Iowa Acts 2012 Senate File 2342, effective May 25, 2012, created a new sales and use tax exemption for "property [that] is entirely consumed in connection with the performance of an auto body repair service purchased by the ultimate user." Because this exemption became effective upon enactment, the Department is providing the following guidance for auto body repair shops and their suppliers in advance of actual rule making.
What Items Are Exempt?
Examples of "property [that] is entirely consumed in connection with the performance of an auto body repair service" are abrasives, body filler or putty, bolts, nuts, washers, buffing pads, degreasing compound, floor dry, masking tape, paint, polishes, sandpaper, solvents, and thinner. The Department will develop a more comprehensive list for the administrative rules.
Claiming the Exemption
To claim the exemption, auto body repair shops should submit to their suppliers a completed Iowa Sales Tax Exemption Certificate: http://www.iowa.gov/tax/forms/31014.pdf.
The Exemption Certificate should indicate the purchaser is doing business as a "Retailer." For the reason the purchaser is claiming exemption, auto body repair shops should check the "resale" box.
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Billing
Auto body repair shops should charge sales tax on the items they may now purchase tax-free. Because the auto body shop did not pay sales tax on the items the customer must pay the sales tax on the items.