from the Director
With the creation
of the Department of Administrative Services (DAS)
coming July 1, the employees of the State Accounting
Bureau -- formerly part of the Iowa Department of
Revenue and Finance -- will be under the direction
of the new department. There are no current plans
to physically move Accounting Bureau staff.
a result, beginning July 1, Revenue and Finance
will lose the Finance piece of its
name. We will have a new name - the Iowa Department
of Revenue. A new department logo and letterhead
are currently in the works.
Another change taking
place is the Iowa Lottery will become a separate
authority and will no longer fall under the umbrella
of the Iowa Department of Revenue.
Tax Holiday on clothing set for August 1-2
Tax Holiday" will be held August 1-2, 2003. For more
information, please visit our Holiday
clarifies plumbing-related tax policy
letter dated April 14, 2003, and written by the Iowa
Department of Revenue and Finance clarifies that drain
cleaning and unplugging toilets, sinks and sewers are
subject to Iowa sales tax and local option tax, if applicable,
under the enumerated service of "pipe fitting and
The department is publishing
this clarification because it is aware that contrary advice
may have been provided in the past. Businesses that have
not collected sales tax in the past should start collecting
tax on these services immediately.
The taxation of pipe fitting
and plumbing is addressed in department rule 701 IAC 26.36,
Pipe fitting and plumbing. Persons engaged in the business
of pipe fitting and plumbing are rendering, furnishing
or performing a service, the gross receipts from which
are subject to tax. "Pipe fitting and plumbing" shall
mean the trade of fitting, threading, installing and
repairing of pipes, fixtures or apparatus used for
heating, refrigerating, air conditioning or concerned
with the introduction, distribution and disposal of
a natural or artificial substance.
the sales tax rate in...
...your town? Any town
in Iowa? Go to our business index for the complete
list (this is a sortable MS Excel document). Some
users may prefer the city-by-city
alphabetical list. (pdf)
highlights for 2003
New legislation passed
in 2003 will be summarized in detail and posted on the department's
web site as soon as it is reviewed by our Tax Policy section.
The list below highlights the changes for 2003.
HF 344 Motor Fuel Tax
Paid by Benefited Fire District
Benefited fire districts
may receive a refund of motor fuel tax paid on fuel used
for public purposes.
HF624 Farm Deer
Expands the definition
of Elk qualifying for exemption from sales tax.
HF 636 Legislative Branch
Sales by the new Legislative
Services Agency are exempt from sales tax.
HF 654 Equipment and
Materials used in mold making
sale or rental of core and mold making equipment and
sand handling equipment directly and primarily used
in the mold making process by a foundry are exempt from
sales tax. The provision is retroactive to July 1, 1997,
and $600,000 is allocated to pay refund claims submitted
prior to October 1, 2003.
HF 674 Income Tax deduction
and exemption for military personnel
Exempts from income tax
amount of military pay while serving in Operation Iraqi
Freedom, Operation Noble Eagle and Operation Enduring Freedom.
Also includes other income tax benefits.
HF 677 Capital Investment for Business and Tax Incentives
a "New Capital
Investment Program" administered by the Department
of Economic Development. Businesses approved by IDED are
eligible for tax credits.
HF 681 Tax Credits and
Refunds for Value-Added Co-ops
The prior tax credit for
production of ethanol was expanded. Primary production of
ethanol is no longer a requirement.
HF683 Endow Iowa tax
credit - Streamlined Sales Tax
Created a new tax credit
administered by the Department of Economic Development for
endowments made to foundations. Authorized Iowa's participation
in the national Streamlined Sales Tax program.
HF 689 Providing Retroactive Ethanol Credits for fiscal
prior tax credit was expanded so fiscal year income
tax filers can now take the credit for sales made on
or after January 1, 2002, of their tax year.
Research Utilization Program Tax Credit - Property Tax Pilot
Created a new tax credit
administered by the Department of Economic Development.
Created a pilot program in 3 counties to test a new way
of computing property tax.
SF 441 Transfer of Credits for Eligible Housing Business
for the transfer of certain tax credits administered
by the Department of Cultural Affairs.
The legislation is retroactive to January 1, 2003.
SF 442 Update IRC References
This is the annual update
to IRC references. Iowa did not couple with certain federal
bonus depreciation provisions.
SF 445 Local Option
Taxes for School Infrastructure
The provisions for the
School Infrastructure Local Option taxes were repealed effective
December 31, 2022. New procedures were implemented to share
revenue with districts across the state rather than each
county retaining the taxes collected within their county.
SF 453 Lottery Sales
The sale of lottery tickets
will be exempt from sales tax effective July 1, 2003.
care, landscaping services are subject to tax
engaged in the businesses of "lawn care" and "landscaping" in
this state are performing services which are subject
to Iowa sales tax.
"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. You will find this information in Iowa Rule 701-26.61.
services performed by one who arranges and modifies the
natural condition of a given parcel or tract of land
so as to render the land suitable for public or private
use or enjoyment is engaged in the business of "landscaping." The
gross receipts from landscaping performed on or in connection
with new construction, reconstruction, alteration, expansion
or remodeling of a building or structure are not subject
to sales tax. You will find this information in Iowa
or sale of certain construction equipment exempt from local
The following are not subject
to either of Iowa's local option sales taxes: Self-propelled
building equipment, pile drivers, motorized scaffolding,
or attachments customarily drawn or attached to them, including
auxiliary attachments which improve their performance, safety,
operation, or efficiency and including replacement parts.
