Iowa Lodging Tax: Rates, Exemptions, and Airbnb Rules

The Iowa lodging tax is a 5% state excise tax on sleeping room rentals under Iowa Code Chapter 423A, and the 6% state sales tax applies on top of it. Local jurisdictions can add a hotel and motel tax of up to 7%, and a local option sales tax may apply as well. In a city that has adopted every available levy, a guest’s bill can carry roughly 19% in combined tax on the nightly price.¹

How the Rates Stack Up

Four separate taxes can apply to the same hotel stay or short-term rental in Iowa, and each one is calculated on the full rental price:

The 5% state excise tax created by Chapter 423A, which applies to every qualifying rental statewide.
The 6% state sales tax, which applies to overnight accommodations. Conference and banquet room rentals are exempt from this sales tax, but sleeping rooms are not.²
A local hotel and motel tax of up to 7%, imposed in whole-percentage increments by cities, counties, and certain land use districts. Not every jurisdiction charges the maximum and some have not adopted the tax at all.
A local option sales tax where the jurisdiction has adopted one.

The state-level portion by itself is 11%. Local add-ons do the rest. Guests usually see the total grouped on one line or split into “state tax” and “local tax” on the receipt. Operators, though, have to track the components separately when filing, because the state excise tax and local hotel/motel tax are remitted under Chapter 423A while the sales tax runs through the regular sales tax system.²

What Counts as Taxable Lodging

Iowa defines taxable lodging broadly. The tax reaches rooms, apartments, and sleeping quarters in hotels, motels, inns, rooming houses, cabins, bed and breakfasts, manufactured homes, and residential properties where sleeping accommodations are rented to short-term guests.¹ If someone can sleep there and you charge rent for it, the tax almost certainly applies.

A homeowner renting a spare bedroom or an entire house falls under the same rules as a commercial hotel. The tax is based on the full price charged, including mandatory cleaning fees and other charges rolled into the nightly rate.

When Lodging Tax Doesn’t Apply

Stays Over 90 Days

Iowa used to exempt any stay longer than 30 days. That changed in 2020. Under current law, stays in a hotel, motel, inn, rooming house, or any other place that furnishes sleeping accommodations to short-term guests become exempt only after 90 consecutive days.² The first 90 days remain fully taxable even if the total stay runs longer. For other types of lodging not typically used by transient guests, the statute provides an exemption after 31 consecutive days.³

A consultant living in a Des Moines hotel for three months will pay lodging tax on the first 90 nights, and the exemption only kicks in starting on night 91.

Federal Government and Religious Retreats

Contracts made directly with the federal government are exempt from both the 5% state excise tax and any local hotel/motel tax.² The guest or agency usually presents a government credit card or tax-exempt documentation at check-in. State and local government contracts are treated differently and remain subject to both taxes.

Iowa also exempts rooms rented to guests of a religious institution for a religious retreat or function, provided the lodging sits on property that already qualifies for a religious property tax exemption.² Keep documentation for every exempt transaction. If the Department of Revenue audits you, the burden of proof is on the operator.

If You Rent Through Airbnb or VRBO

Starting in 2019, Iowa shifted collection responsibility for online rental platforms. When a property owner lists and rents through a marketplace like Airbnb or VRBO, the marketplace is responsible for collecting and remitting all applicable hotel and motel taxes on the owner’s behalf.² If you rent exclusively through one of these platforms, you do not need to collect lodging tax yourself or file returns for those stays.

The catch is the word “exclusively.” If you book some stays through Airbnb and also take direct bookings through your own website or by word of mouth, you must collect and remit all applicable taxes on the direct bookings yourself. The platform only covers the transactions it processes. Owners mixing direct and platform bookings need a state tax permit and must file returns for the direct rental portion.

Getting a Permit and Filing Returns

Before collecting any lodging tax directly, an operator needs a business tax permit from the Iowa Department of Revenue. Registration happens through GovConnectIowa, the state’s online tax portal, or by paper application on Form 78-005.⁴

You will need your Federal Employer Identification Number before starting. Corporations, partnerships, LLCs, and associations also need each business owner’s name and Social Security Number on hand. Select the hotel and motel tax option during the application so the system configures your account for the correct filing type.

You can begin collecting tax immediately after submitting your registration. Your copy of the application serves as proof of registration until the official account number arrives in the mail, which can take up to six weeks. If you registered through GovConnectIowa, the permit letter will also be available electronically under your account.

Iowa lodging tax returns must be filed monthly regardless of how much tax you collected. This is not optional and does not depend on a dollar threshold.⁵ Even during months with zero rentals, you still need to file a return showing no tax due. All filing and payment happens electronically through GovConnectIowa, which lets you enter gross receipts, calculate the tax owed, and pay by bank transfer or credit card.⁶ Save the digital confirmations with your monthly records as your receipt if the Department ever questions a filing.

One point worth taking seriously: all lodging taxes you collect are considered held in trust for the state and local jurisdictions that imposed them.¹ The money was never yours to spend. Commingling collected tax with operating funds creates legal exposure if you later can’t remit the full amount.

Penalties for Late or Missed Filings

Iowa applies the same penalty framework to lodging tax that it uses for other state taxes:

A 5% penalty on the unpaid tax for failing to file a return on time.
A separate 5% penalty on the unpaid amount for failing to pay when due. This stacks on top of the late filing penalty.
A 5% penalty on any shortfall the Department of Revenue finds during an audit. This replaces the late payment penalty but adds to any late filing penalty.
A 75% penalty for filing a false return or intentionally failing to file to evade tax. This is not subject to waiver.

Interest also accrues on unpaid balances.⁷ A 5% filing penalty, a 5% payment penalty, and running interest can turn a modest tax bill into a much larger problem after only a few months of neglect.

Records You Should Keep

The IRS generally recommends keeping business tax records for at least three years, with employment tax records retained for four years.⁸ For Iowa lodging tax, operators should keep records that document gross receipts, tax collected, exempt transactions with supporting documentation, and the filing confirmations from GovConnectIowa.

Exempt transactions deserve the most careful filing. If a federal employee stays at your property and you don’t collect tax, you need the government credit card receipt or exemption certificate on file. If a long-term guest crosses the 90-day threshold and stops paying tax, keep the original booking records showing the consecutive-night count. The Department’s position during an audit is that the exemption didn’t apply unless you can prove it did.

1
Iowa Legislature. Iowa Code Chapter 423A – Hotel and Motel Tax
2
Iowa Department of Revenue. Iowa Hotel and Motel Tax
3
Iowa Legislature. House File 760 – Enrolled
4
Iowa Department of Revenue. Business Permit Registration
5
Iowa Department of Revenue. Filing Frequency and Return Due Dates
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Iowa Department of Revenue. GovConnectIowa Help
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Legal Information Institute. Iowa Admin Code r 701-10.6 – Penalties
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Internal Revenue Service. Taking Care of Business – Recordkeeping for Small Businesses