sweeteners in the form of bars, drops, or pieces
• Chewing gum
• Sweetened baking chocolate in bars, pieces, or chips
• Candy-coated fruit, including caramel apples and chocolate-covered raisins
• Sweetened coconut
• Hard or soft candies including jelly beans, taffy, licorice, and mints
• Dried fruit leathers or other similar products prepared with natural or artificial sweeteners
• Marshmallows
• Ready-to-eat caramel corn, kettle corn, and other candy-coated popcorn
• Granola bars, unless they contain flour
• Candy breath mints
• Candy primarily intended for decorating baked goods

Exempt Examples, not considered candy

The following are not considered candy, and the sales of them are not subject to tax, unless taxable as prepared food.

• Jams, jellies, preserves, or syrups
• Frostings and other decorating ingredients not sold in the form of bars, drops, or pieces
• Dried fruits
• Marshmallow cream
• Breakfast cereals
• Prepared fruit in a sugar or similar base
• Ice cream, popsicles, or other frozen desserts covered with chocolate or similar covering
• Unpopped caramel corn, kettle corn, and other candy-coated popcorn that is not ready to eat
• Cakes and cookies
• Candy containing flour, unless the flour is added only to exclude its sale from tax
• Cotton candy, unless taxable as prepared food
• Crackers
• Marzipan
• Unsweetened baking chocolate
• Unsweetened coconut
• Trail mix, including trail mix with candy

Relevant Rule

Iowa Administrative Code 701—220.2(2)“f”

Taxable beverages include soft drinks. Soft drinks are nonalcoholic beverages that contain natural or artificial sweeteners. Soft drinks do not include milk, milk products, or milk substitutes. Soft drinks contain 50% or less of vegetable or fruit juice by volume.

Taxable Beverage Examples

• Carbonated and noncarbonated soft drinks using natural or artificial sweetener, including but not limited to cola, ginger ale, near-beer, non-alcoholic beer, root beer, lemonade, and orangeade
• All other drinks or punches with natural fruit or vegetable juice that contain 50% or less of vegetable or fruit juice by volume; a typical example is Hi-C
• Beverage mixes and ingredients intended to be made into taxable beverages; liquid or frozen, concentrated or non-concentrated, dehydrated, powdered, granulated, sweetened or unsweetened, seasoned or unseasoned
• Concentrates intended to be made into beverages that contain 50% or less of vegetable or fruit juice by volume
• All alcoholic beverages
• Bottled water containing natural or artificial sweetener

Exempt Beverage Examples

Unless sold as prepared food

• Bottled water, including effervescent and noneffervescent water, soda water, mineral water (non sweetened)
• Unsweetened tea or coffee, including bottled
• Milk and beverages that contain primary dairy products or ingredient bases, such as egg nog
• Beverages that contain natural fruit or vegetable juice of more than 50% by volume (providing the container’s label shows the percentage of natural fruit or vegetable juice)
• Soy, rice or similar milk substitutes, including beverages containing milk substitutes
• Infant formula
• Nondairy coffee creamers in liquid, frozen, or powdered form
• Sugar or other artificial or natural sweeteners sold separately
• Beverage in concentrate or mix form to be made into an exempt beverage, such as frozen orange juice or apple juice
• Concentrates that when reconstituted are equivalent of beverages containing greater than 50% vegetable or fruit juice by volume
• Mixes intended to be mixed with milk or dairy products, such as Nesquik
• Specialty foods that are liquids or that are to be added to a liquid and that are intended to be a substitute in the diet of more commonly used food items are exempt, such as infant formulas

Relevant Rule

Iowa Administrative Code 701—220.4

a. “Prepared food” means any of the following:

1. Food sold in a heated state or heated by the seller, including food sold by a caterer or
2. Two or more food ingredients mixed or combined by the seller for sale as a single item or
3. Food sold with eating utensils provided by the seller, including plates, knives, forks, spoons, glasses, cups, napkins, or straws. A plate does not include a container or packaging used to transport food.

