What Items Are Exempt From Sales Tax in Iowa?

Items exempt from sales tax in Iowa fall into a handful of predictable groups: most groceries, prescription drugs and certain medical equipment, diapers and feminine hygiene products, clothing under $100 during the August tax holiday, farm and manufacturing inputs, and specific purchases by schools, government agencies, and other qualifying buyers. Iowa’s base sales tax is 6%, with most localities adding a 1% local option tax, so knowing what’s exempt can save real money.¹ Some exemptions apply automatically at the register. Others require you to hand the seller a completed exemption certificate before the sale.

Groceries and Food for Home Consumption

Food and food ingredients sold for home consumption are exempt. Bread, milk, meat, produce, canned goods, and frozen meals all ring up tax-free.²

Several categories stay taxable even inside a grocery store:

Prepared food, meaning anything sold heated, heated by the seller, or made by combining two or more ingredients for sale as a single item. Deli sandwiches, rotisserie chickens, and hot soup from the counter qualify as prepared food.
Candy, defined as a preparation of sugar or sweetener combined with chocolate, fruits, nuts, or flavorings in bar, drop, or piece form. Items containing flour are not candy under Iowa’s rule, so a chocolate chip cookie is exempt while a chocolate bar is taxable.
Soft drinks, meaning beverages with natural or artificial sweeteners. Plain water, milk, and 100% juice stay exempt.
Alcoholic beverages containing at least 0.5% alcohol by volume.
Dietary supplements labeled with a “Supplement Facts” panel. Products with a “Nutrition Facts” label are food.
Any food dispensed from a vending machine that accepts payment.

The bakery and deli counter is where this trips people up. A package of dinner rolls from the shelf is exempt. A custom party platter assembled for your order from the same bakery is taxable, because the seller combined ingredients for sale as a single item.²

Prescription Drugs and Medical Equipment

Prescription drugs dispensed for human use are exempt when the dispenser is licensed under Iowa law or equivalent out-of-state licensing. Oxygen and insulin are exempt whether prescribed or not.³

Three categories of medical equipment are exempt, each on its own terms:

Prosthetic devices, meaning replacement, corrective, or supportive devices worn on or in the body. Orthopedic braces, ostomy and urological supplies, tracheostomy equipment, and intraocular lenses qualify. No prescription required.
Durable medical equipment, meaning equipment that withstands repeated use, serves a medical purpose, is not generally useful without illness or injury, is not worn on the body, and is for home use. Hospital beds, oxygen concentrators, and nebulizers fit here. A prescription is required.
Mobility enhancing equipment that helps a person move from place to place and suits home or vehicle use, such as wheelchairs and walkers. Motor vehicles and standard vehicle equipment do not count. A prescription is required.

These categories don’t overlap in Iowa’s rules. Durable medical equipment, by definition, is not worn on the body. Prosthetic devices, by definition, are. Getting the category right matters because the prescription requirements differ.⁴

Diapers and Feminine Hygiene Products

Since January 2023, feminine hygiene products and diapers are exempt. The feminine hygiene exemption covers tampons, panty liners, menstrual cups, and sanitary napkins. The diaper exemption covers both children’s and adult diapers, cloth or disposable.²

Clothing During the August Sales Tax Holiday

On the first Friday and Saturday of August each year, Iowa exempts individual articles of clothing and footwear priced under $100 from both state and local sales tax. The exemption applies per item. Five items at $95 each all qualify. An item priced at $100 or more doesn’t qualify at all, not even partially.⁵ In 2026, the holiday falls on August 7 and 8.

Farm Equipment, Inputs, and Fuel

Machinery and equipment used directly and primarily in agricultural or livestock production are exempt, including self-propelled implements, attachments, and auxiliary equipment that improves performance or safety.⁶

Production inputs are exempt too. Commercial fertilizer, limestone, herbicides, pesticides, insecticides, and related application products like surfactants qualify when used for disease, weed, or insect control, or for promoting plant or livestock growth. Feed, antibiotics added to feed or water, and vitamins and minerals for livestock and domesticated fowl are also exempt.²

Fuel used in grain drying, heating or cooling livestock buildings, greenhouse production, and aquaculture is exempt, as are gas, electricity, water, and heat used in implements of husbandry engaged in agricultural production. Replacement parts for qualifying farm equipment and machinery used in greenhouse production are exempt as well.⁶

Manufacturing Machinery and Supplies

Machinery, computers, equipment, replacement parts, and supplies used directly and primarily in manufacturing are exempt. Qualifying categories include equipment used in processing, equipment that maintains product integrity or required environmental conditions (including quality-control testing), research and development equipment for new products or processes, recycling or waste-reprocessing equipment, and pollution-control equipment.²

Fuel used to create heat, power, or steam and electricity consumed by qualifying manufacturing equipment are also exempt. More broadly, electricity, steam, and fuel consumed in processing tangible goods intended for retail sale are exempt.

Several items that might look like manufacturing equipment are explicitly excluded: hand tools, point-of-sale equipment, and vehicles subject to registration (unless the vehicle is directly and primarily used in recycling or reprocessing waste). The “directly and primarily” language carries weight. Equipment that only occasionally supports manufacturing won’t qualify.

