Iowa Tax Responsibilities of Cities and Counties

Purchases by Cities and Counties

 

Taxable Purchasess

Purchases of goods, wares, merchandise, or taxable services are subject to sales tax when purchased by:

Note: A relief agency may request a refund from the Department.

For a list of taxable services, see Iowa Sales and Use Tax: Taxable Services.

Exempt Purchases

Purchases of goods, wares, merchandise, or taxable services are exempt from sales tax when purchased by:

Type of Payment Determines if Taxable or Exempt

Exempt

Taxable

Registered Vehicles  

Purchases by cities and counties of vehicles subject to registration are exempt from Iowa's 5% one-time registration fee.

Note: the exemption does not apply to city or county municipal utilities engaged in selling gas, electricity, heat, pay television or communication service to the general public

Utilities and Communication Services

Purchases by cities and counties of utilities or communication services for resale or processing are exempt from tax; city or county gives an exemption certificate (pdf) to the seller

Example - Purchase for Resale

Municipally-owned electric utility ABC purchases additional electricity from XYZ, a neighboring utility, to meet its summer demand peak. ABC will purchase the electricity for resale tax free.

Example - Processing

ABC purchases electricity from XYZ to operate the generators which produce the electricity ABC sells to the public. ABC will purchase the electricity tax free and provide XYZ an exemption certificate since the purchase is for processing.

Sales by Cities and Counties

Taxable Sales

Utilities and Communication Services

The following are subject to sales tax:

The following are subject to sales tax, unless sold to residential customers:

Note: local option tax, if applicable, must still be charged even if sold to residential customers

See Energy Phase-out Summary and FAQs.

Sewer and Solid Waste Services

Nonresidential Commercial Customers

Sales by a city or county of sewer service and solid waste collection and disposal services are taxable to nonresidential commercial customers.

See Sales Tax on Solid Waste Collection and Disposal Services for definition of nonresidential commercial customers and other details.

Entry Fees for Athletic Events

Fees paid to cities and counties that sponsor athletic events are taxable.

Events include but are not limited to baseball, basketball, softball, volleyball, golf, tennis, racquetball, swimming, wrestling, and foot racing.

Fees for Use of Athletic Facility

Fees paid to a city or county to use an athletic facility for the sport for which it was designed are subject to sales tax.

Facilities include but are not limited to golf courses, ball diamonds, tennis courts, swimming pools, and ice skating rinks.

The fee is taxable whether or not the use is for a brief or extended period of time.

Third-party Sales

It may be difficult to determine if a city, county, or third party is the retailer. Therefore, the facts of each situation and the terms of existing contracts must considered.

City or county facility

A city or county that operates a facility through which a third party makes taxable sales is not responsible for the tax on sales by the third party. The third party selling taxable goods or services is the retailer, and, therefore, collects and remits sales tax.

City or county event

If a third party sells at a city or county event, the sales are taxable unless otherwise exempt in the Iowa Code. Third-party sales are not exempt just because they take place at a city or county event.

Fair

Unless otherwise exempt, sales made by third parties at a fair are taxable.

Registered Vehicles

If a city or county sells a vehicle subject to registration, the buyer will pay the 5% Iowa one-time registration fee on the purchase price when the vehicle is registered.

Exempt Sales

Athletic Lessons or Instruction

Fees paid to cities and counties for lessons or instructions on playing or improving an athletic sport are not subject to sales tax. This includes, but is not limited to, golf and swimming lesson fees.

Athletic Equipment Rental

Rental fees paid to cities and counties on equipment used to participate in athletic sports are not taxable. Examples include the rental of a golf cart or recreational boat.

Sewer and Solid Waste Services

Residential Customers

Sales by a city or county of sewer service and solid waste collection and disposal services to residential customers are exempt from sales tax.

See Sales Tax on Solid Waste Collection and Disposal Services

Utilities and Communication Services

The following are exempt from sales tax when sold to residential customers:

Note: local option tax, if applicable, must still be charged even if sold to residential customers

See Energy Phase-out Summary and FAQs.

