|September 2012 ------------------------------------------------------------------------------------------------------------------------------------------------
In This Issue
Beginning January 1, 2013, a new E911 surcharge will be imposed on the purchase of prepaid wireless telecommunication service. The surcharge is collected from the consumer by retailers.
Prepaid telecommunication service includes:
- Prepaid wireless telephone minute cards;
- Prepaid phones that include minute plans; or
- Prepaid wireless service in any other form.
If you sell prepaid wireless telecommunication service, you will be required to collect 33 cents per retail transaction. “Retail transaction” means the purchase of prepaid wireless telecommunications service from a seller for any purpose other than resale. If more than one separately priced item of prepaid wireless calling service is purchased by an end user, each item purchased constitutes a separate retail transaction. For example, if a seller sells two prepaid wireless phone calling cards to one consumer, two retail transactions have occurred.
There are limited exceptions to this requirement. If a minimal amount of prepaid wireless telecommunications service is sold with a prepaid wireless device for a single, nonitemized price, the seller may elect not to apply the prepaid wireless surcharge to the retail transaction. A minimal amount of service is denominated as ten minutes or less, or five dollars or less.
Retailers are permitted to keep 1 cent from each retail transaction.
The remaining 32 cents per transaction must be paid to the Iowa Department of Revenue when filing the Iowa sales tax return through eFile & Pay at: www.iowa.gov/tax
Iowa consumer's use tax - Everyone's responsibility
The Iowa Department of Revenue is pleased to announce two new methods for reporting and paying Iowa consumer’s use tax.
- eFile & Pay – you can now pay consumer’s use tax electronically on our Web site, even if you don’t have a consumer’s use tax permit.
- Consumer’s Use Tax Worksheet (coming October 2012) – a fillable online worksheet to report consumer’s use tax and mail with a check.
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
- mail-order catalogs
- television shopping programs
- toll-free 800 numbers
Why Pay Use Tax?
- Use tax protects Iowa 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.
- This affects the economic health of your community and state by hurting main street businesses, the ones who employ our citizens, pay property tax, and support local organizations.
Iowa Sales/Use Tax Basics Webinar
Wednesday, October 3, 2012
1:00 pm to 2:30 pm
See the informational course flyer.
Click here to register at a Community College near you.
This online course for businesses is brought to you in cooperation with the Iowa Community Colleges. It will provide an overview of Iowa sales and use tax, including local option sales tax.
Iowa withholding eFile & Pay enhancement
On August 30, 2012, the Iowa Department of Revenue installed enhancements to the Department’s electronic eFile & Pay system to capture additional withholding tax credit data. These withholding enhancements impact both the “single file” online filing option, as well as the “bulk file” online filing option.
The bulk file specification changes include:
- Two-digit identifier for certificate/credit
- Twelve-digit certificate number
- Digit code of credit program and amount
Updated withholding bulk file specifications may be found on the Iowa Department of Revenue web site at: www.iowa.gov/tax/business/EFilePayBulkMasterPage.html .
A link to the withholding bulk file layout screen is provided below for your convenience.
For additional details see Guidelines for Claiming Withholding Tax Credits through the Iowa Department of Revenue eFile & Pay System.
Please note this change applies to all withholding quarterly/annual tax returns bulk filed within the 3-year statute of limitations.
Exemption certificates for energy
used in processing/agriculture
An Iowa sales tax exemption exists for certain types of energy used directly in processing/agriculture. The IA 843 Claim for Refund is used to obtain a refund of tax already paid on these exempt purchases, and many claims are filed with the Department each year. The Department would like to make you aware of a more efficient option, which allows you to claim a sales tax exemption at the time of purchase and eliminate the need to file a claim for refund later.
To claim exemption at the time of purchase, simply complete the Iowa Sales Tax Exemption Certificate for Energy Used in Processing/Agriculture (Form 31-113) and give it to your supplier. Your utility company will require an updated form at least every three years and will need documentation showing how the energy is used.
When filling out the exemption certificate for your utility company, you will need to show what percent of your total energy consumption is for exempt purposes. Separate meters for production and non-production use are ideal for determining the exempt and nonexempt energy percentages; however, a separate meter for non-production use is not practical in some cases. If you do not have production and non-production uses metered separately, you need to determine the percentage of total energy used for exempt purposes. Form 31-113 can assist you in determining this.
Additional guidance on determining exempt and nonexempt percentages can be found in the following publications: Iowa Sales and Use Tax on Manufacturing and Processing (78-530); Iowa Sales Tax on Food (78-516); Farmers Guide to Iowa Taxes (78-507). Your utility company may also be able to provide assistance, or you may seek the help of an energy consultant.
The Department urges you to explore the exemption certificate option. Please feel free to contact us with any questions.
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. To read more about this process and to view the amount of solar energy system tax credits awarded to date, visit this Web page.
Reminders for income tax preparers
The Department has the following suggestions for preparers of Iowa income tax returns:
- While the statute of limitations is three years, it is recommended that copies of filed tax returns be retained for a longer period. Five years is a good rule of thumb. Be aware the Department may go back even farther in the event no tax return was filed.
- Remind clients to review Iowa impact if anything changes on their federal returns.
- Preparers may want to check with Iowa if they file late federal returns to see if an Iowa return was filed.
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.
Snow removal - Applying sand, salt, ice-melt
Snow removal is not subject to Iowa sales tax.
The service of applying sand, salt, or ice-melt is likewise not taxable.
However, the materials applied – sand, salt, ice-melt – are taxable products. Sales tax is due on these materials.
- When the snow removal business applies these materials for their customer and does not make a separately itemized charge for them, that business is the consumer of the materials and owes sales tax to its supplier when they are purchased. No tax is charged to the snow removal business’ customer for services or materials.
- In some cases, the snow removal business may separately itemize charges to their customer for the materials. If so, the business may be able to purchase the materials for resale and not pay sales tax to its supplier when three conditions are met.
- The business and its customer must agree that the product is being sold separately from the service, and
- The product must be sold to the customer in a definite form or amount and with a specific price attached, and
- The cost of the product must be itemized on the bill.
When purchasing products for resale, a valid Sales Tax Exemption Certificate (pdf) will be provided by the snow removal business to the supplier who sells them the materials. In this situation, the snow removal business must charge sales tax to their customer on the materials, but not on the services.
Can you eFile for free?
Are you 25 or younger?
Are you 65 or older?
Are you in the military?
Do you qualify for earned income credit?
Find out at www.iowa.gov/tax!
File your federal & Iowa returns at the same time from links on our Web site.
Get your refund in days instead of weeks.
eFiling is fast, safe, and easy.