<%@LANGUAGE="JAVASCRIPT" CODEPAGE="1252"%> Iowa Department of Revenue electronic newsletter: Iowa Tax eNews
DECEMBER 2005
graphic for Iowa Department of Revenue Tax eNews electronic newsletter


New Director Appointed

Mark R. Schuling became director of the Iowa Department of Revenue on December 15. Mr. Schuling has been a practicing attorney for 25 years in Des Moines and has worked in private practice on tax litigation. During four of those years, he was an assistant attorney general in the Iowa Attorney General's Office and advised the department on statutes, rules, and declaratory rulings. In addition to holding a doctor of jurisprudence degree from Drake University, Mr. Schuling is also a certified public accountant.

Former Director Mike Ralston resigned to become president of the Iowa Association of Business and Industry on December 1.

Do you make estimated income tax payments?

Beginning January 2006, you will be able to pay your Iowa estimated payments - individual and corporation income tax - through eFile & Pay. If you file Iowa sales/use or withholding tax, you already have a Business eFile Number (BEN). To make your estimated payments online, simply use the same BEN.

If you do not have a BEN, you may request one from the department or you may simply make payments without obtaining a BEN. You will see a message that says: Wish to make an ePayment for Individual Income or Corporation Income Taxes? Not enrolled? Click here. Just follow the directions to continue.

New local option sales tax jurisdictions

Four counties have approved the school local option tax and jurisdictions in four other counties have added the regular local option tax. Rates are found on our Web site.

You might consider using the Sales Tax Rate Lookup . Enter the exact address of the buyer to obtain the total sales tax rate.

Shoveling snow?

Snow removal is not a taxable service!

Reminder to utility companies

Beginning January 1, 2006, the Iowa state sales tax rate of 5 percent is no longer charged on sales of metered gas, electricity, and fuel, including propane and heating oil used as energy in residential dwellings. Local option taxes, if any are applicable, continue to be charged.

This does NOT apply to water and telephone utilities.

This is the final step in a 1% per year phase-out of the state sales tax on residential energy that began in 2002.

To report this phase-out when completing the Iowa sales tax return.

1. Report all sales on line 1 (Gross receipts)

2. Determine the gross sales subject to phase out and put:

  • 80% of that amount on line 4 (Exemptions) for returns filed in 2005
  • 100% of that amount on line 4 (Exemptions) for returns filed in 2006 and thereafter

3. Designate that amount as "Residential Utility" under Exemptions to document that exemption.

4. Remember that the phase out does not apply to local option taxes, so add that amount back into your taxable sales when reporting amounts subject to local option or school local option taxes.

Sales Tax on Fuel Surcharges

Transportation and delivery charges are exempt from sales tax, as long as they are separately stated, reasonable in amount and related to the cost of transportation. Fuel surcharges assessed to customers must meet these requirements to qualify for exemption.

Fuel surcharges that relate to the cost of transportation would typically need to be imposed based in some way on the distance traveled. This would include a specific "per mile" charge, or perhaps differing surcharge amounts based upon certain "ranges" of miles traveled. Fuel surcharges assessed in this manner would be exempt from sales tax assuming they also meet the requirements of being separately stated and reasonable in amount.

A fuel surcharge that is imposed as a "flat fee" (the same amount charged to all customers without regard to the distance traveled) or calculated as a percentage of the cost of the good to which it applies would not be considered part of exempt transportation or delivery charges, but rather as part of taxable gross receipts.

End-of-Year reminders to withholding filers

With the end of the year approaching, you will want to file your Iowa Verified Summary of Payments Report (VSP) through eFile & Pay. Paper VSPs for 2005 are no longer available.  To file through eFile & Pay, go to our Web site and click on the eFile & Pay link, top left.  Remember that Iowa does not require you to send in copies of the W-2s or 1099s.  Employers are, however, required to keep copies for three years.  The VSP must be filed by February 28, 2006 .

The federal government requires employers to provide W2s and 1099s to employees no later than January 31, 2006, for tax year 2005.  W-2s and 1099s are federal forms and can be obtained through the IRS Web site, by calling the IRS at 1-800-572-3676, or by purchasing them through an office supply company.

Iowa Motor Fuel Tax Update

eFile & Pay

Iowa liquefied petroleum gas (LPG) fuel tax returns are required by statute to be filed electronically through the online eFile & Pay system starting with the January 2006 monthly return, which is due February 28, 2006.  The system will be accessible beginning on February 1, 2006.  Electronic payment of the tax due will also be required.

Notification letters, including the Business eFile Number (BEN), will be sent by our department prior to the first due date.

Motor fuel and special fuel taxes remitted by licensed suppliers, restrictive suppliers, importers, and blenders will be required by statute to be filed electronically through the online eFile & Pay system starting with the June 2006 monthly return, which is due July 15 (importers) or July 31, 2006 (all other filers).  The system will be accessible beginning on July 1, 2006. Note: These dates are tentative and subject to change.  Electronic payment of the tax due, which is already required, will switch to the new online eFile and Pay system for direct debit transactions.  ACH Credit or credit card electronic payment will also be allowed.  Returns and all schedule information will be required to be filed using EDI standards or excel spreadsheet uploads.

E85

Beginning January 1, 2006, E85 will have a new  Iowa fuel tax rate of 17¢ per gallon. E85 is ethanol-blended gasoline that contains at least 85% denatured alcohol from the first day of April through the last day of October, or at least 70% denatured alcohol from the first day of November through the last day of March. Prior to January 1, 2006, E85 will continue to be taxed at the current rate of 19¢ per gallon, the same rate as all other types of ethanol blended gasoline. 

A revised return which includes this new fuel tax rate for E85 will be available on our Web site in January 2006. Note: For return purposes, report both E70 and E85 as E85.  For schedule purposes, they will be reported separately.

The department allows suppliers to invoice gasoline to be blended into ethanol blended gasoline at the lower Iowa gasohol rate of 19¢ per gallon if they have a federal 637 "M" registration. This allows the gasoline and the alcohol portions of the gasohol to be taxed at the same 19¢ rate.  

However, the department will not allow gasoline or alcohol to be blended to make E70 or E85 to be purchased at the reduced 17¢ cent rate. It can be purchased at the 19¢ rate under the same guidelines as other ethanol blended gasoline. Refunds of the difference in tax rates can be claimed by filing a refund claim form for Excess Tax Paid on E85. The claim form will be available in January 2006 on the IDR Web site.

How fast do you want your Iowa income tax refund?

Willing to wait weeks? Then paper-filing is for you.

How about days? Choose one of our e-filing options. Electronic filing begins January 13. Our Web site will have links to approved vendors, including those participating in Free File Alliance.

ADDITIONAL QUESTIONS?

About Iowa eFile & Pay:
E-mail
515-281-8453 or
1-866-50-e-file (1-866-503-3453)

About LPG Fuel Tax:  
515-281-6447 or 
515-242-6033

About Iowa Tax Law:
E-mail
515-281-3114 or
1-800-367-3388

Classes About Iowa Business Taxes

Our tax classes are held all year statewide. In addition, we make house calls! If your business would benefit from training on Iowa taxes, contact us.

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