Sales Tax Imposed on Personal Transportation Service
The sales price from personal transportation service in Iowa is subject to Iowa sales tax and local option sales tax, as applicable.
Iowa Code section 423.2(6)(ac) imposes sales tax on “personal transportation service.” “Personal transportation service” includes, but is not limited to, taxis, driver service, ride sharing service, rides for hire, and limousine service. The sales price from rendering, furnishing, or performing a personal transportation service includes such costs as facilitation fees, reservation fees, service fees, cancellation fees, and non-refundable payments.
Iowa Administrative Code rule 701—211.33 implements Iowa Code section 423.2(6)(ac) and provides information on taxable personal transportation service. This rule defines personal transportation service as “[t]he arrangement or provision of transportation of a person or persons for consideration, regardless of whether the person or entity providing such service supplies or uses a vehicle in conjunction with the service.” Personal transportation service includes, but is not limited to the following:
- Transportation Services provided by a human driver - Services including but not limited to drivers with a Class C, Class D endorsement 3, or Class M license, or by a chauffeur, as defined under Iowa Code section 321.1(8). Examples of such services include but are not limited to taxi services, driver services, limousine services, bus services, shuttle services, and rides for hire.
- Transportation Services provided by a nonhuman driver - Services provided by a nonhuman driver including autonomous vehicle or driverless vehicle.
- Transportation Services provided by a ride sharing service - Services including but not limited to prearranged rides as defined in Iowa Code section 321N.1(4). Examples include but are not limited to Uber and Lyft.
Sourcing of Personal Transportation Service
The tax on personal transportation service used in Iowa is sourced to the location at which the service is first received, as demonstrated in the example below:
Joe schedules a personal transportation service while at his residence in Ankeny but requests the service to start the transportation from Bondurant to Carlisle. Rider independently travels to Bondurant, where he enters a vehicle owned by the transportation service and the service brings him from Bondurant to Carlisle, where the service ends and he pays for the service. The sale is sourced to Bondurant — the location at which he first received the transportation service. The transportation service must charge sales tax and the applicable local option tax in Bondurant, even though Joe scheduled the service while in Ankeny and the service concluded and payment was made in Carlisle.
Personal Transportation Service Between States
Federal law prohibits Iowa from imposing tax on interstate motor carrier transportation service. Therefore, Iowa sales is not imposed on a personal transportation service where the vehicle travels across state borders during the rendering, furnishing, or performance of the service. The following are examples of interstate transportation service where Iowa sales tax is not imposed:
- Transportation service starts in Iowa and ends in Illinois.
- Transportation service starts in Nebraska and ends in Iowa.
- Transportation service starts and ends in Iowa, but traveled into Wisconsin at any point during the trip.
Exemptions for certain transportation services
The following transportation services are exempt from Iowa sales tax under Iowa Code section 423.3(106):
- Medical transportation services: The sales price for emergency and non-emergency medical transportation is exempt. Iowa Administrative Code 701—211.33(4) defines “medical transportation” as “a personal transportation service for an individual to travel to a health care provider for the individual’s medical care. Medical transportation is not limited to transportation services for immediate life-threatening or serious injuries.”
- Paratransit service: Iowa Administrative Code 701—211.33(4) defines “paratransit service” as “[p]ersonal transportation service provided to individuals with disabilities.”
- Public Transit Systems: “Public transit system” is defined in Iowa Code section 324A.1(4) as “an urban or regional transit system providing transit services accessible to the general public and receiving federal, state or local tax support.”