Iowa's state sales and use tax rate is 6%, and most local jurisdictions add a 1% local option sales tax, so the rate you pay is 6% or 7% depending on where you buy (Iowa Department of Revenue, read November 2026). Most groceries and prescription drugs are exempt; candy, soft drinks and prepared food are taxable. The Department lists five Johnson County cities as new local option jurisdictions effective 1 July 2026, so the extra 1% applies there from that date (our reading of the Department's 1% local option rate).
First Friday and Saturday of August, items under $100
Introduction
Iowa has one statewide sales tax rate, but the amount at the till depends on whether the city or county has adopted the local option sales tax. This guide sets out the state rate, how the local option tax works, what is taxable and exempt, and when use tax applies, using the Iowa Department of Revenue's own pages read on 2 November 2026.
It also covers the clothing sales tax holiday and the local option and exemption changes the Department announced for 1 July 2026.
Section 01
The Rate: 6% State, Plus 1% Where Local Option Applies
The Department states: "Iowa law imposes both a sales tax and a use tax. The rate for both is 6%, though an additional 1% applies to most sales subject to sales tax, as many jurisdictions impose a local option sales tax." The state sales tax and use tax rates are the same.
The local option sales tax (LOST) is 1% in jurisdictions that have authorized it. It is not statewide: within a county some cities may have it and some may not, and the unincorporated rural area of a county may or may not have it. A jurisdiction may enact the tax on January 1 or July 1. The Department's Sales Tax Lookup is the place to check the rate for a specific address.
The local option tax applies to sales and services taxed under the state sales tax provisions. There is no corresponding local option use tax.
Section 02
Our Illustration: Tax on a Taxable Purchase at 6% and 7%
Taxable price
Tax at 6% (no local option)
Tax at 7% (with 1% local option)
Total at 7%
$100
$6.00
$7.00
$107.00
$500
$30.00
$35.00
$535.00
$1,200
$72.00
$84.00
$1,284.00
This table is our arithmetic on the Department's rates, not an official calculation. For tax-inclusive prices the Department tells retailers to divide gross receipts by 1.06 where only the state tax applies, or by 1.07 where the 1% local option tax also applies. On $17,250 of tax-inclusive receipts at 1.07 that gives $16,121.50 of sales and $1,128.50 of tax (our calculation; the Department's own example uses 1.06).
Section 03
What Is Taxable and What Is Exempt
Goods: sales of tangible personal property in Iowa are subject to sales tax unless exempted by state law.
Services: sales of services are exempt unless state law taxes them, so whether a service is taxable depends on the list of taxable services.
Software: the Department lists software delivered in physical or digital form, and software as a service, as taxable.
Food: with certain exceptions, food and food ingredients are exempt. Alcoholic beverages, candy, dietary supplements, food sold through vending machines, prepared food, soft drinks and tobacco are taxable. Items purchased with SNAP are exempt.
Medical: prescription drugs dispensed by a registered pharmacist or licensed physician, surgeon, dentist or podiatrist are exempt, as are insulin, hypodermic syringes and diabetic testing materials, for human use.
Vehicles: sales of vehicles subject to registration are exempt from sales tax but subject to a fee for new registration of ten dollars plus 5% of the sales or lease price; see our Iowa vehicle registration fee guide.
Car rentals: a 5% automobile rental tax applies to rentals of 60 days or less, in addition to sales tax and any local option tax.
The Department's lists are general; check its guide for a specific product.
Section 04
Use Tax on Out-of-State Purchases
Use tax is most often imposed after the sale takes place and only on goods and services on which sales tax was not collected, typically purchases from out-of-state sellers who do not collect Iowa tax. Individuals and businesses both owe it. The Department's example: an Iowa resident who buys clothing, stereo equipment or jewelry through a mail order catalog and is not charged Iowa sales tax owes use tax.