These must be used directly and primarily by contractors,
subcontractors and builders for new construction, reconstruction,
alterations, expansion or remodeling of real property or
structures to be exempt. (Purchases or sales of this equipment
are still subject to the state sales tax of 5%.)
Please reference 701 IAC
107.9(8) for more information.
not considered 'building material'
The sale of carpeting,
with or without installation, constitutes a retail sale
of tangible personal property and is subject to sales or
use tax, unless purchased for resale or otherwise exempt
from tax. Carpet installation charges, if separately itemized
from the carpet, are exempt from sales tax.
Other floor coverings (i.e. vinyl, tile, wood) which are
shaped to fit a particular room or area and are attached
to supporting floors are considered building materials.
They are taxed in the same manner as building materials
that are used in the performance of a construction contract.
receive your sales tax return?
occasionally asked what taxpayers should do if they
don't get their sales tax return in the mail. If you
do not receive it, you may obtain a form
from our Web site. Be sure to write in the permit number
and filing period. [Editor's Note: Beginning July 2005,
sales and use tax forms are no longer mailed. Returns and
payments are made electronically through eFile & Pay.]
Use the preprinted sales
tax return mailed to you whenever you can. It will expedite
the processing of your return.
All deposits and returns
must still be filed by the due date, even if you did not
receive your preprinted forms.
A penalty of 10% will be
added to the tax due if the return is not filed by the due
date and at least 90% of the correct tax is not paid by
the due date.
If the return is filed
timely, but the total amount due is not remitted, a penalty
of 5% will be added to the tax due if at least 90% of the
correct tax is not paid by the due date.
The interest rate may change
yearly. Interest must be added to delinquent tax at a per
month rate, beginning on the due date of the return and
accruing each month until you make full payment of any or
all tax, penalty and interest due. The interest rate per
month during the year 2003 is 0.6 percent.
We are often asked how
frequently retailers should update blanket exemption certificates
received from regular customers.
rule 15.3(2)b provides general guidance, stating "A seller who accepts
a blanket certificate is required periodically to inquire
of the purchaser to determine if the information on the
blanket certificate is accurate and complete." The
department now recommends that retailers ask for updated
certificates at least every three years.
seeds, food plants exempt
A gentle reminder to Iowa retailers that
sales of seeds, vegetable plants and fruit bearing trees
used to grow food are exempt from Iowa sales tax.
Q & A:
Installing Security and Intercom Systems
Is a "hard-wired" burglar alarm system subject
to sales tax?
The service needed to install this type of burglar alarm
system is subject to sales tax, unless the service is performed
on or in connection with new construction, reconstruction,
alteration, expansion, or remodeling of a building or structure.
However, the tangible personal property that becomes reality
upon installation is subject to Iowa sales or use tax at
the time of purchase by the contractor.
burglar alarm system consists of a main panel that is the
control center of the system and connects all of the sensors
and keypads used to control the system. This main panel
is hard-wired inside the walls throughout the house. There
are sensors wired to the door frames and sensors wired in
the walls for glass breaks as well as to keypads used to
control system functions such as arming, disarming, and
bypassing system security zones. Holes are cut in the walls
for the keypads to be mounted with brackets anchored to
This kind of hard-wired security system appears to have
become realty with the wiring of the sensors and control
panels. When this system is wired in this manner it would
appear to be difficult to remove and not something a buyer
or purchaser of the home or business would normally think
of as being removed when the property is sold.
What if a burglar alarm system is not hard-wired?
Another type of security system is not hard-wired and the
control box with the power supply is plugged into an outlet,
and simply sits on a table or is screwed into the wall with
screws or attached to the wall with double-sided tape. The
sensors are attached in the same manner and can easily be
removed without damage to the walls, the doors or the system.
This type of system would not be considered part of realty,
but is tangible personal property and subject to sales tax.
This system could be moved from house to house or business
What about the taxability of a hard- wired intercom system?
The intercom consists of a hard-wired system which means
it is hard-wired to the structure. The door bell is taken
out and replaced by a speaker box with the door bell integrated
into the speaker box. A large hole is cut into the house
where the doorbell was. The speaker boxes are cut into the
walls and hardwired by connecting them to the main power
The power supply is hardwired from speaker box to speaker
box. This system would now become part of realty, and not
something a buyer or purchaser of the home or business would
normally think of as being removed when the property is
sold. Installation labor of this type of intercom system
is subject to sales tax, unless it is performed on or in
connection with new construction, reconstruction, alteration,
expansion, or remodeling of a building or structure. However,
the tangible personal property that becomes reality upon
installation is subject to Iowa sales or use tax at the
time of purchase by the contractor.
the non-hard-wired systems that are purchased at electronic
stores that simply plug into the outlets are taxed at the
time of purchase as tangible personal property and they
remain tangible personal property upon installation.
Please reference 701 IAC
19.1 for more information.
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