The Iowa sales tax rate is 6%. This is a fixed statewide baseline that applies to most tangible personal property, as well as to a defined set of services. In most Iowa cities and counties, a local option sales tax (LOST) of 1% applies on top of the base rate and brings the combined rate to 7%.

Below, we’ll discuss how LOST works and where it applies, how to calculate what your business owes at the transaction level, and common mistakes businesses make when collecting and remitting sales tax in Iowa.

Highlights

• Iowa’s base sales tax rate is 6%, and most jurisdictions add a 1% tax for a combined rate of 7%.

• Unprepared groceries and prescription drugs are exempt from Iowa sales tax, but clothing, digital products, and software-as-a-service (SaaS) are taxable.

• Iowa City’s combined sales tax rate will increase on July 1, 2026.

What is the Iowa sales tax rate?

Iowa’s sales tax rate is 6%. That’s the base tax rate that applies everywhere in the state. In many cities and counties, a 1% LOST raises the overall sales tax rate to 7%.

Sales tax rates in Iowa are destination-based. The rate at the delivery location is used, rather than the rate where the seller is based.

Use Stripe’s sales tax calculator to get the correct combined rate for any Iowa location before you collect.

What local sales tax rates apply in Iowa (IA)?

Through Iowa’s LOST program, cities and unincorporated areas of counties can vote on whether to impose an additional 1% tax on top of the state’s base sales tax rate. Most, but not all, of Iowa’s 1,002 sales tax jurisdictions have voted to adopt the LOST. This can create a patchwork effect, where municipalities within the same county operate at different rates. A business with two locations in the same county might need to collect 6% sales tax at one location and 7% at the other.

Localities can also adopt or repeal LOST. In November 2025, Iowa City voters approved a 1% LOST, which takes effect on July 1, 2026. At that point, the sales tax rate in Iowa City will go from 6% to 7%.

Below is a chart detailing the components of Iowa sales tax rates, as well as the possible range.

What is Iowa’s sales tax rate by city?

Most of Iowa’s major cities have adopted the LOST and have a sales tax rate of 7%, although there are some exceptions. Below, we’ll look at some of these cities and their sales tax rates.

What is Iowa’s sales tax rate by county?

Nearly all of Iowa’s 99 counties contain at least some jurisdictions where the combined state and LOST reaches 7%, though some areas remain at the 6% state rate.

How does sales tax apply to goods and services in Iowa?

In Iowa, tangible personal property is taxable unless the state has specifically exempted it. With services, it’s the opposite: they’re exempt unless the state has specifically made them taxable. We’ll run through both types of exemptions below.

Here are the types of goods that are exempt from sales tax in Iowa:

• Unprepared groceries: Most groceries for home consumption are exempt, including produce, dairy, breads, and meats. Heated or prepared foods are taxable, though. (For example, a loaf of bread isn’t taxable, but a deli sandwich is.) Candy and soda don’t qualify as groceries under Iowa law and are taxable.

• Prescription drugs: Medications prescribed to a patient by a licensed practitioner are exempt from sales tax.

• Certain medical devices: Oxygen, insulin, and specific prescribed equipment are exempt from sales tax.

• Agricultural inputs: Farm equipment, breeding livestock, and certain feed and seed purchases are exempt from sales tax.

• Solar energy equipment: Equipment primarily used to collect and convert solar radiation into usable energy is exempt.

• Resale purchases: Businesses purchasing goods that they’ll later resell can use an Iowa Sales Tax Exemption Certificate to buy them tax-free. Sellers must collect and retain those certificates to present them if audited.

• Clothing and footwear on the sales tax holiday: Iowa holds an annual sales tax holiday on the first Friday and Saturday of August. On these days, clothing and footwear priced under $100 per item are exempt from sales tax.

Here are the types of services that are taxable in Iowa:

• Software-as-a-service (SaaS) and most digitally delivered products

• Specified repair and maintenance services

• Motor vehicle and boat rentals

• Installation, maintenance, and upgrade services for digital products

How should businesses collect and remit sales tax in Iowa?

Whether you need to collect sales tax in Iowa depends on whether your business has nexus. If your business has a physical presence in Iowa—such as a store, a warehouse, an employee located in the state, or inventory—it has physical nexus and must pay sales tax. Economic nexus for remote sellers starts once the seller has $100,000 in gross revenue from Iowa retail sales in the current or previous calendar year. Exempt and resale transactions count toward the revenue threshold even when no tax is collected on them.

When you have nexus, you must register with the Iowa Department of Revenue (IDR) through GovConnectIowa. The IDR then assigns a filing frequency—monthly, quarterly, or annually— based on your sales volume. Sales tax is due when taxable goods are delivered or when the first use of a taxable service occurs, not when payment is received. This is important in situations where payments are decoupled from delivery, such as for businesses that invoice net 30 or collect subscription fees in advance.

Each Iowa filer completes a LOST section as part of their return. Tracking which transactions occurred in LOST jurisdictions versus non-LOST jurisdictions is necessary for filing. Stripe Tax automatically calculates the correct combined rate at the point of sale (POS) based on the customer’s address, accounts for LOST jurisdiction boundaries, and generates the transaction-level records you need at filing time.

What are some common mistakes made by businesses when collecting Iowa sales tax?

Businesses that transact in Iowa should be aware of tax exemptions, as well as where LOST applies. Mistakes can be costly. The IDR’s penalty structure generally includes a 5% penalty for failure to file on time and a 5% penalty for failure to pay on time (if less than 90% of the tax was paid by the due date). This can result in a 10% total penalty depending on circumstances. Interest also accrues from the due date at a rate set annually.

Here are some common mistakes businesses can make:

• Applying a flat 7% rate statewide: Although most of Iowa has a 7% combined sales tax rate, some jurisdictions are at 6%. If you charge 7% everywhere, you’re overcharging customers in those jurisdictions and collecting tax you’re not entitled to collect.

• Not updating the rate for Iowa City: The combined sales tax rate for Iowa City increases from 6% to 7% on July 1, 2026.

• Missing digital product taxability: Iowa taxes SaaS, digital streaming, and most electronically delivered products. Remote sellers in software and media must remember to collect sales tax.

• Not keeping exemption certificates: If your business uses Iowa Sales Tax Exemption Certificates, you need to make sure they are validated and stored. Selling tax-free without a valid exemption certificate creates problems in an audit.

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Stripe Tax helps you monitor your obligations and alerts you when you exceed a sales tax registration threshold based on your Stripe transactions. In addition, it automatically calculates and collects sales tax, value-added tax (VAT), and goods and services tax (GST) on both physical and digital goods and services—in all US states and in more than 100 countries.

Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard, or using our powerful application programming interface (API).

Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration or add tax collection with the click of a button in the Stripe Dashboard.

• Register to pay tax: Let Stripe manage your global tax registrations and benefit from a simplified process that prefills application details—saving you time and simplifying compliance with local regulations.

• Automatically collect tax: Stripe Tax calculates and collects the right amount of tax owed, no matter what or where you sell. It supports hundreds of products and services and is up-to-date on tax rules and rate changes.

• Simplify filing: Stripe Tax seamlessly integrates with filing partners, so your global filings are accurate and timely. Let our partners manage your filings so you can focus on growing your business.

Learn more about Stripe Tax, or get started today.