Iowa sits in the Midwest, a region often called the “American Heartland”. It borders Minnesota to the north, Nebraska and South Dakota to the west, Missouri to the south, and Wisconsin and Illinois to the east. Most of its 145,000 km² is rural, and “The Hawkeye State” is best known for its corn and its wide open landscapes. The exceptions are the metro areas around the capital Des Moines, Cedar Rapids, Davenport and Sioux City. All told, just over 3.1 million people live in Iowa.
Iowa is a good place for companies that want to grow and become more profitable in the United States. Business-friendly policies, nationally respected research institutions and a well-educated workforce all count in its favor. Growth is backed by further advantages too: low costs of doing business, a central location and solid infrastructure.
Fast-growing industries include manufacturing and financial services, as well as biotechnology and renewable energy.
A thriving, diverse economy
Iowa has a long tradition of strong agriculture, but today that alone is not enough. State leaders saw this some time ago and used targeted strategies to build a strong mix of industries on top of that farming base.
In 2018, Iowa ranked as the fifth best-run state in the country (24/7 WALL STREET), proof of how hard and how successfully the state works to develop its economy. Nationwide, Iowa takes a very strong second place for the “lowest cost of doing business in the country” (Business Facilities, 2017). Industrial construction costs are 18 percent and industrial rents 15 percent below the national average.
Strong industries
Manufacturing accounts for 18 percent of Iowa's GDP, making it the state's largest industrial sector. The key areas are industrial metalworking, precision machinery for automation and environmental products, all highly specialized and high-performing.
Today 80 insurance companies have their headquarters in Iowa, a clear sign of how strongly the insurance and financial services sector is growing. It already contributes more than six percent of GDP, and the trend is upward. Iowa makes itself attractive with one of the lowest insurance premium tax rates in the country and no premium tax on annuities and certain life insurance contracts. The industry can also draw on a large pool of talent with strong qualifications and experience.
Many bio-industries have also made great strides in recent years and become a major economic force. The concentration of biological technicians in the “Hawkeye State” is 38 percent above the national average (BLS, 2015). There have been successes in agriculture as well as in the state's research capacity in plant and animal science and medicine. In research and development, global market leaders and startups alike drive innovation and lay the groundwork for future growth.
Iowa closes the skills gap
It is well known that the US job market faces skills shortages in some fields. Iowa tackles exactly that and has strengthened STEM education (Science, Technology, Engineering, Math) at its public schools and colleges. Cooperation between businesses and students has been made easier and has grown ever since. Iowa fills the gap with smart, well-trained and efficient workers.
Iowa gives entrepreneurs and companies good opportunities to invest in research and development. The overall conditions let businesses of every size plan their future here and succeed.
Income tax in Iowa
Since 2025, Iowa has levied a flat income tax of 3.8%. On top of that, federal income tax is due.
Corporate tax in Iowa
Iowa levies corporate tax of 5.5% to 7.1% (5.5% on profits up to $100,000, 7.1% above that). On top of that, federal corporate tax is due.
Sales tax in Iowa
The USA has no VAT on the European model. Instead, states, counties and municipalities levy a local sales tax on the sale of goods (but not services).
Sales tax rate in Iowa
Iowa's state sales tax is 6%. Cities and counties add an average of 0.94%, so the combined rate averages 6.94%.
Iowa nexus laws & sales tax
Learn more about economic nexus laws and sales tax.
Effective date:
January 1, 2019
Included transactions:
Gross revenue from sales of tangible personal property, specified digital products and services into the state
Treatment of exempt sales:
Exempt sales and exempt services count toward the threshold
Trigger:
Before July 1, 2019: sales or transactions
As of July 1, 2019: sales only
Sales/transaction threshold:
Before July 1, 2019: $100,000 or 200 transactions
From July 1, 2019: the transaction threshold is removed
Evaluation period:
The threshold applies to transactions in the previous or current calendar year
Additional information:
- Registration requirements: Iowa requires remote sellers to register to collect and remit sales tax "on the first day of the next calendar month that begins at least 30 days from the day the remote seller first exceeded the threshold". For more information, see Remote Sellers.
- Remote seller information
- SF2417
Iowa marketplace sellers & sales tax
Learn more about registration requirements for marketplace sellers
Effective date for marketplace facilitators:
January 1, 2019
Economic nexus threshold:
At least $100,000 in Iowa sales or at least 200 separate transactions in the current or previous calendar year from January 1 to June 30, 2019. The transaction threshold was abolished as of July 1, 2019. When calculating the threshold:
- Remote sellers include sales made through a marketplace
- Marketplace facilitators include all sales made through the marketplace
Registration requirements:
- Remote multichannel sellers: Once you exceed the economic nexus threshold, you must register with the Iowa Department of Revenue (DOR) and collect Iowa sales tax on sales not taxed by a marketplace facilitator.
- You must report all sales, but you can deduct sales on which a marketplace facilitator collected the tax.
- Remote marketplace sellers: You do not need to register and collect Iowa sales tax, even once you exceed the economic nexus threshold.
- In-state multichannel sellers: You must register with the Iowa DOR and collect tax on sales not taxed by a marketplace facilitator.
- You must report all sales, but you can deduct sales on which a marketplace facilitator collected the tax.
- In-state marketplace sellers: You must register. Contact the Iowa DOR for more information.
- Learn more here.
Want to compare Iowa with other locations? You'll find every profile in the overview of US states, and the guide to forming a company in the USA shows exactly how formation works. Whether a US LLC without a US permanent establishment could even stay tax-free for you is explained on our sister site www.zerotax.llc.
Our services for Iowa:
Got plans in Iowa? We form your US company in one of the six states we cover. You'll find the options and fees under US company formation, and we'll answer your questions in a consultation.