Mark R. Schuling became director
of the Iowa Department of Revenue on December 15. Mr. Schuling has
been a practicing attorney for 25 years in Des Moines and has worked
in private practice on tax litigation. During four of those years,
he was an assistant attorney general in the Iowa Attorney General's
Office and advised the department on statutes, rules, and declaratory
rulings. In addition to holding a doctor of jurisprudence degree from
Drake University, Mr. Schuling is also a certified public accountant.
Former Director Mike Ralston
resigned to become president of the Iowa Association of Business and
Industry on December 1.
you make estimated income tax payments?
Beginning January 2006, you
will be able to pay your Iowa estimated payments - individual and corporation
income tax - through eFile & Pay. If you file Iowa sales/use or
withholding tax, you already have a Business eFile Number (BEN). To
make your estimated payments online, simply use the same BEN.
If you do not have a BEN,
you may request one from the department or you may simply make payments
without obtaining a BEN. You will see a message that says: Wish to
make an ePayment for Individual Income or Corporation Income Taxes?
Not enrolled? Click here. Just follow the directions to continue.
local option sales tax jurisdictions
Four counties have approved
the school local option tax and jurisdictions in four other counties
have added the regular local option tax. Rates are found on our Web
You might consider using the Sales
Tax Rate Lookup . Enter the exact address of the buyer to obtain
the total sales tax rate.
Snow removal is not a taxable
to utility companies
Beginning January 1, 2006,
the Iowa state sales tax rate of 5 percent is no longer charged on
sales of metered gas, electricity, and fuel, including propane and
heating oil used as energy in residential dwellings. Local option taxes,
if any are applicable, continue to be charged.
This does NOT apply to water
and telephone utilities.
This is the final step in
a 1% per year phase-out of the state sales tax on residential energy
that began in 2002.
To report this phase-out when
completing the Iowa sales tax return.
1. Report all
sales on line 1 (Gross receipts)
2. Determine the gross sales subject to phase out and put:
- 80% of that
amount on line 4 (Exemptions) for returns filed in 2005
- 100% of that amount on
line 4 (Exemptions) for returns filed in 2006 and thereafter
3. Designate that amount as "Residential
Utility" under Exemptions to document that exemption.
4. Remember that the phase out does not apply to local option taxes, so add
that amount back into your taxable sales when reporting amounts subject to
local option or school local option taxes.
Tax on Fuel Surcharges
Transportation and delivery
charges are exempt from sales tax, as long as they are separately stated,
reasonable in amount and related to the cost of transportation. Fuel
surcharges assessed to customers must meet these requirements to qualify
Fuel surcharges that relate
to the cost of transportation would typically need to be imposed based
in some way on the distance traveled. This would include a specific "per
mile" charge, or perhaps differing surcharge amounts based upon certain "ranges" of
miles traveled. Fuel surcharges assessed in this manner would be exempt
from sales tax assuming they also meet the requirements of being separately
stated and reasonable in amount.
A fuel surcharge that is imposed
as a "flat fee" (the same amount charged to all customers without regard
to the distance traveled) or calculated as a percentage of the cost
of the good to which it applies would not be considered part of exempt
transportation or delivery charges, but rather as part of taxable gross
reminders to withholding filers
With the end of the year approaching,
you will want to file your Iowa Verified Summary of Payments Report
(VSP) through eFile & Pay. Paper VSPs for 2005 are no longer available. To
file through eFile & Pay, go to our Web site and click on the eFile & Pay
link, top left. Remember that Iowa does not require you to send
in copies of the W-2s or 1099s. Employers are, however, required
to keep copies for three years. The VSP must be filed by February
28, 2006 .
The federal government requires
employers to provide W2s and 1099s to employees no later than January
31, 2006, for tax year 2005. W-2s and 1099s are federal forms
and can be obtained through the IRS Web site, by calling the IRS at
1-800-572-3676, or by purchasing them through an office supply company.
Motor Fuel Tax Update
eFile & Pay
Iowa liquefied petroleum gas
(LPG) fuel tax returns are required by statute to be filed electronically
through the online eFile & Pay system starting with the January
2006 monthly return, which is due February 28, 2006. The system
will be accessible beginning on February 1, 2006. Electronic
payment of the tax due will also be required.
Notification letters, including
the Business eFile Number (BEN), will be sent by our department prior
to the first due date.
Motor fuel and special fuel
taxes remitted by licensed suppliers, restrictive suppliers, importers,
and blenders will be required by statute to be filed electronically
through the online eFile & Pay system starting with the June 2006
monthly return, which is due July 15 (importers) or July 31, 2006
(all other filers). The system will be accessible beginning on
July 1, 2006. Note: These dates are tentative and subject to
change. Electronic payment of the tax due, which is already
required, will switch to the new online eFile and Pay system for direct
debit transactions. ACH Credit or credit card electronic payment
will also be allowed. Returns and all schedule information will
be required to be filed using EDI standards or excel spreadsheet
1, 2006, E85 will have a new Iowa fuel tax rate of 17¢ per
gallon. E85 is ethanol-blended gasoline that contains at least 85%
denatured alcohol from the first day of April through the last day of
October, or at least 70% denatured alcohol from the first day of November
through the last day of March. Prior to January 1, 2006, E85 will
continue to be taxed at the current rate of 19¢ per gallon, the
same rate as all other types of ethanol blended gasoline.
A revised return which includes
this new fuel tax rate for E85 will be available on our Web site in
January 2006. Note: For return purposes, report both E70 and
E85 as E85. For schedule purposes, they will be reported
The department allows
suppliers to invoice gasoline to be blended into ethanol blended gasoline
at the lower Iowa gasohol rate of 19¢ per gallon if they have
a federal 637 "M" registration. This allows the gasoline
and the alcohol portions of the gasohol to be taxed at the same 19¢ rate.
However, the department will not allow
gasoline or alcohol to be blended to make E70 or E85 to be purchased
at the reduced 17¢ cent rate. It can be purchased at the 19¢ rate
under the same guidelines as other ethanol blended gasoline. Refunds
of the difference in tax rates can be claimed by filing a
refund claim form for Excess Tax Paid on E85. The claim form will
be available in January 2006 on the IDR Web site.
fast do you want your Iowa income tax refund?
Willing to wait weeks? Then
paper-filing is for you.
How about days? Choose one
of our e-filing options. Electronic filing begins January 13. Our Web
site will have links to approved vendors, including those participating
in Free File Alliance.
About Iowa eFile & Pay:
About LPG Fuel Tax:
About Iowa Tax Law:
About Iowa Business Taxes
tax classes are held all year statewide. In addition, we make
house calls! If your business would benefit from training on Iowa
taxes, contact us.