<%@LANGUAGE="JAVASCRIPT" CODEPAGE="1252"%> Iowa Department of Revenue electronic newsletter: Iowa Tax eNews
SEPTEMBER 2007
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Message from the Director:

Pay the tax and relax.

Iowa's Tax Amnesty program began September 4 and will end October 31, 2007. The Tax Amnesty program is available for all state taxes administered by the Department of Revenue.

Eligible taxpayers include those who did not file a required return, those who made mistakes on a previously-filed return, and those who may simply have tax debt with the Department. The program allows for a waiver of all penalties and one-half the interest for past-due tax returns or reports and any additional taxes due for returns or reports that were originally due on or before December 31, 2006.

The benefits of participating in the Tax Amnesty program include the following:

  • participating taxpayers can “wipe the slate clean” by clearing up unpaid, underreported or overdue taxes without fear of retaliation;
  • taxpayers can save money because the program offers a one-time chance to pay without penalty and one-half the interest waived;
  • taxpayers will be able to avoid legal action; and
  • participating in the Tax Amnesty program will not increase the chance of being audited in the future.

The official Iowa Tax Amnesty Web site can be found at IowaTaxAmnesty@iowa.gov . The site includes frequently-asked questions and their answers and access to the Tax Amnesty application and other tax forms. In addition, the Department is taking calls at the Tax Amnesty toll-free number: 1-877-422-5829.

Mark Schuling, Director

Nonprofit entities: Sales tax issues

 

The issue of sales tax in relation to nonprofit entities is often confusing to businesses that sell to them and to the organizations themselves. The information below is general in nature. For more details, including definitions and numerous examples, please see Nonprofit entities: Sales to and sales by (78-595).

Sales Made TO Nonprofit Entities

Nonprofit entities, churches and religious organizations are not automatically exempt from paying state sales taxes on taxable goods and services. This is true even if they are exempt from paying state and federal income taxes. State sales tax and local option tax, if applicable, must be paid unless some other general sales tax exemption applies. In other words, a nonprofit entity, church or religious organization is treated the same as any other private citizen for sales and use tax purposes when purchasing taxable goods and services.

An exception is sales made to private nonprofit educational institutions. They do not pay sales tax on taxable goods and services that are used for educational purposes. An “educational institution” primarily functions as a school, college, or university with students, faculty, and an established curriculum. The faculty must be associated with the institution, and the curriculum must include basic courses that are offered every year. A library is also considered an “educational institution.”

Certain other nonprofit organizations are also exempt from sales and use tax under Iowa law. Please see Nonprofit entities: Sales to and sales by for a list of those entities.

Sales Made BY Entities/Organizations

Sales made by entities or organizations engaged in educational, religious, or charitable activities are exempt if:

  • The gross receipts must be from a retail sale or rental of tangible personal property or taxable services;
  • The profits from the sale must be used by or donated to one of the following:
    • An entity that is exempt from federal income tax under Internal Revenue Code Section 501(c)(3);
    • A government entity; or
    • A private nonprofit educational institution
  • The net proceeds after direct expenses are paid must be used for qualifying educational, religious, or charitable purposes. The expenses must be necessary and be directly related to the activity.

NOTE: All receipts from gambling activities sponsored by nonprofit entities are subject to sales tax, regardless of the ultimate use of the proceeds.

Legislation

 

The 2007 Legislative Summary is now available.

eFile & Pay enhancement

 

For customers who file Iowa business returns electronically but pay by mail, we now offer a system-generated payment voucher. On the confirmation screen, you will see two print buttons if “mail a check” has been selected: one button to print the confirmation screen and a second button to print the voucher to mail with the payment. eFile & Pay will automatically fill in the payment voucher so that it can be scanned by our equipment.

Taxpayers continue to take advantage of ePay, the direct debit function in eFile & Pay. Currently, we receive 50 percent of sales tax and 63 percent of withholding payments electronically. Taxpayers who file and pay electronically mail nothing!

Pumpkins: Pies and jack-o'-lanterns

 

This information is no longer valid. Pumpkins are considered food and exempt from sales tax.

The Department recently refined its position on whether pumpkins are subject to Iowa sales tax to more closely match what we believe to be their predominant use.

In the past, pumpkins were exempt from sales tax as a food (edible squash), even if they were to be later made into jack-o'-lanterns or used as decorations.

Our position now is that pumpkins are taxable if:

  1. They are advertised to be used as jack-o'-lanterns/decorations, or
  2. It is understood that they will be used as jack-o'-lanterns/decorations

Pumpkins are exempt in the following circumstances:

  • The buyer completes a sales tax exemption certificate stating they will be used as food, or
  • The pumpkins are a specific variety used to make pumpkin pies and are advertised in that way, or
  • They are purchased with Food Stamps.

Retailers who sell pumpkins should keep these guidelines in mind and make any necessary changes to their tax treatment of pumpkin sales.

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.

Snow Shoveling

 

Snow removal is not subject to Iowa sales tax.

Contact us

 

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