Tax breaks

2020 snapshot

Exemptions, deductions and exclusions

The Department of Revenue hasn’t updated this study since 2020. These are its estimates for tax year 2020 (property tax: 2018 assessments). Iowa has since cut income tax rates to one flat rate and stopped taxing retirement income, so the income tax figures, especially, are out of date².

Every break in the study

169 breaks in sales and use tax; the 80 costing the most are shown.

• Resale of Tangible Personal Property$3.34B
  Sales and use tax · Exemption · Administrative · Iowa Code 423.3(2)Sale of tangible personal property or taxable services or for resale of tangible personal property in connection with the furnishing of taxable services are exempt from sales and use tax.
• Medical Services$693.3M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423.2Medical services are not listed as an enumerated taxable service; these services are thus nontaxable. Medical services purchased under government health i.e. Medicare or Medicaid services care are not subject to sales and use tax and are considered in a separate estimate.
• Gambling Boat Games and Admissions$574.0M
  Sales and use tax · Exemption · Business Incentive · Iowa Code 99F.10(6)Sales by licensees authorized to operate excursion gambling boats for (1) charges for admission to excursion gambling boats and (2) gross receipts from gambling games authorized by the state racing and gaming commission and conducted on excursion gambling boats are exempt from sales and use tax.
• Construction Services$492.2M
  Sales and use tax · Exemption · Business - Inputs for Manufacturing · Iowa Code 423.2Construction services are not listed as an enumerated taxable service; these services are thus nontaxable.
• Food Sales for Human Consumption$477.3M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423.3(57)Sales of food for human consumption are exempt from sales and use tax if those food items are eligible for purchase under the Supplemental Nutrition Assistance Program (SNAP) administered by the United States Department of Agriculture.
• Interstate Sales$461.8M
  Sales and use tax · Exemption · Administrative · Iowa Code 423.3(43)The sale of property or of services performed on property which the retailer sends or delivers to a point outside of Iowa are exempt from sales and use tax as long as the property is not returned to Iowa, except in the course of interstate commerce or transportation.
• Medical Services paid by Medicare and Medicaid$440.3M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423.2Medical services purchased under government health i.e. Medicare or Medicaid services care are not subject to sales and use tax.
• Vehicles Subject to One-Time Registration Fee$436.6M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423.3(73), 321.105AThe purchase of vehicles subject to registration or subject only to the issuance of a certificate of title and sales of aircraft are exempt from the sales and use tax. These purchases are subject to a one-time new registration fee of five percent, and these collections are deposited in the Road Use Tax Fund.
• Transportation Services and Delivery Charges$425.7M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423.3(70)Transportation services, including the transportation of people, and delivery charges are exempt from sales and use tax when they are separately contracted in writing. If no written contract exists, the charges are not subject to sales and use tax if the bill itemizes the charges.
• Fuel Subject to the Motor Fuel Excise Tax$348.8M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 452A.3Fuel used for any purpose for the privilege of operating motor vehicles in the state is exempt from the sales and use tax when it is subject to the excise tax which is applied before the sale is made to the consumer.
• Tax Levying or Certifying Bodies In Iowa$311.8M
  Sales and use tax · Exemption · Government · Iowa Code 423.3(31)Sales to any tax-certifying or tax-levying body of the State of Iowa or governmental subdivision are exempt from sales and use tax.
• Products Used in Processing$253.0M
  Sales and use tax · Exemption · Business - Inputs for Manufacturing · Iowa Code 423.3(51)Tangible personal property sold for processing is exempt from sales and use tax. Tangible personal property is sold for processing only when it is intended that the property will, by means of fabrication, compounding, manufacturing, or germination, become an integral part of other tangible personal property intended …
• Agricultural Feed$241.3M
  Sales and use tax · Exemption · Agricultural Input · Iowa Code 423.3(5)The sale of feed for any form of animal life when the product of the animals constitutes food for human consumption and the sale of food or medication used in disease control or health promotion of livestock produced as part of agricultural production for market are exempt from the sales and use tax.