The types of retailers who are generally considered to be offering prepared food for sale include restaurants, coffee shops, cafeterias, convenience stores, snack shops, and concession stands, including those at recreation and entertainment facilities. Other retailers that often offer prepared food include vending machine retailers, mobile vendors, and concessionaires operating facilities for such activities as education, office work, or manufacturing.

If food is sold for consumption on the premises of a retailer, the food is rebuttably presumed to be prepared food. “Premises of a retailer” means the total space and facilities under control of the retailer or available to the retailer, including buildings, grounds, and parking lots that are made available or that are available for use by the retailer, for the purpose of sale of prepared food and drink or for the purpose of consumption of prepared food and drink sold by the retailer. Availability of self-service heating or other preparation facilities or eating facilities such as tables and chairs, and knives, forks, and spoons, indicates that food, food products, and drinks are sold for consumption on the premises of the retailer and are subject to tax as sales of prepared food.

Food may be taxable as prepared food even if the food would be exempt in other circumstances. For example, bottled water, bags of potato chips, and fresh fruit may be taxable as prepared food if sold by a restaurant, even if those items would be exempt if sold by a different retailer.

The following examples are intended to show some of the situations in which sales are taxable as sales of prepared food and drink.

Example A: A movie theater owner operates a movie theater and a concession stand in the lobby of the theater. There is not a separate area set aside for eating facilities. Sales of prepared food and drink through the concession stand are taxable.

Example B: As a convenience to employees, a manufacturer owns and operates several food and drink vending machines located on the premises of the plant. No separate seating or other facilities for eating are provided. Sales of prepared food and drink through the vending machines are taxable.

Example C: Mobile vendor units located throughout an office are operated by the owner of the business and are stocked with snack food priced to cover the cost of the items to the employer. No separate eating facilities are provided. Sales of prepared food through the mobile vendors are taxable.

Example D: An insurance company hires a caterer to run a cafeteria that provides food, at a low cost, to its employees. The insurance company also pays the caterer an amount, per month, that varies with the number of meals the caterer serves to provide this food service. The caterer does not lease the cafeteria premises; therefore, the premises remain under the control of the insurance company. In this case, the caterer sells the food in a space made “available to the retailer [caterer],” and the amount that the insurance company pays, on a monthly basis, to the caterer is presumed to be the taxable sales price from the sale of prepared food, as well as the amount paid by the employees to the caterer.

b. “Prepared food” does not include food that is any of the following:

1. Only cut, repackaged, or pasteurized by the seller.
2. Eggs, fish, meat, poultry, and foods containing these raw animal foods requiring cooking by the consumer as recommended by the United States Food and Drug Administration in Chapter 3, Part 401.11 of its Food Code, so as to prevent food-borne illnesses.
3. Bakery items sold by the seller that baked them. The term “bakery items” includes but is not limited to breads, rolls, buns, biscuits, bagels, croissants, pastries, donuts, Danish, cakes, tortes, pies, tarts, muffins, bars, cookies, and tortillas. Baked goods sold for consumption on the premises by the seller that baked them are sold exempt from tax.
4. Food sold in an unheated state as a single item without eating utensils provided by the seller which is priced by weight or volume.
5. Food sold that ordinarily requires additional cooking by the consumer prior to consumption, such as take-and-bake pizzas.

The following are additional examples of foods that are or are not “prepared foods,” the sales price of which is taxable.

Example A: A supermarket retailer cuts Bibb and romaine lettuce, mixes them together, and places them in a bag for sale. This is food that is only cut and repackaged. Its sale is not the sale of prepared food; therefore, its sale is exempt from tax.

Example B: The same factual situation as Example A above applies, except that the lettuce is mixed with a salad dressing, placed in a container, and sold as a salad that is ready to eat. Sale of the salad is a taxable sale of “prepared food.”

Example C: A supermarket retailer slices a roll of cotto salami and a roll of regular salami. The retailer places 10 slices of each in the same container and sells the combination as an Italian luncheon meat variety pack. This is, again, the sale of food which is only cut and repackaged. The sale of the salami is exempt from tax.

