Recent Changes to Iowa Sales Tax Exemption Certificates

Exemption certificates play an important role in sales tax compliance. Companies who regularly present or receive sales tax exemption certificates should be aware of recent and upcoming changes to Iowa exemption certificates.

Benefit to Buyers

Presenting a valid exemption certificate allows the buyer to purchase a product exempt from sales tax. An exemption certificate allows a purchaser to receive the benefit of the sales tax exemption immediately—without having to file a refund with the Iowa Department of Revenue (IDR).

Benefit to Sellers

For sellers, exemption certificates can offer valuable protection from tax liability. Without an exemption certificate, the default rule is that the seller and the buyer are jointly liable for uncollected Iowa sales tax. In many situations, IDR looks first (and often only) to the seller to assess uncollected Iowa sales tax.

If a seller follows the rules for accepting an exemption certificate, the seller is relieved from liability if it turns out the buyer did not actually qualify for an exemption.   

Blanket Sales Tax Certificates No Longer Automatically Expire Every 3 Years

Until recently, Iowa sales tax exemption certificates could not last more than 3 years. 

In late 2024, IDR’s new exemption certificate removed the 3-year limitation on “blanket exemption certificates” where the buyer and seller have a “recurring business relationship.”  A “recurring business relationship” refers to a buyer who purchases products from the seller at least once a year.  A “blanket exemption certificate” covers more than one transaction between the buyer and seller. 

Take Away from the New Exemption Certificates

The change means a blanket exemption certificate can remain valid longer than 3 years.  But the new exemption certificate also makes clear that a blanket exemption certificate will automatically lapse if a buyer does not purchase from that seller at least once a year. 

Going forward, the new blanket exemption certificates will be canceled if either of the following happens:

1. A buyer cancels the certificate; or
2. A buyer does not make a purchase from the seller for 1 year.

Even though IDR will no longer require the parties with a recurring business relationship to keep updating blanket sales tax exemptions every 3 years, taxpayers should not become complacent about sales tax. 

Buyers need to make sure they continue to qualify for exemptions. 

Sellers should track when a recurring buyer, who previously filed a blanket exemption certificate, goes more than a year between purchases.  

Special Exemption Certificates for Energy and Fuel

There is a special exemption certificate used for purchases of energy in processing or agriculture. There is also a special fuel tax exemption certificate. Both of these exemption certificates still have a maximum length of 3 years.

Data Center Exemption Certificates

In the next few months, data center businesses will be required to register with IDR.  IDR will issue a special sales tax exemption for data centers. This was enacted as part of a new Iowa law. Data center businesses will be required to start using these new exemption certificates for purchases starting February 1, 2026.

Contact one of our Nyemaster tax attorneys with any questions about Iowa sales tax.