from the Director:
What a beautiful fall in Iowa!
At the Department, we are engaged in fall activities that include addressing
tax changes in new legislation. This affects our electronic and paper
forms, as well as education internally and externally about those changes.
change effective July 1, 2008, is that Iowa 's sales and use tax
rate changed from 5% to 6%. In addition, Iowa's school local option
(SILO) sales tax was discontinued. “Regular” local option
sales tax (LOST) continues where applicable. Filers still need to
track and report all sales by county. This affects all
Iowa sales and use tax permit holders, both in-state and out-of-state.
There are some exceptions
to the rate change. The state sales tax rate remains at 5% for
hotel, motel, and bed and breakfast room rental, sales of certain construction
equipment, and for the auto rental tax.
amendments affected individual or corporate income tax. They are
contained in our legislative summary referenced in this newsletter
and located on our Web site. Where appropriate, changes are being
made to our instructions and forms. We will communicate those changes
as they are made through our eList
Our Research Library is being
replaced with a new and better version. It is anticipated it will be
up and running in November. Additionally, our Web site is being redesigned.
You will find it easier to access the Department information you are
I hope you have an opportunity to enjoy the great weather. Please let
us know how we can be of further assistance.
Mark R. Schuling
Flood & Storm Damage – No
New Sales Tax Exemptions
The natural disasters that
impacted Iowa earlier this year have generated sales tax questions
about services performed as part of the recovery effort.
Please see our publication
Which ones are taxable? (78-524) for a list of services that are
normally subject to Iowa sales/use tax.
One of the services
listed which could be performed as part of flood or storm clean-up
is that of “janitorial and building maintenance
or cleaning; non-residential only.” This service
is taxable only for non-residential customers.
At this time there
are no new sales, use, or local option tax exemptions specifically
addressing clean-up and reconstruction due to flood or storm damage.
However, there is an existing exemption for services performed on or
connected with new construction, reconstruction,
alteration, expansion or remodeling of real property.
Rebuilding a structure damaged
by flood, fire, other uncontrollable disaster or casualty is considered
reconstruction. In this situation,
the contractor is responsible for paying tax to the supplier on materials;
however, the contractor does not charge tax to the building owner on
services and materials.
Repairs remain taxable.
contractors (78-527) publication explains the
difference between taxable repairs and exempt reconstruction.
If you have questions,
please contact the Department.
Sales tax on residential
residential dwellings, apartment units, and condominiums
is exempt from state sales tax.
It is, however, subject to local option tax, if applicable.
metered gas, electricity, propane, kerosene, and heating oil.
exemption was established
in 2001 by House File 705.
exemption on manufactured, mobile, and modular homes
The Iowa Department of Revenue
has reviewed the 2008 legislation that increased the exemption percentage
on manufactured housing and mobile homes from 40 percent to 80 percent.
We have changed our initial interpretation of that legislation. Originally,
we believed that modular homes were also impacted by this legislative
change. That is not the case.
Effective July 1, 2008, manufactured
housing and mobile homes are subject to use tax at the rate of 5 percent
on 20 percent of the purchase price.
Modular homes are subject
to 6 percent state sales tax, plus local option tax, if applicable,
on 60 percent of their purchase price.
Replacement parts for farm
Prior to July 1, 2008, replacement
parts used to repair farm machinery or equipment were exempt from Iowa
sales/use tax only if the parts were “essential
to” the machinery or equipment's use in agricultural production. Therefore,
items such as cigarette lighters and radios did not qualify for exemption.
However, a legislative change
became effective on 7-1-08 that replaced the words “essential to” with “used in.” This
change means that any replacement parts used in the operation of eligible
farm machinery or equipment are now exempt from sales tax.
Replacement parts should not
be confused with supplies, most of which are taxable. Oil and grease used in the routine maintenance of
a tractor, for example, are not considered exempt replacement parts. They
are considered taxable supplies.
For more information on tax
issues related to agriculture, you may reference our Farmers
guide to Iowa taxes (78-507). Please contact the Department
if you have any additional questions.
Legislative Summary has been posted on our Web site.
Purchases of TV Converter Boxes
The upcoming conversion
of television signals from analog to digital will require the
purchase of converter boxes in some cases. The
purchase of these boxes is subject to Iowa sales/use tax. Coupons,
often in the amount of $40, may be available that allow customers
to purchase the converter boxes at a reduced price; however, the
taxable amount will be the price prior to the reduction for the
coupon. This is the case even when the coupon is issued
by a governmental entity.
For additional information on coupons and other price reductions,
please see our publication titled Discounts,
rebates and coupons: How to apply tax .
about Iowa taxes
you a new business? Or just need to know more? Our
tax classes are held all year statewide.
addition, we make house calls! Gather
your employees or your organization's membership. We will come to you
and address your Iowa business tax concerns. This service is free of
charge. Just e-mail us to contact
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