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Iowa Water Tax Change

Posted on Tuesday, June 26, 2018

During the 2018 session, the Iowa legislature passed a new law which created a Water Service Excise Tax (WET). Effective July 1, this tax replaces the current sales tax charged on water (which was 6% plus a 1% local option sales tax) and is not a tax increase. The new local excise tax will be 6% with no local option tax. It will apply to service charges, consumption, disconnect fees, and other related items, just as the current sales tax does. Customer bills should be minimally affected.

A portion of the total taxes collected will be used to improve the water quality in Iowa, with all remaining funds being deposited into the General Fund. Entities that are currently exempt from the water sales tax will most likely remain exempt, but please consult with your tax professional for specific advice. Those who will continue to be exempt do not need to submit new exemption certificates. The new excise tax will expire either July 1, 2029 or with the next state sales tax increase, whichever comes first.

For more information, please visit https://tax.iowa.gov/WET.