Iowa Enacts Remote Seller Nexus Provisions
Effective Date: January 1, 2019 for $100,000 or 200 transactions; July 1, 2019 for $100,000 H.F. 779
Threshold: $100,000 or 200 or more separate transactions; $100,000 beginning July 1, 2019
Measurement Date: Current or immediately preceding calendar year
Includable Transactions: Gross sales; Marketplace sales included towards the threshold for individual sellers
When You Need to Register Once You Exceed the Threshold: The first day of the next calendar month that starts at least 30 days from the day the remote seller first exceeded the economic nexus threshold
Iowa Governor Kim Reynolds has signed legislation containing extensive remote seller nexus provisions. Effective January 1, 2019, any person who meets any of the following criteria is considered a retailer in the state of Iowa and is required to collect and remit Iowa sales tax and local option sales tax on sales into the state:
- A retailer that has gross revenue from Iowa sales of $100,000 or more in the current or immediately preceding calendar year
- A retailer that makes Iowa sales in 200 or more separate transactions in the current or immediately preceding calendar year
- A retailer that owns, licenses, or uses software or data files that are installed or stored on property used in Iowa. “Software or data files” include but are not limited to software that is affirmatively downloaded by a user, software that is downloaded as a result of the use of a website, preloaded software, and cookies
- A retailer that uses in-state software to make Iowa sales. “In-state software” means computer software that is installed or stored on property located in Iowa or that is distributed within Iowa for the purpose of facilitating a sale by the retailer.
- A retailer that provides or enters into an agreement with another person to provide, a content distribution network (CDN) in Iowa to facilitate, accelerate, or enhance the delivery of the retailer’s website to purchasers. “Content distribution network” means a system of distributed servers that deliver internet sites and other internet content to a user based on the geographic location of the user, the origin of the internet site or internet content, and a content delivery server.
Note that the nexus provisions described in the last 3 provisions (regarding software or data files, in-state software, and content distribution networks) do not apply to a retailer that has gross revenue from Iowa sales of less than $100,000 in the current or immediately preceding calendar year.
- A marketplace facilitator that makes or facilitates Iowa sales on its own behalf or for one or more marketplace sellers equal to or exceeding $100,000, or in 200 or more separate transactions, for an immediately preceding calendar year or a current calendar year.
A marketplace facilitator is required to collect sales and use tax on the entire price paid by a purchaser on each Iowa sale subject to sales and use tax that is made or facilitated by the marketplace facilitator, regardless of whether the marketplace seller for whom an Iowa sale is made or facilitated has or is required to have a retail sales tax permit or would have been required to collect sales and use tax had the sale not been facilitated by the marketplace facilitator, and regardless of the amount of the price that will ultimately accrue to or benefit the marketplace facilitator, the marketplace seller, or any other person. The sales and use tax collection responsibility of a marketplace facilitator applies to but shall not be limited to sales facilitated through a computer software application (in-app purchases) or through another specified digital product.
A marketplace facilitator will be relieved of liability for failure to collect and remit sales and use tax on an Iowa sale made or facilitated for a marketplace seller under the following circumstances and up to the amounts permitted under the following circumstances:
- If the marketplace facilitator demonstrates to the satisfaction of the Iowa Department of Revenue (DOR) that they have made a reasonable effort to obtain accurate information from the marketplace seller about a retail sale and that the failure to collect and remit the correct tax was due to incorrect information provided by the marketplace seller, then the marketplace facilitator shall be relieved of liability for that retail sale. This does not apply with regard to a retail sale for which the marketplace facilitator is the seller or if the marketplace facilitator and the seller are affiliates. For Iowa sales for which a marketplace facilitator is relieved of liability under this provision, the marketplace seller and purchaser are liable for any amount of uncollected, unpaid, or unremitted tax.
- If the marketplace facilitator demonstrates to the satisfaction of the DOR that the Iowa sale was made or facilitated for a marketplace seller prior to January 1, 2026, through a marketplace of the marketplace facilitator, that the marketplace facilitator is not the seller and that the marketplace facilitator and the seller are not affiliates, and that the failure to collect sales and use tax was due to an error other than an error in sourcing the sale. To the extent that a marketplace facilitator is relieved of liability for collection of sales and use tax under this provision, the marketplace seller for whom the marketplace facilitator has made or facilitated the Iowa sale is also relieved of liability.
- The liability relief provided in this bullet point shall not exceed the following percentage of the total sales and use tax due on Iowa sales made or facilitated by a marketplace facilitator for marketplace sellers and sourced to Iowa during a calendar year, which Iowa sales shall not include sales by the marketplace facilitator or affiliates of the marketplace facilitator:
- For Iowa sales made or facilitated during the 2019 calendar year, 10%.
- For Iowa sales made or facilitated during calendar years 2020 through 2024, 5%.
- For Iowa sales made or facilitated during the 2025 calendar year, 3%.
Note that a marketplace facilitator is deemed to be an agent of any marketplace seller making retail sales through a marketplace of the marketplace facilitator.
- A referrer if, for any immediately preceding calendar year or a current calendar year, makes $100,000 or more in Iowa sales or 200 or more separate Iowa sales transactions result from referrals from a platform of the referrer. A referrer is not required to collect and remit sales and use tax pursuant to this paragraph if the referrer does all of the following:
- The referrer posts a conspicuous notice on each platform of the referrer that includes all of the following:
- A statement that sales or use tax is due on certain purchases.
- A statement that the marketplace seller from whom the person is purchasing on the platform may or may not collect and remit sales and use tax on a purchase.
- A statement that Iowa requires the purchaser to pay sales or use tax and file sales or use tax returns if sales or use tax is not collected at the time of the sale by the marketplace seller.
