Sales and Use Tax Permit, Return Filing, and Payment Changes

The Department is aware that sales and use tax permit holders that collect less than $1,200 in sales and use tax per year were changed to monthly filers on July 1, 2022. The Department reviewed these accounts and adjusted the filing frequency to annual. All affected taxpayers will be notified by mail of their current permit status, filing frequency, and instructions for filing the remainder of your 2022 taxes. 
 
NOTE: If you file hotel and motel, automobile rental, or construction equipment excise taxes you must electronically file and pay monthly.

On June 17, 2022, Governor Reynolds signed a bill that changed filing and payment requirements for sales, use, and excise taxes in Iowa. The three key changes of this legislation include: 
 

Sales and use taxes will be combined into one permit and filed using one return. 

  • All sales and use taxes will be filed on a single return. Separate returns for consumer’s use and retailer’s use taxes will no longer be used. 
  • If you have both a sales tax and use tax permit for your business location, the Department will cancel any unneeded permits for you. See below for more details.

Filing frequencies have changed for sales, use, and excise taxes. 

  • Taxpayers that collect less than $1,200 in sales and use tax per year will file returns and pay taxes annually. 
  • Taxpayers that collect $1,200 or more in sales and use tax per year will file returns and pay taxes monthly. All monthly filers are required to file and pay electronically. 
  • If you collect and remit most excise taxes, you must file a return and pay those taxes each month. This includes hotel and motel, automobile rental, and construction equipment. Water service excise tax will remain on a separate permit and return and can be either monthly or annual. 

Deposit payments are no longer required. 

  • Payments are due only when a sales and use tax return is filed. 
  • You can continue to make deposit payments using GovConnectIowa, but it is not required by the Department. 

What does this mean for you? 

  • If you have not already done so, create your GovConnectIowa logon today and request access to your tax accounts so you can file your return and pay tax on time. Quick Pay is available if you do not yet have a logon.
  • The Department will mail a letter to all active tax accounts to alert taxpayers of their filing frequencies after these changes are made on July 1, 2022. You can also view your filing frequency and account status by logging into your GovConnectIowa account. 
  • Monthly filers will file a single tax return and make one payment for all sales and use tax collected each month, beginning with tax collected in July 2022. The return and payment for the July 2022 tax period is due August 31, 2022. 
  • Annual filers will file a single tax return and make one payment for all sales and use tax collected each year, due on January 31 of the following year. 
  • In January 2023, you will file a single tax return for all sales and use taxes collected in 2022. When filing the return, report any payments made in 2022 as deposit payments to ensure you do not pay those taxes twice. 

Additional helpful information can be found by watching the Sales and Use Tax Changes video. 

  • Prior to July 1, 2022, a business may have needed to obtain separate permits and file separate returns for sales tax, retailer’s use tax, and consumer’s use tax. Retailer’s use tax is a voluntary collection and remittance by sellers without physical presence or economic nexus in Iowa who make sales on goods and services they know will be used in this state. Because of changes to the law that took effect January 1, 2019, most taxpayers that previously collected retailer’s use tax are now required to collect sales tax. The key difference between retailer’s use tax and sales tax is that an additional 1 percent local option tax is imposed in most jurisdictions on sales subject to sales tax but not use tax. 

    Consumer’s use tax is typically owed by taxpayers for tangible personal property or services they acquire without paying the sales tax. The Department has historically advised taxpayers that if they “regularly'' make purchases subject to use tax, they should obtain a consumer’s use tax permit and file a consumer’s use tax return. The Department has also instructed taxpayers who only occasionally incur use tax to report such purchases on the Goods Consumed line of today’s sales tax return. 

    Starting July 1, 2022, businesses will only need to register for one permit to cover all of these tax types, and they will be able to report all tax due for each of these tax types on the same return. The Department will also no longer use the terms “retailer’s use” and “consumer’s use” taxes to describe these two use taxes. The new sales and use tax return will have one use tax section that will allow taxpayers to report “taxable purchases” and “sales subject to use tax” on separate lines. Additionally, a taxpayer that owes or expects to owe $1,200 or more in use tax for taxable purchases in a calendar year will be required to obtain a sales and use tax permit rather than reporting that tax on the non-permit use tax return.

  • Prior to July 1, 2022, most sales tax permit holders filed returns once per calendar quarter. In addition, taxpayers must remit taxes based on how much tax they collect, as prescribed by administrative rule, on a quarterly, monthly, or semimonthly basis. 

