• 01.21.13

Who Needs Starbucks? Dwolla Gets Into Gov’t With Iowa Tax-Paying Plan

This could save you money–and make the company much more of it.

Who Needs Starbucks? Dwolla Gets Into Gov’t With Iowa Tax-Paying Plan

Paying taxes in Iowa could soon be a tad less annoying than in other states.


That’s because Iowa is accepting some tax payments using startup money transfer platform Dwolla, Governor Terry Branstad announced today. The option will first be available for businesses paying the cigarette stamp tax, which accounts for about $100 million of Iowa’s revenue each year. But Gov. Branstad said the state would consider expanding it to other fees and taxes.

“This is just the first,” he told Fast Company.

Des Moines-based Dwolla is a payment network that transfers money directly from one bank account to another. Because it cuts out middlemen such as credit card companies, it is able to charge a favorable rate. Transactions less than $10 are free, and transactions for any greater amount cost $.25.

This consistent and relatively low transaction rate makes Dwolla particularly attractive to businesses and now–it hopes–governments that regularly transfer large amounts of money. Only about 11% of transactions made on the platform are between individuals.

A government embrace of Dwolla could save users money. As one policy advisor to Gov. Branstad put it, “there is no line item for paying Visa in the budget,” and payment processing fees generally get passed on to citizens in the same way businesses pass them onto customers. A lower payment processing fee could mean a lower amount due.

Dwolla, meanwhile, takes in the same $.25 whether the transaction is $10 or $1 million, so even if it handles all $100 million of the cigarette stamp taxes in Iowa this year, it won’t necessarily mean getting a huge payday. But if the service expands to other government transactions within Iowa, and in other states, there are not only large transactions, but a huge number of them–fishing and driving licenses, income and property taxes–from which it could profit.

[Image: Flickr user 401 (K) 2013]

About the author

Sarah Kessler is a senior writer at Fast Company, where she writes about the on-demand/gig/sharing "economies" and the future of work.