Beginning July 1, a 1% Local Option Sales Tax (LOST) takes effect in Iowa City, Coralville, and North Liberty after voters in the three cities approved the tax in November 2025. The City of Iowa City has created a local option sales tax guide for local businesses to explain what the tax is, who must collect it, how to collect it, and more.
LOST is a 1% local sales tax approved by voters. Monies from the collected tax stay local and are applied to specific local projects or areas. The merchant collects the tax at the point of sale on taxable goods and services and remits it to the Iowa Department of Revenue. It is applied in addition to the State of Iowa’s 6% sales tax.
If your business is required to collect Iowa state sales tax, you must also collect the 1% LOST on any taxable goods and/or services delivered to or received by customers in Iowa City, Coralville, or North Liberty. This applies to both in-person and online sales when Iowa law requires sales tax collection, the online tax guide explains.
The Iowa Department of Revenue – not the municipalities whose voters approved the tax – determines whether a business must collect sales tax, including LOST.
Funds raised, how they will be used
According to the City of Iowa City website, the funding generated by the additional 1% sales tax will generate about $14 million each year for Iowa City alone. The site explains how the tax generated will be spent:
- 50% for property tax relief: To lower property tax rates and/or prevent future increases to property tax rates.
- 25% for affordable housing: To preserve existing affordable housing, increase temporary and permanent housing supports, and improve access to and increase the supply of affordable housing for households with low incomes.
- 10% for public infrastructure and facilities: To fund essential public improvements such as maintaining and constructing public streets, sidewalks, trails, parks, and other facilities like fire stations or the Senior Center.
- 15% for community partnerships: To support arts, culture, social services, economic development, and intergovernmental collaborations.
Where can businesses get help?
For questions about your specific situation, contact the Iowa Department of Revenue. Additional resources on the department’s website include:
If you have questions about whether the local option sales tax applies to your situation, contact the Iowa Department of Revenue.
For assistance updating your point-of-sale (POS) system or online sales platform, contact your platform provider or payment processor.
If you need individualized tax advice, consult your accountant or tax professional.
Iowa City businesses may also contact Assistant City Manager Kirk Lehmann at [email protected] or (319) 356-5014.
