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Iowa Consumer Tax Laws

Consumers in Iowa pay many different types of taxes on the different goods and services they use every day. Typically, the businesses must submit the taxes for the consumer. Some taxes are intended to purely raise revenue for the government to keep the schools, police, health care systems, and other services operational. Other taxes have a dual purpose, they both raise money and inhibit certain behaviors viewed as bad by the government or society. These taxes make any “vice” items more expensive, such as taxes on liquor, cigarettes, or gambling.

Another influence on consumer taxes is market controls. For example, California taxes wine growers and vineyards a low excise tax on the wine they make, it’s nearly the lowest in the country. If California taxes on wine were close to the national average, then California wines sold in other states would have artificially inflated prices, thus hurting its marketability, which California doesn’t want to do because it would hurt the economy. Iowa isn’t known as a great wine growing region and it also has a high wine tax at the third most expensive in the country.

Iowa Consumer Tax Rates

A sample of the common consumer taxes in Iowa are listed in the table below.

Sales Tax Iowa has a 6% sales tax on all tangible personal property, goods, wares, or merchandise sold in the state to consumers.
Use Tax Goods or services that are purchased tax-free by consumers and are subsequently used in Iowa are taxed at 6%, just like the sales tax. For example, a laptop, tools, or clothes bought out-of-state or online tax-free and then used in Iowa by an Iowa resident would be taxed 6% for use.
Gasoline Tax Iowa gas taxes depend on the type of fuel:
  • Gasoline – $.21 per gallon
  • Diesel – $.22.5 per gallon
  • Ethanol blended gasoline – $.19 per gallon
  • E85 – $.19 per gallon
  • Aviation gasoline – $.08 per gallon
Cigarette Tax Iowa charges a tax of $1.36 per pack of 20 cigarettes and $1.70 per pack of 25 cigarettes.
Liquor Tax The liquor tax depends on the type of alcohol used:
  • Beer – $5.89 per 31 gallon barrel
  • Wine – $1.75 per gallon
  • Spirits – 50% markup by the Iowa Alcoholic Beverages Division
Gambling Tax Gambling taxes are administered by the Iowa Department of Inspections & Appeals: Social & Charitable Gambling Unit or the Iowa Racing and Gaming Commission. The taxes and fees depend on the type of gambling activity, including licenses for various bingo, game nights, raffles, etc. from $25 to $150. A license to manufacture bingo is most expensive at $1,000 for one year.

Riverboat and racetrack gambling is taxed at a graduated rate from:

  • 5% on the first $1 million
  • 10% on the next $2 million
  • 22% for over $3 million

Racetrack betting is taxed a maximum of 24% for racetracks with slots and table games with gaming revenues over $100 million.

If you have more questions about the taxes you’re paying, you should speak to an experienced Iowa tax lawyer or other tax expert.

Note: State and federal tax laws change frequently. Contact a tax attorney or conduct your own legal research to verify these state tax laws.

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