DES MOINES | Gov. Terry Branstad on Tuesday signed legislation to close a loophole that lets out-of-state online retailers offer customers a purchase price without collecting the state’s sales tax.

“By signing House File 625, the governor has helped the state make a huge leap forward in helping Iowa businesses have a fighting chance against these giant online-only companies," said Jim Henter, president of the Iowa Retail Federation.

The legislation takes effect July 1. 

State officials have been unable to gauge the potential fiscal impact of the law change in part because “we just don’t know for sure what’s out there,” said Victoria Daniels, of the state Department of Revenue.

In all, 232 Iowa small businesses joined with the Iowa Retail Federation, Iowa Grocers Association and the Iowa Alliance for Main Street Fairness coalition to encourage state lawmakers to pass the “e-fairness” legislation last month.

A separate provision increases the school tuition organization tax credit annual cap from $8.75 million to $12 million effective for tax year 2014. This bill also amends the credit to allow a contribution made by a partnership, limited liability company, S corporation, estate or trust electing to have the income taxed directly to the individual to qualify for the tax credit – a provision which is retroactive to Jan. 1, 2013.

The school tax credit is an income tax break allowed for contributions to private, non-profit school tuition organizations that award tuition scholarships to eligible students to attend qualified non-public elementary or secondary schools in Iowa. The credit is equal to 65 of the amount contributed and it is allowed for cash and noncash contributions.

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