• Processing Chemicals$211.1M
  Sales and use tax · Exemption · Business - Inputs for Manufacturing · Iowa Code 423.3(51), 423.6(3)Chemicals, solvents, sorbents, and reagents directly used and consumed, dissipated, or depleted in processing tangible personal property intended to be sold ultimately at retail shall be exempt from sales and use tax. A catalyst is considered to be a chemical, solvent, sorbent or reagent.
• Slaughter and Meat Processing Services$209.2M
  Sales and use tax · Exemption · Business Incentive · Iowa Code 423.2Slaughter and meat processing services are not listed as an enumerated taxable service; these services are implicitly exempt from sales and use tax.
• Packaging Containers$176.3M
  Sales and use tax · Exemption · Business Incentive · Iowa Code 423.3(45)The sales of property which is a container, label, carton, pallet, packing case, wrapping paper, twine, bag, bottle, shipping case, or other similar article or receptacle is exempt from sales and use tax when sold to retailers or manufacturers for the purpose of packaging or facilitating the transportation of tangible …
• Nonprofit Hospitals$152.4M
  Sales and use tax · Exemption · Charitable Organization Support · Iowa Code 423.3(27)Sales of tangible personal property to or of services furnished for a nonprofit hospital licensed under Iowa Code 135B are exempt if the property or service purchased is used in the operation of the hospital.
• Industrial Machinery, Equipment and Computers$150.6M
  Sales and use tax · Exemption · Business - Inputs for Manufacturing · Iowa Code 423.3(47)This estimate includes: Installation of New Industrial Machinery The sale or rental of machinery, equipment, and computers used by a manufacturer in processing is exempt from sales and use tax.
• Prescription Drugs and Medical Devices$148.0M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423.3(60)The sale or rental of prescription drugs, durable medical equipment, mobility enhancing equipment, prosthetic devices, and other medical devices intended for human use or consumption is exempt from sales and use tax.
• Residential Utility Exemption$141.3M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423.3(84)(a)The sale or furnishing of metered gas, electricity, and fuel, including propane and heating oil, to residential customers which is used to provide energy for residential dwellings and units of apartment and condominium complexes used for human occupancy is exempt from sales and use tax.
• Data Centers and Web Search Portals$128.2M
  Sales and use tax · Exemption · Business Incentive · Iowa Code 423.3(92)A business that qualifies as a web search portal business or a data center that has a physical location in Iowa and that meets specific criteria may obtain an exemption from sales and use tax on specific purchases that are used in the operation and maintenance of the web search portal business.
• Casual Sale of Goods and Services$108.4M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423.3(39)Sales of otherwise taxable tangible personal property or services that are on a casual basis are generally exempt from sales and use tax.
• Commercial Fertilizer and Lime$107.6M
  Sales and use tax · Exemption · Agricultural Input · Iowa Code 423.3(4)Commercial fertilizer and agricultural limestone sales are exempt from the sales and use tax if the purchaser utilizes the fertilizer or limestone for the health promotion of plants which are produced as part of agricultural production for market. Plant hormones are considered to be commercial fertilizer.
• Trade-In for Remanufacture or Resale$93.9M
  Sales and use tax · Exemption · Administrative · Iowa Code 423.3(59)When tangible personal property is traded toward the purchase price of other tangible personal property, the gross receipts are only the portion of the purchase price which is payable in money to the retailer if two of three conditions are met: (a) the tangible personal property is traded to a retailer, and the …
• On-Line Computer Service$90.3M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423.3(65)The furnishing of any contracted on–line service is exempt from sales and use tax if the information is made available through a computer server. The exemption applies to all contracted on–line services, as long as they provide access to information through a computer server.
