<%@LANGUAGE="JAVASCRIPT" CODEPAGE="1252"%> Iowa Department of Revenue electronic newsletter: Iowa Tax eNews
MARCH 2009
graphic for Iowa Department of Revenue Tax eNews electronic newsletter


Message from the Director
:

The Department has a new and improved Web site at its same address: www.state.ia.us/tax. The changes we made will facilitate your use of our site and make locating the relevant information easier. Additionally, we will highlight current tax topics on our home page. Please let us know if the Web site meets your needs and if you would like to see any changes. It is a Department goal to keep you current on Iowa tax issues of importance to you.

We continue to face an economic challenge. The State, like a lot of you, is making cuts in spending. We will try to make these cuts without affecting our service to you. We recognize our responsibilities to the taxpayers, and service is a priority. We will expand our use of electronic communications for information delivery. Our Web site, Tax eNews letters, tax reminder notices, and Department listservs will be valuable sources of information. We will continue to add and improve on those services. Additionally, your use of electronic filing will assist the Department as cuts in spending occur.

We consider ourselves to be a service organization, and service to Iowans will remain our top priority.

Mark R. Schuling
Director

New Local Option Jurisdictions Oil Filters
Planning a Craft or Art Show? Income Tax Return Extensions and Payment Plans
Vegetable Seeds, Plants, and Fruit Trees Federal Extenders and IRC Update
Landscaping, Lawn Mowing, Lawn Care Classes about Iowa taxes
Complimentary Beverages and Meals Contact Us

New Local Option Jurisdictions in Linn County on April 1

The local option tax will become effective in nine cities and the unincorporated (rural) area of Linn County on April 1. See the list of new jurisdictions.

New local option tax jurisdictions are normally added only on January 1 and July 1.  Special legislation allowed for a different implementation date in certain disaster areas.

Planning a Craft or Art Show?

Sponsors of special events such as craft and art shows are responsible for notifying the Department of the event and providing a list of the vendors. If you are a sponsor, use this online form.

Vendors who have regular Iowa sales tax permits will report their sales and tax collected on their returns as usual.

Vendors who need temporary sales tax permits should call Cheryl at 563/386-6484 x1 or fax her at 563/386-5201.

An exhibitor shows/demonstrates products. Exhibitors who do not sell products do not need sales tax permits; however, they still need to contact the sponsor or Cheryl at 563/386-6484 x1 or fax at 563/386-5201.

Vegetable Seeds, Plants, and Fruit Trees

If your customer will be consuming the produce from the seeds, plants or trees, the sale is taxable.

If your customer will be selling the produce, the sale is exempt. Be sure to get a Sales Tax Exemption Certificate (pdf) from your customer.

Landscaping, Lawn Mowing, and Lawn Care

The services of landscaping, lawn mowing, and lawn care are taxable unless performed on or in connection with new construction, reconstruction, alteration, expansion, or remodeling of a building or structure.

“Lawn care” includes but is not limited to the following services: mowing, trimming, watering, fertilizing, reseeding, resodding, and killing of insects, moles, other vermin, weeds, or fungi which may be threatening a lawn.

Persons who mow lawns are providing a taxable service regardless of their ages. However, your services will be exempt if:

  • you are the owner of your business and the only person performing the service, and
  • you are the owner of the business and a full-time student, and
  • the total gross receipts do not exceed $5,000 for a calendar year.

Please see our handout on landscaping and lawn care. (pdf)

Bars, Restaurants, Hotels, and Motels Complimentary Beverages and Meals

This article was published in March 2009 with the intent of correcting information presented in a June 2008 eNews article. However, early in 2010 the Department was asked by taxpayers to review its determination. The Department agrees the original interpretations in June 2008 were correct. Please follow the guidance presented in the June 2008 article and disregard the article below. The Department regrets any confusion that may have been caused.

Bars, restaurants, hotels, motels and other similar businesses may owe Iowa sales or use tax on complimentary items given to customers or employees.

Complimentary beverages and meals GIVEN TO CUSTOMERS

Alcoholic beverages, soft drinks, candy and other items that are not tax exempt as food are taxable as goods consumed when given to customers at no charge. This is because these items are normally subject to sales tax. The items were purchased tax free by the business because they were intended for resale. When they are given to customers, they are considered "goods consumed" by the business for its own use. The basis for the use tax on those goods consumed is the purchase price paid by the business.

