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Iowa Shoppers Now Pay Sales Tax on Amazon

Manuel Alarcon/flickr

Iowans shopping at Amazon.com have a surprise in store when they go online today.  

Starting January 1, the retail giant will be collecting sales tax for the first time on purchases in Iowa, as they do in 30 other states.   

Department of Management Director Dave Roederer says it will be good for state coffers and for other retailers.

“It is leveling the playing field for the main street merchants,” Roederer said.  “Main Street merchants are required to collect sales tax.  The online was not.  So that levels that out.”

Amazon does not have a brick and mortar store in Iowa, so they are not required to collect the tax.  

Technically, Iowans owe an equivalent use tax, but most shoppers do not submit the tax to the Department of Revenue.

The company did not respond to a request for information explaining the change.    

It is leveling the playing field for main street merchants

The new tax collections are included in revenue estimates for the rest of this fiscal year and next.

“Amazon has announced that they will start collecting sales tax so we have factored in what we estimate that Amazon will be contributing,” Roederer said.  “I mean collecting.”    

The Department of Revenue estimates that uncollected taxes on sales by online retailers comes to as much as $24 million  a year, with Amazon the biggest participant.  

Purchases of books on Amazon’s e-reader the Kindle will remain untaxed because digital downloads are exempt from the state sales tax.