Example D: The same factual circumstances as in Example C apply, except that the retailer takes the sliced salami, places it between two slices of bread, adds some condiments, surrounds the meat, bread, and condiments with plastic, and sells the result as a ready-to-eat sandwich. This is prepared food, “two or more food ingredients...combined by the seller for sale as a single item,” and more is done to the ingredients than cutting and repackaging. Sales of the sandwiches are taxable.

Bakery Goods

Bakery items sold by the seller that baked them are exempt from sales tax. Furthermore, baked goods sold by the seller that baked them are exempt from sales tax when sold for consumption on the premises of the seller.

Catered Foods

All sales of food, food products, and drinks on a catered basis are subject to tax.

Catering is, at the very least, delivering food that is ready to eat. This includes hot, delivered pizza. Catering can involve additional services beyond food delivery, including setup, serving, and cleanup.

If a retailer is advertised as a caterer and delivers food that is prepared to be eaten immediately, that service—including the charge for the food—is taxable. It does not matter if the caterer actually serves the food.

A person who makes pies and cakes and delivers them is not considered a caterer, and those sales are not taxable.

Personal or Private Chefs

A personal chef sells taxable prepared food. This is true regardless of who purchases the groceries used by the personal chef or whether the personal chef itemizes the cost of groceries and the chef’s cooking service for the customer. 

Delicatessens and Grocery Stores

Food sales from a delicatessen of prepared foods by a grocery store are generally subject to sales tax.
If several items are sold together as part of a meal and they are not separately itemized, the total amount charged for the meal is subject to sales tax. A meal might include a loose-meat sandwich, a bag of potato chips, and a soft drink for a single, combined price. The full amount of the sale is taxable.

Many delis take surplus food and package it and place it in a cooler separate from the deli counter. Generally, sales of this food are exempt from sales tax. Cole slaw, baked beans, and potato salad sold in various size containers are exempt from sales tax because they are not sold with eating utensils and are priced by weight or volume. However, meals prepared by the retailer and stored in a cooler are subject to sales tax because they are not priced by weight or volume. Typical examples include a meatloaf sandwich or a Chinese meal.

Tips and Service Charges

If meal service cannot be obtained without paying the gratuity or if the gratuity is inseparable from the service charge, tax is due on the full amount charged for the meal service. Any mandatory charge for meal service—whether labeled as a tip, gratuity, service charge, or something else—is subject to tax. A service charge for the use of a debit or credit card is taxable, because the charge is required to obtain the meal service. Tips or gratuities paid voluntarily by the customer are not taxable.

Example A: Restaurant A enforces a policy where parties of 10 or more are charged a 20% tip/gratuity on the total bill. A party of fifteen incurs a bill of $800 and is charged a gratuity of $160. The total taxable amount is $960 as the $160 gratuity is a mandatory tip that is required in order for the transaction to be completed. Any additional gratuity the customer voluntarily pays beyond the mandatory 20% is not taxable.

Example B: Restaurant B enforces a policy of imposing a 3% service charge to customers paying with a debit or credit card. Customer X incurs a bill of $40 for meal service and is charged an additional “service charge” of $1.20 (3% of the bill) because he paid with his debit card. The total taxable amount is $41.20 because the service charge is required in order for the transaction to be completed. Any gratuity Customer X voluntarily pays is not taxable.

Example C: Customer Y purchases meal service at Restaurant C in the amount of $50. At the time of checkout, Customer Y voluntarily pays an additional $10 as a tip for her server. The total taxable amount is $50; the $10 is a voluntary tip and is not subject to sales tax.

Alcoholic Beverages

Sales of alcoholic beverages are subject to Iowa sales tax. If sales tax is included in the price of alcoholic beverages, the retailer must post a sign indicating that tax is included in the price.

The base price on which the sales tax is to be calculated can be determined by dividing the gross receipts from the sales of such alcoholic beverages by 1.06 (if only the state rate applies). The resulting amount is multiplied by the appropriate tax rate to arrive at the amount of sales tax due.

