A message from the director:

Thanks for taking time to review this latest edition of the Iowa Department of Revenue's Tax eNews publication. Our goal with this publication is two-fold. First, we hope to share information that is truly useful to you as a taxpayer and/or a practitioner. Second, and just as importantly, we use it as a tool to seek your advice, counsel, questions, or comments about IDR issues.

As for sharing information, you'll note several references to the department's new eFile & Pay program. Many of you already know about the program and the objective of providing total electronic interaction with the department at YOUR convenience. The program started at the beginning of the year with implementation of electronic filing and payments related to withholding returns. The next phase kicks off July 5 with electronic applications related to sales and retailer's use tax.

We've received lots of feedback related to the eFile & Pay program. As you can imagine, it has been mixed; some folks love it and some folks hate it. The negative comments have decreased over time to the point that there appears to be great acceptance of the program among Iowans. For that we thank you. Still, know that we want to hear from you. Should you need assistance or wish to make suggestions, you can e-mail the department or call (866) 503-3453 toll free.

So, you'll find information about eFile & Pay, and other issues, in this edition of Tax eNews. Let me close by again encouraging you to let us hear from you.

Thank you in advance for your comments and your suggestions,
Mike Ralston

Every effort is being made to reach permit holders who file these Iowa taxes. In May, our department mailed a letter to each permit holder, notifying them of the upcoming change. The media assisted us in educating the public and businesses after our press conference in June. In addition, a news release was sent to all media statewide and to Chambers of Commerce and business and professional organizations.

In July, letters will be sent once again, this time with important information on accessing eFile & Pay. Our tax specialists will hold meetings statewide to explain the electronic process and answer questions.

More information is available on our Web site.

Please note: The quarterly return for the second quarter of this year is not required to be filed through eFile & Pay, although it can be. You may use the preprinted paper return you received from the department for the second quarter and begin using eFile & Pay for periods after July 1.

2005 Sales Tax Holiday

The 2005 Sales Tax Holiday will be held Friday and Saturday, August 5 and 6. Complete information about the Holiday can be found online.

*Please note the following changes.*

Layaway sales

A layaway sale is a transaction in which merchandise is set aside for future delivery to a customer who makes a deposit, agrees to pay the balance of the purchase price over a period of time and at the end of the payment period, receives the merchandise.

Eligible items will qualify for the exemption if the customer:

• takes delivery of the merchandise during the exemption period or
• puts the merchandise on layaway, even if final payment and delivery is not made until after the Sales Tax Holiday

Mail order sales

Eligible items purchased by mail order, catalog or Internet will be exempt if they are:

• delivered during the exemption period, or
• ordered and paid for during the exemption period, even if delivery is made after the Sales Tax Holiday.

Shoe inserts and laces are exempt , not taxable.

Local Option Sales Taxes

New jurisdictions are being added July 1 in both school local option tax and regular local option tax.

Lawncare, landscaping subject to Iowa sales tax

A reminder that lawncare and landscaping services performed in Iowa are subject to 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.

The 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.” Landscaping performed on or in connection with new construction, reconstruction, alteration, expansion or remodeling of a building or structure is not subject to tax.

When a landscape and lawn care company installs underground irrigation or lighting systems, or constructs other structures such as retaining walls, sidewalks or pools, it is in a construction contract.  When this occurs, the company must pay tax on all construction materials and will collect no tax from the customer.  It is important in these situations for the landscape or lawn care company to know the difference between landscape materials and construction materials.

For complete information, please read our brochure, "Iowa Tax Rules: Landscaping and Lawn Care." (pdf)

Vegetable seeds, plants, and fruit trees

If the purchaser of vegetable seeds, plants or fruit trees will be consuming the produce from the seeds, plants or trees, the sale is taxable in Iowa. Sales of vegetable seeds, plants, and fruit trees are exempt if the buyer will be selling the produce.

Classes About Iowa Business Taxes

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