Merchandise Sales

Food and drinks at athletic events

City or county sales of food or drink to anyone watching or participating in any athletic sport are not taxable. This includes concessions sold at city-owned swimming pools and golf courses.

Office equipment and furniture

Sales by auction or other means of office equipment and furniture are not taxable.

Leaf bags

Sales of leaf bags directly to the customer by a city or county are exempt from sales tax.

However, the same leaf bags are taxable when sold by a store for a percent of the sales. If the store sells the bags but turns all the proceeds back to the city or county, they are exempt.

Stickers for leaf bags

Stickers required to be placed on a bag to make it eligible for pickup are not taxable when sold by the city, county, or retail store.

Facility or Park Rental

Fees paid to cities and counties for the use of facilities and parks are not taxable as long as the area is not a specific athletic facility.

Hiking and Camping

Fees paid to cities and counties for the use of a campground or hiking trail are not subject to tax.

Repair Work

Payments to cities and counties that provide service to the public for repair of city or county property are not subject to tax.

Sales to the U.S. Government or the State of Iowa

Sales by cities and counties to agencies or instrumentalities of federal, state, county, or municipal government are not subject to tax.

County Fairs

Sales by county fairs organized under chapter 174 of the Iowa Code are not subject to tax.

Exempt sales include but are not limited to:

Sales to American Indians

Sales to American Indians with delivery on the reservation are not taxable.

Reporting Tax

Tax Liability

A city or county is responsible for remitting tax to the Department even if it fails to collect the tax from its customer.

The city or county may contact the purchaser to recover the sales tax it failed to collect. The unpaid tax is considered a legal debt.

Sales Tax Permits

Sales tax permits must be obtained for each location at which taxable sales occur.

Filing and Paying

The eFile & Pay system is a paperless method of filing Iowa sales tax and withholding deposits and returns either online or by touch-tone telephone. Both are safe, secure systems. The system provides the option to pay electronically. Semi-monthly filers are required to pay electronically.

The Department does not provide paper forms.

Statute of Limitations

The sales tax statute of limitations for assessing a tax or applying for a refund is three years. Sales tax records should be kept for at least that long.

Use Tax

The use tax is usually imposed when property purchased out-of-state on which Iowa tax has not been paid is brought into Iowa for use here. The exemptions that apply to the sales tax also apply to the use tax.

There is no local option use tax.

Electricity loss through “line loss” is not subject to tax.

Local Option Sales Tax

Most cities and unincorporated areas have a 1% local option tax.

Jurisdictions and Rates

See Local Option Sales Tax Lists and Rates.

Election and Collection Information

See Iowa Local Option Sales Tax (LOST) Questions and Answers.

Additional Local Option Sales Tax Information

See Iowa Local Option Tax Information.

Local Hotel / Motel Tax

A city or county may impose a hotel / motel tax at a rate not to exceed 7%.

Jurisdictions and Rates

See Hotel / Motel Excel file.

Election and Collection Information

See Iowa Hotel and Motel Tax Questions and Answers.

Additional Hotel / Motel Tax Information

See Iowa Hotel / Motel Tax.

Construction Contracts

Designated exempt entities, including cities and counties, may issue special exemption certificates to contractors and subcontractors that allow them to purchase, or withdraw from inventory, building materials for the governmental construction contract free from sales tax.

This special exemption certificate also allows a manufacturer of building materials to consume materials in the performance of a construction contract with a designated exempt entity without owing tax on the fabricated cost of those materials.

These exemption certificates are obtained and issued only by exempt entities who register their projects through the online system developed by the Department.

See Index to Information About Construction Contracts with Designated Exempt Entities.

Questions?

If you have questions, please contact Taxpayers Services by email or by phone at 515-281-3114 or 1-800-367-3388 (Iowa, Omaha, Rock Island, Moline).