For more information about taxation and regulation of alcohol in Iowa, see Alcohol Laws.

Meals Provided to Employees

Meals provided free of charge by a retail food establishment to its employees are exempt from sales tax.

Napkins, Plates, and Tableware

Napkins, paper plates, and plastic tableware are exempt from sales tax when they are purchased to become part of the selling price of prepared food. If they are not part of the selling price, the food establishment must pay tax on them when they buy them. If the business purchased the items and did not pay sales tax but should have, the items must be included as goods consumed on the Iowa sales tax return. The business must also pay Iowa sales or use tax on its purchases of cloth napkins, glasses, porcelain cups, silverware, and other durable tableware for use by its customers.

Vending Machines

An operator who places vending (or other coin-operated) machines on different locations need only to hold one permit in a regular place of business. The one permit will apply to all machines located in Iowa.

If the sale of a substance is exempt from tax because it is a sale of “food” when the substance is sold by means other than a vending machine, then the sale of that same substance through a vending machine will also be exempt from tax. Conversely, if the sale of a substance by any means other than through a vending machine is taxable, then the sale of that same substance through a vending machine will also be taxable. See Prepared Food.

Sales Tax

We often hear from people who feel that they have been charged sales tax on items that are exempt. Simply calling the Department is not sufficient. Instead, the taxpayer must file a written claim for refund on an IA 843 (22-009) with all supporting documentation.

Use Tax

Iowa use tax is complementary to the Iowa sales tax. The general rule is that if taxable tangible personal property, services, or specified digital products are purchased outside of Iowa for use or consumption in Iowa, the sale is subject to Iowa use tax. In most cases, these are purchases made from out-of-state suppliers, catalogs, or magazines, or television, radio, or Internet vendors. The purchaser must pay the use tax to the Iowa Department of Revenue. The total gross purchases must be reported and the tax remitted in the quarter in which the purchase occurred.

When sales or use tax is properly paid to another state on goods that are also subject to Iowa use tax, a credit for the tax paid to the other state may be allowed. The credit cannot exceed the Iowa use tax rate.

Consumers who make out-of-state purchases and pay sales tax to another state at a rate less than the Iowa use tax must pay the difference to Iowa.

Local Option Sales Tax

Local option sales tax (LOST) applies in addition to the state sales or use tax. As a general rule, LOST is collected on the sale of the same tangible personal property, services, and specified digital products that are subject to the state sales tax and delivered in local option jurisdictions.

“Delivery” is the location in which ownership of tangible personal property or specified digital products is transferred from the seller to the buyer or the location where the first use of a service occurs, or potentially could occur. If delivery occurs in a LOST jurisdiction, then the local option tax must be collected on the transaction.

Within a county, some cities may have LOST, but some may not. Also, the unincorporated area of a county may or may not have the tax. The rate may be up to 1 percent. Not all jurisdictions have this tax.
There is no local option use tax in Iowa. Therefore, sales that are subject to use tax are not subject to local option sales tax.

Local option tax lists are updated in June and in December; effective dates are July 1 and January 1. To obtain a current list of jurisdictions, please see our local option sales tax page.

For more detailed information about the local option sales tax, view LOST Questions and Answers.

Businesses making taxable purchases on a regular basis should register with our Department to file sales and use tax returns. However, some businesses may only occasionally make purchases for their own use and owe Iowa use tax. You can report the use tax on the sales and use tax return or file and pay the tax as outlined for individuals below.

Individuals without a permit who rarely make purchases subject to use tax should pay their tax in one of the following ways:

• Electronically through GovConnectIowa
• Complete the Iowa Non-Permit Use Tax Return (32-007) and send to:
  Iowa Department of Revenue
  PO Box 10412
  Des Moines, IA 50306-0412
  
  Make checks payable to: “Iowa Department of Revenue"

Anyone who regularly purchases merchandise from out of state for their own use in Iowa should register for a sales and use tax permit and pay the use tax when filing their sales and use return.