DOCKET NUMBER 07-30-6-0009
On January 11, 2007, the Petitioner filed a Petition for Declaratory Order pursuant to 701 IAC 7.56. The Petitioner is a full service public accounting firm that provides a variety of services that includes auditing and review of auditing and review of financial statements, accounting services, human resources consulting, tax credit programs to assure clients claim federal and state tax credits they are entitled to claim, payroll services, tax services, marketing, and merger and acquisitions services to assist clients in the buying and selling other businesses. The Petitioner employs approximately 159 employees in five locations. The educational levels of the Petitioner's employees consist of one employee with a law degree, four with an MBA degree, seventy-three with a four-year degree, thirty-six with a two-year degree, one with a one-year degree, thirteen interns, and thirty one with a high school diploma. Of these previously listed employees, the Petitioner has thirty-three Certified Public Accountants and approximately 17 employees with special designations in accounting, insurance and computer related certifications.
Based on this information, the Petitioner seeks to know if the Petitioner a “commercial enterprise” within the meaning of Iowa Code section 423.3(47)(2007) and department rule 701 IAC 18.58 and is therefore entitled to claim exemption from Iowa sales and use tax on the purchase of computers and computer equipment?
The general classification of the Petitioner is an accounting firm. The Petitioner employs many professionals as well as nonprofessional employees in order to provide a wide array of services to customers of the Petitioner. Many of the Petitioner's employees possess law degrees and Certified Public Accounting certifications, which are professions. Although the majority of the Petitioner's employees possess degrees of four-years or less, that alone does not hinder the Petitioner's business from being classified as a profession. It is necessary to employ a wide variety of employees in order for the Petitioner to provide the various services that the Petitioner can provide to its large customer base. To determine whether the Petitioner is engaged in a “commercial enterprise”, profession, or occupation, it is necessary to look at the type of services being provided to the Petitioner's customers along with the educational background of the employees. The type of services provided by the Petitioner includes not just basic bookkeeping, but also long-range business planning, tax planning, mergers, acquisitions, estate planning and litigation support. In addition, the Petitioner offers labor relations, governmental compliance, personnel policy and procedure development, and tax credit programs. These types of services require extensive education and experience and are considered to be professional in nature. Consequently, the Petitioner is a “profession” and not a “commercial enterprise” and the Petitioner cannot claim the exemption from sales tax as set forth.