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Starting a business in Iowa?
You will need to...
- Find out if the goods or services you
will be selling are subject to Iowa sales tax. Read our Sales and Use Tax Information
booklet to find out what is taxable
and what is not.
- Register
online for a permit if the sale of goods or services
are taxable. Or mail or fax the paper (pdf) registration
form to our Department.
This is a combined business application form, which means you can register for one or more of the following:
- sales tax
- use tax
- automobile rental tax
- withholding tax
- corporation
- partnership.
If you will be selling household hazardous material, you will be able to obtain a permit through this form.
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 5% through June 30, 2008. Beginning July 1, 2008, the rate changes to 6%.
For more information about the "regular" local option tax, consult the Regular Local Option Q&A.
Beginning July 1, 2008, the School Local Option Tax will no longer exist as a separate tax.
A list of Current Local Option Jurisdictions is available in Excel and pdf formats and is updated in June and in December.
- Obtain Exemption
Certificates (pdf).
You will give a completed one to your suppliers 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. Our Tax Class Schedules are
updated throughout the year and are available online only. Our online Tax News newsletter is
available by signing up for the Business
Tax eList. Links to the newsletters and other notices will
be e-mailed to you.
- File and remit the
tax. The Department no longer provides paper forms. Business taxes (sales,
use, withholding, fuel) are filed electronically through eFile
& Pay.
- Find out if you need to pay consumer's use tax. 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. This includes items purchased through mail order catalogs and the Internet. See consumer's use tax information for more information.
Does everyone need a federal employer identification number (FEIN)?
No.
You will need a FEIN if...
- You are a sole proprietorship and have employees or
- Your business is a corporation or
- Your business is a partnership or
- You sell alcohol, firearms or tobacco or
- You need to pay federal excise taxes
You can now apply for your FEIN online through the IRS Web site. Or obtain the paper application for FEIN, by downloading pdf form SS-4, Application for Employer Identification Number (pdf). Be sure to read "How to Apply" on page two of the SS-4 instructions.
You do not need a FEIN if...
- You are a sole proprietor but do not have employees and
- You do not sell alcohol, firearms or tobacco and
- You do not need to pay federal excise taxes
Will you have employees?
If so, register to be a withholding agent on the Iowa Business Tax Registration form.
You will need to 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.
In addition to the federal
W-4 (pdf), you will have each employee fill out
an
Iowa W-4 (pdf) . These forms provide the information
necessary to determine how much federal income tax and state income tax
to withhold from your employees' paychecks.
The Iowa Withholding Tax Tables (pdf) are necessary to calculate how much Iowa income tax to withhold. The Internal Revenue Service will send you similar information for federal purposes.
Once you are registered, you will receive a letter from Iowa with your Business eFile Number to access the electronic filing system, eFile & Pay. Paper forms are not provided.
Information About Iowa Withholding Tax is a booklet that explains how withholding works.
Will your workers be independent contractors, not employees?
Your tax liabilities change if your workers are independent contractors. Learn more about this by reading Employees or Independent Contractors.
Be sure to pay income taxes for yourself
If you are a sole proprietor or in a partnership, you need to pay your income taxes by making estimated tax payments. Our brochure, Estimated Taxes, explains how and when to make these payments. You will need to make estimated tax payments for federal tax and estimated tax payments for Iowa tax.
You have two options for making Iowa estimated payments.
- Online through eFile & Pay: Set up estimated payments by electronic funds transfer and check your payment history. This online service is free and secure.
- Paper: To make your first payment, go to the individual income tax forms page and obtain Iowa Estimated Coupons and Instructions. Use the appropriate coupon for the quarter you're paying and follow the directions. The following year our Department will send you preprinted coupons.
Be sure to make federal estimated payments also. You may use the federal online system. (IRS paper forms are available.)
Don't forget to contact other agencies and businesses!
Download our Small Businesses in Iowa brochure to obtain a list of standard contacts, resources, and tax benefits. For example, you will need to contact the Iowa Workforce Development to establish your Iowa unemployment tax account and to register with the Division of Labor if you are a construction contractor. You may file unemployment tax insurance online through Workforce Development.
The Iowa Department of Economic Development is another excellent resource.
The Internal Revenue Service has a Web page specifically for small businesses. Check out their Small Business Information page.