If tax was already paid to another state, no additional tax is due where that tax is the same as or more than Iowa's state rate; if it is less, the purchaser owes Iowa the difference. Persons owing $1,200 or more in use tax per year must register for a sales and use tax permit; those below that level without a permit pay using the non-permit use tax return. Our arithmetic: $1,200 of use tax at 6% corresponds to $20,000 of untaxed purchases in a year. For a $1,000 item with 4% paid to another state ($40), the Iowa 6% is $60, so $20 is owed; with 7% paid ($70), nothing more is owed (our illustration of the credit rule).
Section 05
What Changed in 2026
The Department's update of 18 June 2026 lists five new local option sales tax jurisdictions effective 1 July 2026, all in Johnson County: Coralville, Iowa City, North Liberty, Oxford and Shueyville. The Department labels each "New imposition" and puts the local option rate at 1%, so we read this as the extra 1% applying to taxable purchases there from that date. The same update lists the disincorporation of Conway in Taylor County, with discontinuance on 04/01/2026.
On 2 July 2026 the Department announced three sales tax exemptions signed into law effective 1 July 2026: a central office or transmission equipment exemption (House File 960), a nuclear electric generation facilities exemption (House File 2757) and a honeybees exemption (Senate File 2465, Division IX). None of these is a change to the 6% state rate. This page does not list every local option jurisdiction; check the Sales Tax Lookup, because these lists change on January 1 and July 1. We found no Department list of changes for 1 January 2027 as of 2 November 2026 (a search cannot prove none is coming).
Section 06
The Annual Clothing Sales Tax Holiday
The holiday is held the first Friday and Saturday of August; it does not include Sunday. No sales tax or local option sales tax is collected on an article of clothing or footwear with a selling price under $100.00. The exemption does not apply to the price of an item selling for $100.00 or more, and it applies to each article priced under $100.00 regardless of how many items are on the invoice. Our illustration: a $99.99 shirt carries no tax, while a $100.00 shirt carries $6.00 of tax at 6% or $7.00 where the local option tax applies.
Section 07
Filing and Official Sources
Retailers collect the tax by adding it to the price, and Iowa sales and use tax returns are filed electronically through GovConnectIowa.
The state sales tax rate is 6%. Most local jurisdictions also impose a 1% local option sales tax, so the rate is 6% or 7% depending on the city or county, according to the Iowa Department of Revenue.
Q
Does every Iowa city have the local option sales tax?
No. Within a county some cities may have the local option tax and some may not, and the unincorporated rural area of a county may or may not have it. Use the Department's Sales Tax Lookup for a specific address.
Q
Is food taxed in Iowa?
With certain exceptions, food and food ingredients are exempt. Alcoholic beverages, candy, dietary supplements, food from vending machines, prepared food, soft drinks and tobacco are taxable. Items bought with SNAP are exempt.
Q
Are prescription drugs taxable in Iowa?
Prescription drugs dispensed by a registered pharmacist or a licensed physician, surgeon, dentist or podiatrist are exempt for human use and consumption, as are insulin, hypodermic syringes and diabetic testing materials.
Q
Is clothing taxable in Iowa?
Yes, except during the annual sales tax holiday held the first Friday and Saturday of August, when clothing and footwear priced under $100.00 per article is exempt from sales tax and local option tax.
Q
What is Iowa use tax and when do I owe it?
Use tax is imposed on taxable goods and services bought without Iowa sales tax being collected, often from out-of-state sellers. The rate is the same 6%. If you paid tax to another state, you owe Iowa only the difference when that tax was lower than Iowa's state rate.
Q
Which Iowa cities started charging the local option sales tax in 2026?
The Department lists Coralville, Iowa City, North Liberty, Oxford and Shueyville in Johnson County as new local option jurisdictions effective 1 July 2026 (each marked New imposition).
Q
Are cars subject to Iowa sales tax?
Vehicles subject to registration are exempt from sales tax but pay a fee for new registration of ten dollars plus 5% of the sales or lease price. See our Iowa vehicle registration fee guide for the details.
Disclaimer:This guide gives general tax information for educational purposes and is not tax, legal or financial advice. Rules, forms and deadlines are set by the authorities named here and can change; check the official sources linked in this guide and talk to a qualified tax professional about your own situation.