Qualifying data centers get their own exemption on computers, cooling systems, power infrastructure, backup generators, racking, cabling, backup fuel, and electricity. Eligibility requires at least $200 million invested at an Iowa location within six years and at least 5,000 square feet of operational space. The equipment exemption is permanent; the fuel and electricity exemptions last 10 to 15 years depending on local population.⁷

Software and Digital Products for Businesses

Iowa generally taxes digital products, prewritten software, and related services. When they’re sold to and used exclusively by a “commercial enterprise,” they’re exempt. Commercial enterprise covers for-profit businesses, manufacturers, insurance companies, financial institutions, public utilities, and professions and occupations.²

“Exclusively” matters. If the software or digital product gets more than minimal personal or noncommercial use, the exemption fails. Custom software sold to a commercial enterprise is treated as a nontaxable service transaction when properly documented.

Services Iowa Doesn’t Tax

Iowa taxes only an enumerated list of services. If a service isn’t on the list, it isn’t taxable. The list includes vehicle repair, electrical repair, dry cleaning, janitorial services, lawn care, barber and beauty services, and many others.⁸ Professional services such as legal work, accounting, and medical care are not on the list and are not subject to sales tax.

Two exemptions apply even to listed services. Labor on an enumerated service is exempt when the work is performed on or connected with new construction, reconstruction, alteration, expansion, or remodeling of a building. Routine repair of existing structures stays taxable.⁹ Services bought for resale are also exempt. If your auto shop subcontracts an air conditioning repair to a specialist, the specialist’s charge to the shop is exempt. The shop’s charge to the customer is the taxable sale.¹⁰

Casual Sales Between Individuals

Selling personal belongings in a one-off transaction, when you aren’t in the business of selling, is a “casual sale” and is exempt. Two selling events in a 12-month period count as nonrecurring. A third within the same period crosses into recurring sales, and tax applies starting with that third event.¹¹

The casual sale exemption does not cover vehicles subject to registration, all-terrain vehicles, snowmobiles, off-road motorcycles, off-road utility vehicles, aircraft, or watercraft.² Selling a couch online is a casual sale. Selling your car to a neighbor is not.

Nonprofits and Churches

Nonprofit status does not automatically exempt an organization from Iowa sales tax. A nonprofit generally pays sales tax on its purchases like anyone else, even if it’s exempt from income tax.¹²

Private nonprofit educational institutions can buy tangible personal property, digital products, and services tax-free when the purchases are used for educational purposes. The institution must function primarily as a school, college, or university with students, faculty, and an established curriculum. Certain nonprofit care facilities, rehabilitation centers, community mental health centers, health centers, legal aid organizations, and substance use disorder programs also receive exemptions on their purchases.²

Religious organizations get no special sales tax exemption. A church pays sales tax on hymn books, heating fuel, printing services, vehicle repairs, and most other purchases. It benefits only from exemptions available to everyone, such as the grocery exemption. When a school and church share a building, the primary use of each item determines whether tax applies.

Federal, state, and local government entities are exempt on purchases made for official purposes, including services. For federal purchases, centrally billed government accounts qualify; individually billed accounts do not.¹³

Vehicles Follow a Different System

Vehicles don’t play by regular sales tax rules. Instead, buyers pay a new registration fee of $10 plus 5% of the purchase price, whether buying from a dealer or private party.¹⁴ You have 30 days from the sale date to title and register. Miss that window and you face a $10 title penalty plus a registration penalty of 5% of the registration fee, with the registration penalty growing each month.

How to Actually Claim an Exemption

For everyday consumer exemptions like groceries, prescription drugs, and clothing during the August holiday, the exemption applies automatically at checkout. Nothing to fill out.

For business and institutional exemptions, the buyer has to give the seller a completed Iowa Sales Tax Exemption Certificate (Form 31-014) at or before the time of purchase. This covers purchases for resale, manufacturing equipment, agricultural inputs, and purchases by exempt entities such as schools or government agencies. Sellers must collect and keep these certificates on file.¹ Without the certificate on file, the seller is expected to collect tax, even if the purchase would otherwise qualify.

1
Iowa Department of Revenue. Sales and Use Tax Guide
2
Iowa Legislature. Iowa Code 423.3 – Exemptions
3
Legal Information Institute. Iowa Admin Code r. 701-220.5 – Prescription Drugs
4
Iowa Administrative Code. Iowa Admin Code r. 701-231.8 – Prosthetic Devices, Durable Medical Equipment, and Mobility Enhancing Equipment
5
Iowa Department of Revenue. Iowa’s Annual Sales Tax Holiday
6
Iowa Department of Revenue. Farmers Guide to Iowa Taxes
7
Iowa Department of Revenue. Data Center Sales and Use Tax Incentives
8
Iowa Legislature. Iowa Code Chapter 423 – Streamlined Sales and Use Tax Act
9
Iowa Department of Revenue. Iowa Sales and Use Tax – Taxable Services
10
Legal Information Institute. Iowa Admin Code r. 701-211.2 – Services Purchased for Resale
11
Iowa Administrative Code. Iowa Admin Code r. 701-18.28 – Casual Sales
12
Iowa Department of Revenue. Iowa Tax Issues for Nonprofit Entities
13
GSA SmartPay. Iowa Tax Information
14
Iowa Department of Revenue. Iowa Tax/Fee Descriptions and Rates