Prepared meals given to customers at no charge are taxable as goods consumed because prepared foods are normally subject to sales tax. The ingredients for the meal were purchased by the business with the intent to process them into prepared meals for resale. Raw materials that will be processed into an end product may be purchased tax free because they are intended for resale. In the case of prepared meals, the raw materials, food ingredients, also happen to be exempt from tax. The principle of taxation is that the basis for taxable, processed goods consumed is the purchase price of the raw materials. As such, businesses should work with their tax advisors to establish a reasonable basis for determining the purchase price of the food ingredients used in prepared meals that are given to customers.

The value of the taxable items is reported on line 2 of the quarterly sales tax return as goods consumed. The amount entered on line 2 is the purchase price paid by the business to its supplier, not the amount normally charged a customer.

Complimentary beverages and meals GIVEN TO EMPLOYEES

Alcoholic beverages, soft drinks, candy and other items that are not tax exempt as food are taxable as goods consumed when given to employees at no charge. This is because these items are normally subject to sales tax.

Food consumed without charge by at-work employees is not taxable as goods consumed because the food used to prepare the meal is not intended for sale; rather, it is intended for the employee's consumption pursuant to an employer's arrangement with its employees.

The value of the taxable items is reported on line 2 of the quarterly sales tax return as goods consumed. The amount entered on line 2 is the purchase price paid by the business to its supplier, not the amount normally charged a customer.

Meals and Beverages SOLD TO EMPLOYEES AT A REDUCED PRICE

Alcoholic beverages, soft drinks, candy, and other items that are not tax exempt as food are taxable when sold to employees at a reduced price. The tax is calculated upon the actual selling price.

Prepared meals or food sold at a reduced price and consumed by at-work employees are taxable when sold to employees. The tax is calculated upon the actual selling price.

Hotels & Motels

If a complimentary meal is advertised as being part of the room rental package (i.e. "free continental breakfast"), and is available to all hotel guests, then tax is being paid on the food by the guest in the form of the tax paid on the room rate. The hotel would not owe additional use tax.

If a person is dining in a hotel's restaurant or ordering from room service, where there is a separately stated charge for the meal or food, and the person received the meal free of charge for some reason, that meal would be subject to use tax.

Tips or Gratuities

Tips or gratuities are often added to a bill as a mandatory charge, particularly when large groups are served. In these cases, tax is due on the full amount charged for the meal, including the gratuity or tips.

Tips or gratuities paid voluntarily by the customer are not subject to sales tax.

Oil Filters: Does Your Business Sell, Generate, or Collect Them?

A change to Iowa law (Iowa Code 455D.13) may impact your retail and business operations. If your business sells oil filters or if your business generates or collects used oil filters, this impacts you.

The changes became effective on February 4, 2009.

If your business sells oil filters: You must accept used oil filters from your customers following regulations found in IAC chapter 119 OR you must post a DNR-provided sign informing customers of at least one used oil filter collection site located within the county. If there is more than one collection site located in the county, then the nearest used oil filter collection location must be listed.

If your business generates or collects used oil filters: A business that generates used oil filters or accepts used oil filters cannot dispose of the used oil filters in a sanitary landfill and must source separate and recycle the used oil filters. Your used oil filter transporter will provide you with information on how the filters should be prepared.

For a used oil filter collection site list, transporters/processors list, retailer signs, and the Iowa Administrative Code revisions, visit www.iowadnr.gov/waste/hhm/hhmretailers.html

For additional information, contact Kathleen Hennings at kathleen.hennings@dnr.iowa.gov or 515-281-5859.

Income Tax Return Extensions and Payment Plans

Automatic Extension of Time to File Income Tax Returns

Iowa does not have an application to extend the time to file your income tax return. In addition, we do not accept a federal extension.

Instead, if you have paid at least 90% of the tax you owe by the due date of your return, you automatically have an additional six months to file your return and pay the additional tax due with no penalty. Interest continues to accrue on unpaid tax during the extension period.

If you need to make a payment to meet the 90% requirement, it must be paid or postmarked by April 30 for calendar year filers. You can make your payment electronically through our eFile & Pay system or by mail using form 41-137 (pdf) for individuals, or form 42-019 (pdf) for corporations.

Payment Plans

Iowa does not have a payment plan option for tax shown due on the return. Pay as much as you can, and you will be billed for the balance due. Payment plans can be established only after a bill has been issued and has gone to our collections section for action.

Even if you cannot pay the amount due, file the return on time anyway. Filing the return by the due date will reduce any late payment penalty from 10 to 5 percent. 

Classes about Iowa Taxes

Are you a new business? Or just need to know more? Our tax classes are held all year statewide.

In 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 you.

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