IOWA CITY — Shoppers in Iowa City, Coralville and North Liberty will begin paying a 1% Local Option Sales Tax on taxable purchases starting July 1, 2026. The new tax, commonly called LOST, was approved by voters in November 2025. It will be added to Iowa’s 6% state sales tax, bringing the total sales tax rate in the three communities to 7% on taxable goods and services.
The tax will be collected at the point of sale by businesses that are already required to collect Iowa sales tax. That includes taxable in-person purchases as well as online sales delivered to or received by customers in Iowa City, Coralville or North Liberty when Iowa law requires sales tax collection.
For shoppers, the change means many purchases will cost slightly more beginning July 1. A taxable $10 purchase would include an additional 10 cents in local option sales tax. A taxable $100 purchase would include an additional $1. A taxable $1,000 purchase would include an additional $10.
The tax does not apply to every purchase. LOST generally applies to the same transactions that are subject to Iowa sales tax. Items and services that are exempt from state sales tax are generally not subject to the local option sales tax. The Iowa Department of Revenue determines which goods and services are taxable.
The City of Iowa City has created a guide for local businesses explaining what the tax is, who must collect it, how it should be collected and where businesses can find additional help. Businesses are being advised to update point-of-sale systems, online sales platforms and accounting software to reflect the new 7% rate before the July 1 start date.
Businesses do not remit the tax directly to the City of Iowa City. The local option tax is reported and paid through the Iowa Department of Revenue along with regular state sales tax filings.
City officials said questions about whether the tax applies to a specific business or transaction should be directed to the Iowa Department of Revenue. Businesses needing help updating cash registers, payment systems or online stores should contact their platform provider, payment processor, accountant or tax professional.
The voter-approved tax is expected to generate new revenue for local priorities in Iowa City, Coralville and North Liberty. Under Iowa’s local option sales tax system, the tax is paid not only by local residents but also by visitors and others who make taxable purchases in the communities.
For consumers, the most immediate effect will be seen at checkout beginning July 1, when taxable purchases in the three cities will be charged at the new 7% total sales tax rate, according to the City of Iowa City LOST bulletin and guide; Iowa Department of Revenue; City of Coralville; City of North Liberty.
In Cerro Gordo county, documents show the tax has been here for decades (read more, here.) Mason City’s 1% local option sales and service tax was first approved by voters on April 7, 1992, and took effect July 1, 1992. It was originally set to expire, but voters renewed it in 1996, 2002, 2012 and again in 2022. The 2022 renewal removed the sunset date, so the tax now continues unless voters repeal or change it later. As for revenue, Mason City’s recent local option sales tax receipts are in the roughly $6 million to $6.7 million per year range. A 2024 city bond disclosure listed local option tax receipts at $6,034,738 for fiscal year 2023 and the same amount for fiscal year 2024.