    These legislative changes effective July 1, 2022 eliminate the semimonthly remittance, meaning all taxpayers will file a return and make a payment at the same time -- either monthly or annually. This way, taxpayers remit actual taxes collected, which is required for income tax withholding and is common in other states. Additionally, to mitigate the burden on truly small businesses of more frequent filing and remittance frequency, the threshold for determining whether a taxpayer will be a monthly or annual filer increased to $1,200 of tax collected per year, and annual filers are not required to file returns electronically. 

  • When do these changes take effect? 

    July 1, 2022. Changes for registration will be made for July 1, and taxpayers will need to file the new sales and use return on or before August 31, 2022 for tax collected in July. 

    I have only a sales tax permit number today. Do I need to do anything to my account?

    No. File the new return under your existing permit number according to your updated filing frequency provided by the Department. 

    I have only a consumer’s use permit number today. Do I need to do anything to my account?

    No. File the new return under your existing permit number according to your updated filing frequency provided by the Department. 

    I have only a retailer’s use permit number today.  Do I need to do anything to my account?

    No. File the new return under your existing permit number according to your updated filing frequency provided by the Department. Please review whether you are required to collect and remit sales tax rather than use tax. See the Remote Sellers page for more information about prior law changes impacting sales tax collection obligations. 

    I have sales and a consumer’s use permit numbers today.  Do I need to do anything to my accounts?

    No. The Department will merge your sales and consumer’s use tax accounts so that you file both tax types on one return under your existing sales tax permit number according to your updated filing frequency provided by the Department. 

    I have multiple sales tax or retailer’s use permits today.  Do I need to do anything to my accounts?

    No. If you actively file on multiple permits because you prefer to do so, you may continue filing for those returns. However, please review whether you are required to collect and remit sales tax rather than use tax. See the Remote Sellers page for more information about prior law changes impacting sales tax collection obligations. 

    I collect hotel and motel, automobile rental, or construction equipment excise taxes. What do I need to do?

    Nothing. Continue filing your return under your sales tax permit number. These excise taxes must be remitted on a monthly basis regardless of the amount of tax collected. 

    I collect water service excise tax. What do I need to do?

    Nothing will change for your water service excise tax permit or the water service excise tax return. You will file your water service excise tax return on either a monthly or annual basis based on your total sales and use tax and water service excise tax collected per year. This means if you collect $1,200 or more in sales, use, or water service excise tax in a calendar year, you must file your water service excise tax return and pay that tax monthly. 

    Regarding electronic file and pay mandate: what happens if you make a payment by paper check or in person at the Department of Revenue office?

    Payment made in the wrong manner or form may incur a penalty according to Iowa Code section 421.27. If you are assessed a penalty and want to request it be waived, complete the Penalty Waiver Request. 

    Do taxpayers need to do anything with their accounts?

    No. The Department will make any adjustments to taxpayers’ accounts automatically. 

    How will people find their current filing frequency & requirements?

    The Department will send notices by mail to every taxpayer to notify them of new filing and payment requirements. These notices will be available to view in your GovConnectIowa account under View Letters. If you do not receive a notice from the Department, you may need to update the address we have on file for you. You can update that information using the Business Change Form.

    How can I file my tax returns and make payments?

    File your tax returns electronically with GovConnectIowa. Need help? The GovConnectIowa Help page has resources and tutorial videos to help get started, file returns, and make payments. If you do not yet have a GovConnectIowa logon or don’t have access to your tax accounts, you also have the option to Quick Pay using the Make a Payment link on the GovConnectIowa homepage. 

    What if I want to change my filing frequency?

    Taxpayers who are under the annual filing threshold of $1,200 in sales or use tax collected in a calendar year may request to file and pay monthly. Taxpayers who meet or exceed the annual filing threshold must file monthly. You can request an update to your filing frequency by logging into your GovConnectIowa account and submitting the Change Filing Frequency request available under the Manage Tax Accounts section on the I Want to… tab or by completing the Business Change Form. 

    What if I’m getting correspondence but my business is closed and I don’t need a permit anymore?

    You’re receiving mail correspondence because you have an active permit on file with the Department. If you do not need the permit, complete and submit the Business Cancellation Form. 

    Will there still be seasonal filing?

    Yes. Taxpayers that need to collect and remit sales tax for 4 months or less every year may request to register as a seasonal filer. These taxpayers are expected to file for the months they choose every year until they notify the Department they have changed or closed their business.