Iowa Fuel Tax

Except for dyed diesel, cities and counties must pay the Iowa fuel tax on their purchases of fuel.

Cities and counties are allowed to purchase dyed diesel fuel for use in their off-road vehicles. If allowed under federal law, cities and counties may also purchase dyed diesel for use in on-road vehicles. Dyed diesel is not subject to fuel tax.

Fuel Tax Refunds

Cities and counties

A city or county may apply for a refund of fuel tax.

Political subdivisions

A political subdivision may obtain a refund of fuel tax.

An entity is a political subdivision if it has:

Public schools are a qualifying political subdivision.

If an entity does not meet all of the above criteria, it does not qualify for a refund permit number as a political subdivision.

Urban Transit Systems

Urban transit systems are eligible for fuel tax refunds.

Urban transit systems are bus systems that:

Regional Transit Systems

Regional transit systems can request fuel tax refunds.

A regional transit system is a public transit system:

Other Entities That May Apply for an Iowa Fuel Tax Refund

Instrumentalities

Many nonqualifying entities, referred to as “instrumentalities,” receive funds from cities and counties. However, because they do not qualify as political subdivisions, they cannot file for refunds unless the fuel is used for nonhighway purposes.

For example, a nonprofit group may receive partial funding from a city or county. However, if that group does not meet the above criteria, it cannot apply for fuel tax refunds because it is not a political subdivision of the city or county.

Apply for a refund permit number

To obtain a refund, apply for a refund permit number (pdf) with the Department as an “Other Political Subdivision.” A governmental agency is allowed to designate another governmental agency as an agent for filing and receiving a refund.

File refund claims

Claims for refund may be filed any time after a $60 minimum refund amount has been accumulated. Once the $60 minimum has been met, the claim for refund must be filed within three years.

Claims are not filed on paper. They are processed through a special telephone system developed for this purpose. Cities and counties who apply for a permit will receive detailed information on this telephone system when their refund permit number is issued.

See Iowa Motor Fuel Tax Information and Information on Iowa Motor Fuel Tax Refund Claims

Environmental Protection Charge

The Iowa Environmental Protection Charge (EPC) is imposed on all petroleum products deposited into non-exempt storage tanks in Iowa.

Cities, counties, and school districts must pay the EPC when petroleum is deposited into qualifying tanks owned or operated by them.

See Iowa Environmental Protection Charge

Retail Cigarette / Tobacco Permits

Iowa Retail Cigarette / Tobacco Permits are issued by cities and counties.

Retailer Applies for Permit

The Retail Cigarette / Tobacco Permit Application (70-014) is available online: Retail Cigarette/ Tobacco Permit Application (pdf)

File the application

The retailer files the application with the local jurisdiction: city clerk or county auditor.

City/County Issues Permit

The permit is not online. It is available as a Word file. Cities and counties may request the Word file by e-mailing dawn.johnson@iowa.gov.

City/County Sends Copy of Application

The city or county sends a copy of the completed application to the Iowa Department of Commerce within 30 days.

The original application is kept by the issuing authority. The original permit should be given to the permit holder.

ONLY copies of applications from retailers that have vending machine locations should be sent to the Iowa Department of Revenue.

What to Charge for a Retail Cigarette/Tobacco Permit

The city or county keeps the permit fee. The price of a retail permit depends on two things:

  1. the location of the business and
  2. the month issued

Prices are as follows:

Location

Outside of city limits

City of less than 15,000

City of 15,000 or more

Jul-Sep

$50.00

$75.00

$100.00

Oct-Dec

$37.50

$56.25

$75.00

Jan-Mar

$25.00

$37.50

$50.00

Apr-Jun

$12.50

$18.75

$25.00

 

Questions and Instructions

See Retail Cigarette/Tobacco Permit Q & A for Cities and Counties (pdf) (71-038)

If after reading the Q&A you still have Cigarette/Tobacco questions, you may send an e-mail to dawn.johnson@iowa.gov or call her at 515-281-8023.

01/28/11