<%@LANGUAGE="JAVASCRIPT" CODEPAGE="1252"%> Iowa Department of Revenue electronic newsletter: Iowa Tax eNews
graphic for Iowa Department of Revenue Tax eNews electronic newsletter
June 2012 ------------------------------------------------------------------------------------------------------------------------------------------------

In This Issue

No new LOST jurisdictions

There are no new LOST jurisdictions going into effect on 7/1/2012. 

Iowa legislative summaries

Legislative summaries for 2012 will be posted on our Web site as soon as they are available.

Solar Energy System tax credits

The Iowa Department of Revenue has announced its process to implement new 2012 legislation for solar energy system tax credits.  Please see Solar Energy System Tax Credits for details.

Sales tax exemption for
items used by car washes

Recent legislation, effective May 25, 2012, created a new sales and use tax exemption for certain items used by car washes.  Please see this page on the department’s website for details.

Sales Tax Holiday set for August 3-4, 2012

Iowa's annual Sales Tax Holiday will be held Friday, August 3, and Saturday, August 4, 2012.

For more information, please see our Sales Tax Holiday information.

Do you owe consumer's use tax?

Many taxpayers are not aware Iowa has a 6% consumer's use tax. Consumer's use tax normally applies to items purchased outside Iowa and brought in or delivered into Iowa, such as online purchases.

Please review the following to determine if you might owe the tax and how to pay it if you do.

General Information on Consumer's Use Tax
Consumer's Use Tax Information for Individuals
Consumer's Use Tax Information for Businesses

Use tax protects Iowa businesses

This tax was established in 1937, three years after the sales tax was enacted, to create a fair playing field for Iowa businesses. In Iowa, the rate of the consumer's use tax is always equal to the state sales tax rate.

Use tax protects in-state businesses from unfair competition by ensuring tax will be paid even if an out-of-state seller is not required to collect it from the purchaser. When tax is not collected on taxable purchases and services used in your community, local businesses operate at a competitive disadvantage.

New way to pay consumer's use tax coming

In the fall of 2012, the Department's eFile & Pay system will be updated to include a new option to pay consumer's use tax electronically. This new option will allow taxpayers without a consumer's use tax permit to make an electronic payment of any use tax they may owe.

eFile & Pay withholding tax application changes

In the fall of 2012, the Iowa Department of Revenue will install enhancements to the eFile & Pay Withholding Tax Application.

The enhancements will include:

  • New screen for customers who claim credits on the Withholding Quarterly Return, line 3
  • New screen to report Iowa withholding credits by certificate number on a quarterly basis
  • New screen located before the Withholding Quarterly Return:
    • Automatically populates active certificate numbers
    • Entry field only for dollar amount; report by certificate number.

The Department is on schedule to implement these enhancements September 1, 2012.

Is your contact information up-to-date?

When working with taxpayers, the Department often finds the contact information we have on file for a particular business may be outdated. We know employees come and go, but the Department can only discuss tax matters with the person(s) listed on our records. If that person is no longer with the business, we may not be able to work with the current individual until we have received an official update from the business.

If your business information changes, please be sure to let us know: http://www.iowa.gov/tax/forms/change_cancel.html

Also, if you have a Power of Attorney on file with the Department, please make sure it is up-to-date as well: http://www.iowa.gov/tax/forms/14101.pdf

Have you sold or closed your business?

The Department continues to expect tax returns to be filed until notified. This could result in letters being sent or estimated billings being issued. Please let us know if you need to cancel your permit(s): http://www.iowa.gov/tax/forms/change_cancel.html

Temporary sales tax permits for special events

Special events are any type of show, flea market, road side stand or event where vendors offer products or services for sale. Sponsors of such events, and vendors making sales at them, should review their sales tax responsibilities.

Double-check your check!

If you send a check to the Department, please be sure it is filled out correctly.  Checks should be make payable to Treasurer – State of Iowa.  Also be sure the amount entered on the check in numerals is the same as the amount entered in writing.  If they don’t match, an underpayment or overpayment may occur, resulting in a bill or waiting for a refund.  Of course, the best way to pay is electronically whenever possible.   

New online publications now available

The Department has recently added the following four new publications to its Web site:     

Janitorial, Building Maintenance and Cleaning Services (31-026)

Painting, Papering and Interior Decorating (78-120)

Pet Grooming (31-025)

Photography (31-024)

The publications address Iowa sales tax issues for these types of businesses.    

Sales tax issue for contractors

A contractor is considered the consumer of building materials purchased for use in a construction contract. As such, they are responsible for paying Iowa sales/use tax on those materials at the time of purchase.

When a contractor performs new construction, no additional tax is due because the contractor has already paid tax on the materials and the contractor does not collect any tax from the customer.

If a contractor performs a taxable repair, the contractor collects tax from the customer on both the labor and materials (including any mark-up). Since the contractor paid tax on the materials at the time of purchase, the contractor may take credit for tax paid on materials on the sales tax return.

ABC Company is a contractor and must pay sales tax to its suppliers when it purchases building materials. When ABC performs a taxable repair, it must collect tax on the amount charged to the customer for materials and labor. ABC must have a sales tax permit to report this tax. Since tax was already paid on the materials when ABC purchased them, an adjustment can be made on the sales tax return by entering the amount ABC paid for the materials as an "other" exemption on line 4 of the sales tax return.

For additional details, please see the Iowa Contractors Guide.

Sales tax on services performed by students

During the summer months many students may perform services that are subject to Iowa sales tax.  A complete list of taxable services can be obtained in our publication titled Services: Which ones are taxable?

For example, the services of landscaping, lawn mowing, and lawn care are taxable unless performed on or in connection with new construction, reconstruction, alteration, expansion, or remodeling of a building or structure. Persons who mow lawns are providing a taxable service regardless of their ages; however, effective 7/1/06 a casual sale exemption exists if (1) the owner of the business is the only person performing the services; (2) the owner of the business is a full-time student; and (3) total gross receipts from the services do not exceed $5,000 for a calendar year. Please see our handout on landscaping and lawn care .

 A casual sale exemption may also apply to services which would otherwise be taxable if:

1. It is a sale of a nonrecurring nature, and

2. The seller at the time of the sale must not be engaged in selling goods or taxable services for profit; or if the seller is so engaged, the casual sale must be outside the regular course of business.

Two separate selling events outside the regular course of business within a 12-month period are considered nonrecurring. Three separate selling events within a 12-month period are considered recurring. Tax applies beginning with the third separate selling event. However, when a sale event is planned and occurs consistently over a span of years, the sale is recurring and not casual, even though only one sale event occurs each year.

Students performing taxable services for which a casual sale exemption does not exist should apply for a sales tax permit online at Apply for an Iowa permit .

Sales tax for grocery stores and restaurants

It is sometimes confusing to determine when sales of food are subject to Iowa sales tax and when they are not.  People in the food sales business should review our Iowa Sales Tax on Food publication for more details.