Iowa Gov. Terry Branstad has joined with Ben Milne, founder of Des Moines-based Dwolla, in announcing that the state's businesses can now pay their cigarette stamp taxes electronically via Dwolla.

Some $100 million in cigarette stamp taxes is paid annually by Iowa businesses.

“Dwolla is a safe, secure payment method, and we are proud as a state to be partnering with such a great Iowa company,” said Branstad in a press statement. “This new method is an efficient, effective means of payment for Iowa taxpayers, and I look forward to expanding this service into additional areas within state government.”

Up until now the only way businesses had to pay these taxes was with a check, Jordan Lampe, a Dwolla spokesman, said in an interview. Payees will pick up Dwolla's 25 cents per payment fee but, noted Lampe, that is less than the cost of a postage stamp.

Because no costs are absorbed by the government, Iowa was not required to issue an RFP and go through a protracted bid process. As a result, this deal came together “very quickly,” said Lampe, who elaborated that the Iowa governor had made public commitments to cost cutting and the Dwolla electronic payment option allows the government to collect taxes at lower costs than processing paper checks.  Businesses, for their part, will also get their tax stamps quicker.

“The number of state and federal payments are in the billions with transactions totaling in the trillions, meaning even a fraction of savings could have a profound effect on the economy.” said Milne, Dwolla's CEO, in a statement. “This partnership is about creating a more sustainable, responsive and convenient business climate for the state and its taxpayers, both today and tomorrow.”

The joint Dwolla-state government announcement elaborated: “From collecting property taxes to issuing refunds, from renewing vehicle registrations to paying government contractors, Branstad [said] the state will be identifying the potential impact Dwolla's open, social, online and mobile payment technologies could have on every level of state government.”

Dwolla, with backing from The Members Group, has announced a string of integrations with credit unions as a person-to-person payments tool.

Dwolla indicated it was in talks with other governments about offering payments tools to their citizens, but also said revealing details was premature.