Starting a Business

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.

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.

Register for a permit if the sale of goods or services are taxable.

Register

This is a combined business application form, which means you can register for one or more of the following:

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 6% as of July 1, 2008.

For more information about the "regular" local option tax, consult the Local Option Q&A.

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.

You will give a completed Exemption Certificate (pdf) to each supplier 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.

We strongly encourage you to review the online training presentations provided at the following link before registering your business:

http://www.iowa.gov/tax/educate/TrainOnline.html

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.

Does everyone need a Federal Employer Identification Number (FEIN)?

No.

You will need a FEIN if...

How to apply for a FEIN...

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...

Will you have employees?

If so, you will need to:

Register to be an Iowa withholding agent through the online Iowa Business Tax Registration form.

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.

Have each employee fill out a federal W-4 (pdf) and 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 with Iowa, you will receive a letter from us 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 estimated 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. You will need to make estimated tax payments for federal tax and estimated tax payments for Iowa tax. Our brochure, Estimated Taxes, explains how and when to make Iowa payments.

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 Iowa Workforce Development to establish your Iowa unemployment insurance tax account and to register with the Division of Labor if you are a construction contractor. You must file your registration form and unemployment insurance quarterly reports online at www.MyIowaUI.org.

The Employers' Council of Iowa works in conjunction with Iowa Workforce Development to offer guidance, support, training, and other resources to small and medium sized businesses.

The Iowa Economic Development Authority is another excellent resource. So is IA SourceLink.

The Internal Revenue Service has a Web page specifically for small businesses. Check out their Small Business Information page.