• Farm Machinery - Self-Propelled$85.5M
  Sales and use tax · Exemption · Agricultural Input · Iowa Code 423.3(8)The sale or rental of farm machinery and equipment and replacement parts, including auxiliary attachments which improve the performance, safety, operation, or efficiency of the machinery and equipment, is exempt from the sales and use tax if the machinery and equipment is used directly and primarily in production of …
• Processing Power and Fuel$75.0M
  Sales and use tax · Exemption · Business - Inputs for Manufacturing · Iowa Code 423.3(50)(51), 423.6(3)(b)The sales price of electricity or steam when purchased and used in the processing of tangible personal property intended to be sold ultimately at retail and any fuel which is consumed in creating power, heat, or steam for processing or for generating electric current are exempt from sales and use tax.
• Dentists$69.4M
  Sales and use tax · Exemption · Consumer BenefitReceipts for services performed in Dentists offices in the State of Iowa.
• Architectural and Engineering Services - Business$68.8M
  Sales and use tax · Exemption · Business Incentive · Iowa Code 421.14, 423.2Architectural and engineering services are not listed as enumerated as taxable services; these services are implicitly exempt from the sales and use tax.
• Construction Materials under Contracts with Tax Exempt Entities$66.1M
  Sales and use tax · Exemption · Charitable Organization Support · Iowa Code 423.3(80)Designated tax-exempt entities awarding construction contracts on or after January 1, 2003 may issue special exemption certificates exempting contractors and subcontractors from paying sales and use tax for materials used in the construction project.
• Agricultural Chemicals$62.5M
  Sales and use tax · Exemption · Agricultural Input · Iowa Code 423.3(5)This estimate includes: An undetermined portion of Adjuvants and Surfactants Sales of herbicides, pesticides, insecticides which are to be used in disease, weed, or insect control or health promotion of plants or livestock produced as part of agricultural production for market are exempt from sales and use tax.
• Legal Services - Business$58.9M
  Sales and use tax · Exemption · Business Incentive · Iowa Code 421.14, 423.2Legal services are not listed as an enumerated taxable service; these services are implicitly exempt from sales and use tax.
• Laboratory Tests on Humans$54.1M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423.2(6)Receipts for the service of laboratory testing on humans are exempt from sales and use tax.
• Sales by a City or County$49.7M
  Sales and use tax · Exemption · Government · Iowa Code 423.3(32)In general, sales made by a city or county are exempt from sales tax. The exemption does not apply to sales from furnishing or service of gas, electricity, water, heat and communication services rendered, furnished or performed by a county or city.
• Accounting and Bookkeeping Services - Business$40.9M
  Sales and use tax · Exemption · Business Incentive · Iowa Code 421.14, 423.2Accounting and bookkeeping services are not listed as an enumerated taxable service; these services are implicitly exempt from sales and use tax.
• Prepaid Merchandise Cards$31.5M
  Sales and use tax · Exemption · Administrative · Iowa Code 423.1(46), 423.2(1)Sales of prepaid merchandise cards other than prepaid telephone calling cards are not sales of tangible personal property and thus are exempt from the sales and use tax.
• Veterinary Products and Services - Small Animal$31.5M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423.3(5)Veterinary services are not an enumerated taxable service and thus are not subject to sales and use tax. The exemption does not apply to food, drugs, medicines, bandages, dressings, serums, and tonics used in the treatment of pets or animals for hobby purposes or any sales of tangible property or enumerated service …
• Legal Services - Consumer$24.1M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 421.14, 423.2Legal services are not listed as an enumerated taxable service; these services are implicitly exempt from sales and use tax.
• Food Purchased with SNAP Benefits$23.8M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423.3(58)Sales of all foods for human consumption which are purchased with Supplemental Nutrition Assistance Program (SNAP) benefits are exempt from sales and use tax.
• Lottery Tickets$22.3M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423.3(81)Sales of lottery tickets or shares of a lottery game are exempt from sales and use tax.
• Fuel for Implements of Husbandry$20.8M
  Sales and use tax · Exemption · Agricultural Input · Iowa Code 423.3(6)Sales of fuel, gas, electricity, water and heat consumed in implements of husbandry are exempt from sales and use tax. An implement of husbandry is defined to mean any tool, equipment, or machine necessary to the carrying on of the business of agricultural production and without which that work could not be done.
