<%@LANGUAGE="JAVASCRIPT" CODEPAGE="1252"%> Iowa Department of Revenue electronic newsletter: Iowa Tax eNews
JUNE 2008
graphic for Iowa Department of Revenue Tax eNews electronic newsletter


Message from the Director
:

The floods have been devastating to Iowa. I wish I could say we have all dried out, but it is raining as I write this. The positive news is that Iowans are pulling together. Help is available inside and outside of Iowa. The Governor has directed state agencies to help wherever we can. It never seems fast enough but we are working as quickly as we can.

Two proclamations related to taxes have been signed by the Governor. The first proclamation extends the deadline to July 28, 2008, for taxpayers who are affected by flooding or tornados and who have returns and payments due after May 24, 2008, and before July 23, 2008. The taxes that are impacted by this extension are:

  • Withholding tax
  • Individual income tax
  • Corporation income tax
  • Franchise tax
  • Sales and use tax, including the automobile rental excise tax and the special equipment tax
  • Hotel and motel tax
  • Environmental protection charge
  • Inheritance tax, including the generation skipping transfer tax and the qualified use inheritance tax
  • Motor fuel and special fuel tax
  • Cigarette and tobacco tax

Taxpayers filing a paper return should make a notation on the return stating, “Taxpayer affected by tornadoes/flooding.” Affected taxpayers will not be subject to any penalty for failing to file or pay. In addition, interest will not be due on payments made by July 28, 2008. If an affected taxpayer receives a penalty or interest notice from the Department, the taxpayer should call the telephone number on the notice.

The second proclamation concerns property tax credits in Linn County. The Linn County and Cedar Rapids Assessors' offices were closed because of flooding. The deadline for Linn County and Cedar Rapids taxpayers applying for Homestead, Disabled Veterans, and Military Service property tax credits has been extended until July 31, 2008.

Please let us know if we can be of assistance.

Mark R. Schuling
Director

When contacting us

When you contact our Department, please have available the form, bill, document, or other material about which you have a question. We can serve you better and faster if you do.

When mailing multiple returns

When mailing tax returns for more than one period, please send them in separate envelopes. This reduces the chances of a return being accidentally overlooked and not processed properly.

Local option sales tax

Beginning July 1, 2008, the school infrastructure local option (SILO) tax no longer exists as a separate tax.

The "regular" local option sales tax (LOST) will continue and becomes effective in more than 21 new jurisdictions on July 1.

Hotel / Motel Tax

Hotels and motels in additional jurisdictions will begin collecting the hotel / motel tax July 1.

Bars & Restaurants

Upon further review by the Department in February 2009, this article was thought to be partially inaccurate. However, early in 2010 the Department was asked by taxpayers to again review its determination. The Department agrees the original interpretations in June 2008 were correct. Please follow the guidance presented in the article below. The Department regrets any confusion that may have been caused.

Complimentary beverages and meals

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

For example, if you provide complimentary alcoholic beverages or soft drinks to customers or employees, Iowa tax is due on the value of the beverages. These beverages are taxable as "goods consumed" since the bar or restaurant originally purchased them for resale and did not pay sales tax. Instead of selling them, the business gave them away.

The value of the beverages 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 bar or restaurant to its supplier, not the amount normally charged a customer. 

On the other hand, complimentary meals provided to customers or employees are generally not taxable as goods consumed. The reason for this difference can be traced back to the original purchase of the items. Alcohol and soft drinks are ordinarily taxable at the time of purchase. They are purchased tax free by the business only because they are intended for resale. Unprepared food, with some exceptions, is not taxable at the time of original purchase because it is a grocery item.

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

To Learn More...

For additional information concerning food and beverage sales, you may wish to review our Food/Restaurants and Grocery Stores publication.

Services Performed by Students

During the summer months many students may perform services that are subject to Iowa sales tax.  A complete list of taxable services can be obtained in our publication titled Services: Which ones are taxable?

For example, 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. Persons who mow lawns are providing a taxable service regardless of their ages; however, effective 7/1/06 a casual sale exemption exists if (1) the owner of the business is the only person performing the services; (2) the owner of the business is a full-time student; and (3) total gross receipts from the services do not exceed $5,000 for a calendar year. Please see our handout on landscaping and lawn care .

 A casual sale exemption may also apply to services which would otherwise be taxable if:

1. It is a sale of a nonrecurring nature, and

2. The seller at the time of the sale must not be engaged in selling goods or taxable services for profit; or if the seller is so engaged, the casual sale must be outside the regular course of business.

Two separate selling events outside the regular course of business within a 12-month period are considered nonrecurring. Three separate selling events within a 12-month period are considered recurring. Tax applies beginning with the third separate selling event. However, when a sale event is planned and occurs consistently over a span of years, the sale is recurring and not casual, even though only one sale event occurs each year.

Students performing taxable services for which a casual sale exemption does not exist should apply for a sales tax permit online at Apply for an Iowa permit .

Legislation

Legislative summaries will be posted in the Research category of our Web site as soon as they are available.

The Smokefree Air Act

The Smokefree Air Act was signed into law by Governor Chet Culver on April 15, 2008. The law goes into effect on July 1, 2008. Smoking will be regulated in public places, places of employment, and certain outdoor areas in Iowa. The Smokefree Air Act outlines areas where smoking is prohibited, areas where smoking is not regulated, enforcement details, and scheduled penalties for persons and businesses that violate the law. To learn more about your responsibilities, visit the Iowa Department of Public Health Web site or call them at 1-888-944-2247.

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.

Contact Us

Questions About eFile & Pay

Questions About Iowa Taxes

Newsletter Ideas