- Information informing the purchaser that the notice is provided under the requirements of this provision.
- Instructions for obtaining additional information from the DOR regarding whether and how to remit sales and use tax to the state of Iowa.
- The referrer provides a monthly notice to each marketplace seller to whom the referrer made a referral of a potential customer located in Iowa during the previous calendar year, which monthly notice shall contain all of the following:
- A statement that Iowa imposes a sales or use tax on Iowa sales.
- A statement that a marketplace facilitator or other retailer making Iowa sales must collect and remit sales and use tax.
- Instructions for obtaining additional information from the DOR regarding the collection and remittance of Iowa sales and use tax.
- The referrer provides the DOR with monthly reports in an electronic format and in the manner prescribed by the DOR, which monthly reports contain all of the following:
- A list of marketplace sellers who received the referrer’s notice described above.
- A list of marketplace sellers that collect and remit Iowa sales and use tax and that list or advertise the marketplace seller’s products for sale on a platform of the referrer.
- An affidavit signed under penalty of perjury from an officer of the referrer affirming that the referrer made reasonable efforts to comply with the applicable sales and use tax notice and reporting requirements of this provision.
Note that a referrer is deemed to be an agent of any marketplace seller making retail sales resulting from a referral of the referrer.
For purposes of this legislation, “Referrer” means a person who does all of the following:
- Contracts or otherwise agrees with a retailer, seller, or marketplace facilitator to list or advertise for sale a product of the retailer, seller, or marketplace facilitator on a platform, provided such listing or advertisement identifies whether or not the retailer, seller, or marketplace facilitator collects sales and use tax.
- Receives a commission, fee, or other consideration from the retailer, seller, or marketplace facilitator for the listing or advertisement.
- Provides referrals to a retailer, seller, or marketplace facilitator, or an affiliate of a retailer, seller, or marketplace facilitator.
- Does not collect money or other consideration from the customer for the transaction.
For purposes of this legislation, “Referrer” does not include any of the following:
- A person primarily engaged in the business of printing or publishing a newspaper.
- A person who does not provide the retailer’s, seller’s, or marketplace facilitator’s shipping terms and who does not advertise whether a retailer, seller, or marketplace facilitator collects sales or use tax.
Note that this provision only applies to referrals by a referrer and shall not preclude the applicability of other provisions of this section to a person who is a referrer and is also a retailer, a marketplace facilitator, or a marketplace seller.
- A retailer that makes Iowa sales through the use of a solicitor. For purposes of this paragraph, “solicitor” means a person that directly or indirectly solicits business for a retailer. This provision is similar to “Click-Through” nexus provisions.
- A retailer is deemed to have a solicitor in Iowa if the retailer enters into an agreement with a resident under which the resident, for a commission, fee, or other similar consideration, directly or indirectly refers potential customers, whether by link on an internet site, or otherwise, to the retailer. This determination may be rebutted by a showing of proof that the resident with whom the retailer has an agreement did not engage in any solicitation in this state on behalf of the retailer that would satisfy the nexus requirement of the U.S. Constitution during the calendar year in question.
- This provision shall not apply to a retailer that has Iowa gross revenue from Iowa sales of $10,000 or less for an immediately preceding calendar year or a current calendar year.
- A retailer that owns, controls, rents, licenses, makes available, or uses any tangible or intangible property in Iowa or with a situs in this state, to make or otherwise facilitate a retail sale.
- Any person that enters into a contract or agreement with a governmental entity, including but not limited to contracts for the provision of financial assistance or incentives such as a tax credit, forgivable loan, grant, tax rebate, or any other thing of value. Any seller who submits a bid for a government contract must certify that they are registered with the DOR and will collect and remit IA sale tax. If the certification is false, the state agency can void the bid.
- Any affiliate of any person that is required to collect and remit sales and use tax under these provisions, provided the affiliate makes retail sales.
Per the legislation, the DOR may, in its discretion, adopt rules establishing and imposing notice and reporting requirements related to Iowa sales for retailers, including but not limited to marketplace facilitators, who do not collect and remit sales and use tax under this legislation. The rules may include but are not limited to rules requiring retailers, including but not limited to marketplace facilitators, to do any of the following:
- Notify purchasers at the time of an Iowa sales transaction of their sales and use tax obligations.
- Provide purchasers with periodic reports of purchases that are Iowa sales.
- Provide the DOR with annual reports that include but are not limited to information relating to purchases, purchasers, and Iowa sales.
Per the legislation, the DOR may adopt rules establishing and imposing penalties as follows, provided that any such penalty shall include a procedure for waiver of the penalty upon a showing of reasonable cause for such failure:
- The DOR may impose penalties for failure to provide a notification to a purchaser in the manner and form prescribed by the DOR. Such penalties shall not exceed $5 for each failure.
- The DOR may impose penalties for failure to provide a purchaser with a periodic report of purchases in the manner and form prescribed by the DOR. Such penalties shall not exceed $10 for each failure.
- The DOR may impose penalties for failure to provide the DOR with an annual report in the manner and form prescribed by the DOR. Such penalties shall not exceed an amount per annual report equal to $10 multiplied by the number of purchasers for whom information should have been but was not included in the annual report.
(S.F. 2417, Laws 2018, effective January 1, 2019)
UPDATE: On May 3, 2019, Iowa removed its 200-sale threshold for remote sellers, marketplace facilitators, and referrers through new enacted legislation. With this change, remote sellers will only be subject to the $100,000 threshold. The change is effective July 1, 2019. (H.F. 779, Laws 2019, effective July 1, 2019)