• Processing Services and Goods for Food Products$18.4M
  Sales and use tax · Exemption · Business - Inputs for Manufacturing · Iowa Code 423.3(49)Carbon dioxide in a liquid, solid, or gaseous form, or taxable services primarily used in the performance of processing food products are exempt from sales and use tax.
• Wind Energy Conversion$18.1M
  Sales and use tax · Exemption · Business Incentive · Iowa Code 423.3(54)The sales of tangible personal property used to convert wind energy to electrical energy or the gross receipts from the sale of materials used to manufacture, install, or construct property used to convert wind energy to electrical energy are exempt from sales and use tax.
• Residential Sewer and Refuse Services$17.3M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 421.14, 423.2Residential sewer and refuse services are not listed as an enumerated taxable service; these services are implicitly exempt from sales and use tax. Solid waste collection and disposal services for nonresidential commercial operations are taxable.
• Accounting and Bookkeeping Services - Consumer$16.7M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 421.14, 423.2Accounting and bookkeeping services are not listed as an enumerated taxable service; these services are implicitly exempt from sales and use tax.
• Dormitories and Memorial Union Room Rental$13.7M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423A.5(1)(b)The renting of sleeping rooms in dormitories and in memorial unions at all universities and colleges located in the state of Iowa is exempt from the hotel and motel excise tax. In addition, these rentals are implicitly exempt from the sales and use tax.
• Farm Machinery - Special Purpose$13.4M
  Sales and use tax · Exemption · Agricultural Input · Iowa Code 423.3(11)The sale or rental of farm machinery and equipment and replacement parts, including auxiliary attachments which improve the performance, safety, operation, or efficiency of the machinery and equipment are exempt from the sales and use tax.
• Solar Energy Equipment$12.1M
  Sales and use tax · Exemption · Business IncentiveThe sales price of solar energy equipment is exempted from Iowa sales and use tax. Solar energy equipment is defined as equipment that is primarily used to collect and convert incident solar radiation into thermal, mechanical or electrical energy, or equipment that is primarily used to transform such converted solar …
• Fuel to Heat/Cool Livestock Buildings$10.9M
  Sales and use tax · Exemption · Agricultural Input · Iowa Code 423.3(6)The sale of fuel used to provide heat or cooling for livestock buildings is exempt from sales and use tax. Fuel includes electricity and livestock includes domesticated fowl.
• Nonprofit Health Centers$10.9M
  Sales and use tax · Exemption · Charitable Organization Support · Iowa Code 423.3(18)(e)Sales of goods or services to community health centers as defined in 42 USCA section 254c and to migrant health centers defined in 42 USCA section 254b are exempt from sales and use tax.
• High Quality Job Program Sales Tax Refund$10.6M
  Sales and use tax · Refund · Business Incentive · Iowa Code 15.331ABusinesses can claim a refund under the High Quality Job Program for the sales and use taxes paid for gas, electricity, water, or sewer utility services, goods, wares, or merchandise, or on services rendered, furnished, or performed to or for a contractor or subcontractor and used in the fulfillment of a written …
• Fuel Used in Grain Drying$10.5M
  Sales and use tax · Exemption · Agricultural Input · Iowa Code 423.3(6)The sale of fuel, including electricity, used in grain drying is exempt from sales and use tax.
• Nonprofit Treatment Facilities$10.5M
  Sales and use tax · Exemption · Charitable Organization Support · Iowa Code 423.3(18)Purchases of tangible personal property or services by nonprofit treatment facilities are exempt from sales and use tax. Nonprofit treatment facilities include facilities providing residential care and intermediate care for persons with an intellectual disability and residential care for persons with mental illness;
• Inert Gases$9.8M
  Sales and use tax · Exemption · Business - Inputs for Manufacturing · Iowa Code 423.3(52)Sales of inert gases to be used in the manufacturing process are exempt from sales and use tax. Only sales of inert gases are eligible for the exemption. Argon, helium, hydrogen, neon, nitrogen, carbon dioxide, krypton, xenon and radon are nonexclusive examples of inert gases.
