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Amazon purchases including Prime memberships now subject to Iowa sales tax

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On January 10, 2017, the Iowa Department of Revenue clarified that Amazon’s remittance of Iowa’s 6% sales tax also applies to Amazon Prime memberships.

Effective January 1, 2017, Amazon began collecting and remitting Iowa’s 6% sales tax to Iowa customers. This applies to all purchases with a shipping address of Iowa. Amazon is not required to remit the 1% local option tax.

Prior to this change, most small- to medium-sized business owners were not self-reporting use tax on taxable purchases if the vendor had not charged them sales tax. This has resulted in a constant adjustment made by auditors. Keith Habel, CPA, Honkamp Krueger & Co., P.C. partner and state and local tax (SALT) practice leader, says, “This change now alleviates the need for businesses as well as consumers to self-report use tax on those purchases. Businesses who remit use tax on their Amazon purchases should take note so they do not pay the tax twice.”

The state estimates $18 million to $24 million will be remitted on Amazon purchases. Amazon now remits tax in 34 states (including Washington D.C.).