Tax News Update    Email this document    Print this document  

Effective January 1, 2019, remote sellers and marketplace facilitators must collect and remit Iowa state and local option sales taxes in the same manner as retailers with a physical presence in the state.

Remote sellers

A remote seller makes retail sales of tangible personal property, services, or specified digital products into Iowa, but does not have a physical presence in the state. Under legislation enacted last year (SF 2417), remote sellers with $100,000 in gross revenue from Iowa sales or 200 separate sales transactions in Iowa in 2018 must collect and remit Iowa state and local option sales tax, starting January 1, 2019.

Marketplace facilitators and remote sellers using marketplace facilitators

A marketplace facilitator generally includes businesses that facilitate retail sales by (1) providing infrastructure (i.e., listing the product on the marketplace, communicating offer or acceptance of a retail sale, providing the physical or electronic marketplace, etc.) or support (i.e., customer service, fulfillment or storage services, etc.) for retail sales to occur; and (2)collecting the sales price, processing payments, or receiving compensation from the retail sale.

Under SF 2417, if a marketplace facilitator makes or facilitates $100,000 or more in Iowa sales or makes or facilitates Iowa sales in 200 or more separate transactions during 2018, the marketplace facilitator must collect and remit Iowa sales tax and applicable local option sales tax on all taxable sales made through its marketplace starting January 1, 2019. If a remote seller only makes retail sales in Iowa through a marketplace, and the marketplace facilitator collects Iowa sales tax and applicable local option sales tax, the remote seller does notneed to obtain an Iowa sales tax permit or file Iowa sales tax returns. Iowa sales tax will be reported and paid on a sales tax return filed by the marketplace facilitator.

A remote seller who has bright line economic nexus must collect Iowa sales tax if the marketplace facilitator did not exceed the bright line economic nexus threshold in 2018, and is not collecting tax. Remote sellers should contact the marketplaces on which they make sales to determine when the marketplace will begin collecting Iowa sales tax and applicable local option sales tax to assess their potential sales tax duties.

Permit requirements

While remote sellers and marketplace facilitators that exceed the Iowa sales and transactional thresholds listed previously must now obtain an Iowa retail sales tax permit and file sales tax returns, a business does not need to obtain an Iowa sales tax permit if it does not make any taxable retail sales (i.e. only makes exempt sales) in Iowa.

Implications

Based on these new standards, remote sellers and marketplace facilitators should review their 2018 sales data to determine if they should register with the Iowa Department of Revenue and begin collecting, and remitting Iowa sales tax and local applicable option sales tax as of January 1, 2019. Remote sellers specifically should be inquiring with marketplace facilitators they utilize to see if the marketplace facilitator will be collecting tax on their sales starting January 1, 2019, or if the remote seller needs to register, collect, and remit on its own if the remote seller exceeds either of the previously mentioned thresholds.

———————————————