• Printers' and Publishers' Supplies$9.5M
  Sales and use tax · Exemption · Business - Inputs for Manufacturing · Iowa Code 423.3(46)Sales to a printer or publisher of an enumerated list of products that are generally expendable tools and supplies used to complete a finished product for sale at retail are exempt from sales and use tax.
• Agricultural Drainage Tile$9.3M
  Sales and use tax · Exemption · Agriculture Support · Iowa Code 423.3(5)The sale or installation of drainage tile which is to be used in disease control, weed control, or the health promotion of plants or livestock produced as part of agricultural production for market is exempt from sales and use tax. The materials used to install the drainage tile are also exempt.
• Massage Therapy$9.0M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423.2(6)The sale of massage therapy services provided by massage therapists licensed under Iowa Code 152C is exempt from sales and use tax.
• Funeral Homes and Funeral Services$8.5M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423.2Certain goods sold and services performed by funeral homes are exempt from the sales and use tax.
• Breeding Stock$8.1M
  Sales and use tax · Exemption · Agriculture Support · Iowa Code 423.3(3)Sales of agricultural breeding livestock are exempt from sales and use tax. Livestock means domestic animals which are raised on a farm as a source of food or clothing, including cattle, sheep, hogs and goats, ostriches, rheas, emus, fish and other aquaculture animals.
• Hotel and Motel Excise Tax$7.7M
  Sales and use tax · Exemption · Business Incentive · Iowa Code 423A.3The renting of any lodging is exempt from the sales and use tax. The sales price for the renting of lodging for 31 or fewer consecutive days is subject to an excise tax of five percent. This excise tax is deposited into the General Fund.
• Rental or Broadcast of Entertainment Media$7.3M
  Sales and use tax · Exemption · Business Incentive · Iowa Code 423.3(41)Sales from the rental of films, video and audio tapes or discs, records, photos, copy, scripts, or other media used for the purpose of transmitting that which can be seen, heard or read is exempt from sales and use tax if the lessee imposes a charge for the viewing or rental of the media with that charge subject to …
• Transportation Services –All Air Charters$7.2M
  Sales and use tax · Exemption · Business Incentive · Iowa Code 423.3(61), 423.3(7)This estimate includes: Agricultural Aerial Spraying Transportation Services Sales price of services furnished by specialized flying implements of husbandry used for agricultural aerial spraying and aerial commercial and chartered transportation services are exempt from sales and use tax.
• Cold Storage Services$6.9M
  Sales and use tax · Exemption · Business Incentive · Iowa Code 423.2Cold storage services are not listed as an enumerated taxable service; these services are implicitly exempt from sales and use tax.
• Beverage Container Deposits$6.4M
  Sales and use tax · Exemption · Administrative · Iowa Code 455CSales and use tax shall not apply to beverage container deposits. On all carbonated and alcoholic beverages, consumers pay a five-cent deposit when purchasing the beverage container and receive a five-cent refund when returning the container to a store or redemption center.
• Domesticated Fowl$6.3M
  Sales and use tax · Exemption · Agriculture Support · Iowa Code 423.3(3)Sales of domesticated fowl are exempt from sales and use tax. Domesticated fowl include any domesticated bird raised as a source of food, either eggs or meat, whether sold to a person engaged in agricultural production or not.
• Commercial Amusement Enterprises$6.2M
  Sales and use tax · Exemption · Business Incentive · Iowa Code 423.2(4)Sales by commercial amusement enterprises which contract to furnish a show for a fixed fee are exempt from sales and use tax. For example, the fee charged by a performer to a venue is not taxable, but any admissions to see the performance are taxable.
• Nonprofit Private Educational Institutions$6.0M
  Sales and use tax · Exemption · Charitable Organization Support · Iowa Code 423.3(17)Sales of goods, wares, merchandise, or services to any nonprofit private educational institution in Iowa are exempt from sales and use tax if used for educational purposes.
