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INTANGIBLE INCOME TAX NEXUS IN IOWA?

June 12, 2008

Can you be required to pay Iowa corporation income tax if your only presence in Iowa is bits and bytes? A memo released this week by the Department of Revenue says "yes."

The memo deals with a taxpayer that licenses software used to prepare some unspecified government reports to Iowa users. From the memo:

As noted in the example, it does not matter if the fee is considered a royalty or something else. If the fee is received for the use of the software, then it was earned from intangible property located or having a situs in Iowa. Therefore, this activity would be sufficient to create Iowa corporation income tax nexus.

So another happy customer gets to pay Iowa's highest-in-the-nation corporation income tax.

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