Question 1

How does sales tax revenue work for municipalities?

Accepted Answer

Iowa collects sales tax statewide and distributes a portion back to municipalities based on where sales occur. Municipalities may also add local taxes on top of the state rate. The municipal share of sales tax is a major revenue source for most towns.

Question 2

Why does sales tax revenue fluctuate month to month?

Accepted Answer

Monthly fluctuations are normal due to seasonal shopping patterns (holiday spending, back-to-school), one-time large purchases (vehicles, appliances), and the 2-3 month lag between when a sale occurs and when the municipality receives its share from the state.

Question 3

What is the home rule sales tax?

Accepted Answer

Home rule municipalities can levy additional local sales taxes beyond the standard rates. This gives towns more control over their revenue but means consumers pay a higher combined rate. Non-home-rule municipalities are limited to state-authorized tax rates.

Sales Tax Revenue — Q1 2026