• Central Office and Transmission Equipment for Telecommunication Companies$5.8M
  Sales and use tax · Exemption · Business - Inputs for Manufacturing · Iowa Code 423.3The sale or rental of central office equipment or transmission equipment is exempt from sales and use tax if it is primarily used by local exchange carriers and competitive local exchange service providers;
• Railroad Rolling Stock$5.4M
  Sales and use tax · Exemption · Inputs for Transportation · Iowa Code 423.3(71)Sales of tangible personal property used as railroad rolling stock for transporting persons or property along with related materials and parts are exempt from sales and use tax.
• Newspapers$5.2M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423.3(55)The gross receipts from the sale of newspapers, free newspapers and shoppers’ guides are exempt from sales and use tax. A newspaper is a periodical, published at short, stated and regular intervals, usually daily or weekly. It is printed on newsprint with news ink.
• Sales by State, County or District Fairs$5.2M
  Sales and use tax · Exemption · Government · Iowa Code 423.3(23)Sales of tangible property or services rendered, furnished or performed by the state fair organized under Iowa Code chapter 173 or a county, district or fair society organized under Iowa Code chapter 174 are exempt from sales and use tax.
• Reconditioning Services$5.0M
  Sales and use tax · Exemption · Business Incentive · Iowa Code 423.3(50), 423.1(55)Sales of services to a retailer to recondition or repair tangible personal property are exempt from sales and use tax if the property is normally sold in the regular course of the retailer's business and is held for sale by the retailer.
• Water Sold to Farmers$4.9M
  Sales and use tax · Exemption · Agricultural Input · Iowa Code 423.3(5)Sales of water used as drinking water for livestock or poultry products for market are exempt from the sales and use tax. Sales of water used in the production of plants are also exempt.
• Clothing Sales Tax Holiday$4.6M
  Sales and use tax · Exemption · Consumer Benefit · Iowa Code 423.3(68)Purchases of items of clothing or footwear designed to be worn on or about the human body are exempt from sales and use tax if the sale price of an item is less than one hundred dollars and the sale of the item takes place during the period beginning at 12:01 a.m.
• Travel Agencies - Business$4.5M
  Sales and use tax · Exemption · Business Incentive · Iowa Code 423.2Travel agency services are not listed as an enumerated taxable service; these services are thus nontaxable.
• Aircraft$4.3M
  Sales and use tax · Exemption · Business Incentive · Iowa Code 423.6(12)Aircraft exempt from use tax include those used: 1. in scheduled interstate Federal Aviation Administration certified air carrier operations and 2. by an aircraft dealer who rents or leases the aircraft;
• Biodiesel Production Sales Tax Refund$4.2M
  Sales and use tax · Refund · Business Incentive · Iowa Code 423.4(9)A biodiesel producer engaged in the manufacturing of biodiesel for use in biodiesel blended fuel who has registered with the United States EPA is eligible for a sales and use tax refund calculated by multiplying a designated rate by the total number of gallons of biodiesel produced by the biodiesel producer in this …
• Laboratory Tests on Animals$4.1M
  Sales and use tax · Exemption · Agriculture Support · Iowa Code 423.2(6)Receipts for the service of laboratory testing on animals are exempt from sales and use tax.
• Agricultural Packaging$4.0M
  Sales and use tax · Exemption · Agriculture Support · Iowa Code 423.3(15)Containers, labels, cartons, pallets, packing cases, wrapping, baling wire, twine, bags, bottles, shipping cases, or other similar articles or receptacles sold for use in agricultural, livestock or dairy production are exempt from the sales and use tax.
• Home Health and Community-based Service Providers$3.5M
  Sales and use tax · Exemption · Charitable Organization Support · Iowa Code 423.3Sales of tangible personal property and services to a nonprofit corporation which is a home and community-based service provider certified to offer Medicaid waiver services by the Iowa Department of Human Services are exempt from the sales and use tax.