Iowa Sales Tax Guide for SaaS and E-Commerce Businesses 2025

This Iowa sales tax guide explains how SaaS, digital products, and e-commerce sales are taxed in Iowa. It covers sales tax rates, local option taxes, economic nexus rules, filing deadlines, penalties, and registration steps with the Iowa Department of Revenue (IDR).

Last updated: September 2025

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Quick Reference: Iowa Sales Tax (2025)

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Is SaaS Taxable in Iowa?

Yes. Software-as-a-Service (SaaS) is taxable in Iowa, whether sold to businesses (B2B) or consumers (B2C). Iowa law treats SaaS and most specified digital products as taxable services:

• Prewritten software: taxable, regardless of delivery method (download or cloud).
• SaaS (subscriptions or access fees): taxable as a service.
• Digital products: taxable (e-books, music, videos, apps, webinars).
• Custom software / professional services: taxable unless a clear exemption applies.

See official guidance:

• Taxation of Specified Digital Products, Software, and Related Services
• Iowa Sales and Use Tax: Taxable Services

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E-Commerce & Goods Taxability in Iowa

• Tangible goods: Taxable at the 6% state rate plus any applicable local option tax.
• Shipping and delivery charges: Taxable if included in the sales price. Exempt if separately stated and not part of the sale.
• Marketplace sales: Sales made through platforms like Amazon, Shopify, or Etsy count toward your economic nexus threshold, even if the marketplace collects and remits tax on your behalf.

See: Sales and Use Tax Guide — Iowa DOR

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Who Must Collect Iowa Sales Tax?

You must register with the Iowa Department of Revenue if you meet any of the following:

• Economic nexus: More than $100,000 in Iowa sales in the current or previous calendar year.
• Physical nexus: Offices, inventory, employees, or contractors located in Iowa.
• Marketplace sales: Count toward nexus even if the marketplace collects the tax.

See: Sales & Use Tax Guide — Iowa DOR

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Iowa Sales Tax Filing & Due Dates

• Filing frequency: Assigned by Iowa DOR — monthly, quarterly, or annually.
• Due date: Returns and payments are due by the last day of the month following the reporting period.

Example: Sales made in April must be reported and paid by May 31.

See: Sales & Use Tax Guide: Filing Section

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Iowa Sales Tax Penalties & Interest

Failure to file or pay Iowa sales tax on time can result in penalties and accruing interest:

• Late filing or late payment: 5% penalty of unpaid tax if less than 90% is paid on time. Both may apply if you file and pay late.
• Audit underpayment: 5% penalty if additional tax is found during examination.
• Fraudulent returns: 75% penalty on unpaid tax (cannot be waived).
• Frivolous returns: $500 penalty for substantially incorrect or incomplete filings.
• Failure to file after demand: $1,000 per return if you do not file within 90 days of a demand letter.
• Electronic filing/payment: 5% penalty if you fail to file or pay electronically via GovConnectIowa.
• Interest on unpaid balances: Accrues monthly until paid in full. Partial months count as a full month.
• Penalty waivers: May be available in limited cases; request via Form 78-629 or GovConnectIowa.

See full details: Iowa DOR — Penalties and Interest

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How to Register for Iowa Sales Tax

1. Determine nexus (economic or physical).
2. Register online via GovConnectIowa.
3. Collect sales tax at 6% plus applicable local option tax.
4. File returns as assigned (monthly, quarterly, or annually).
5. Remit payment by the due date.

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FAQs: Iowa Sales Tax for SaaS & E-Commerce

Is SaaS taxable in Iowa?
Yes. SaaS is a taxable service in Iowa under state sales tax rules.

What is Iowa’s economic nexus threshold?
Remote sellers must register once sales into Iowa exceed $100,000 in the current or prior year.

Does Iowa have local sales tax?
Yes. Many jurisdictions levy a 1% local option tax in addition to the statewide 6%.

When are Iowa sales tax returns due?
By the last day of the month following the reporting period.

Do marketplace sales count toward nexus?
Yes. Marketplace sales are included in the $100,000 threshold, even if tax is collected by the platform.

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Official Iowa Resources

• Iowa Department of Revenue — Sales & Use Tax Guide
• Taxation of Specified Digital Products, Software, and Related Services
• Iowa Sales and Use Tax: Taxable Services
• GovConnectIowa — Business Permit Registration
• GovConnectIowa — Tax Accounts Portal (TAP)
• Iowa DOR — Penalties and Interest

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