On November 27, 2006, a Petition for Declaratory Order was filed by the Petitioner, requesting a binding order be issued by the Director regarding the sales/use taxability of uniform and work clothing purchases. On December 28th, 2006, the Petitioner filed a Supplemental Submission for the Petition for Declaratory Order. Due to identical issues being protested, the department orally informed the Petitioner that the department cannot issue a Declaratory Order for the time periods requested in the Petition for Declaratory Order, because the Petition included periods currently under protest. However, the department informed the Petitioner that it was willing to issue an informal opinion regarding the taxability of the uniform purchases for prospective purchases under a new purchase program implemented by the Petitioner. Consequently, on January 18, 2007, the Petitioner withdrew its Petition for Declaratory Order.
Subsequently, an informal letter was written for the Petitioner answering the question of taxability for prospective purchases by the Petitioner. However, due to internal communications, the informal letter was delayed in its release. During this delay, the Petitioner filed another Petition for Declaratory Order on May 2, 2007, requesting an order from the Director making a determination regarding the sales/use taxability of uniform and work clothing purchases by the Petitioner. On May 15, 2007, an order denying the Petitioner's request for a Declaratory Order was issued denying the Petition due to the issue regarding the taxability of the uniform purchases for some of the periods being under protest with the department.
On May 18th, 2007, the informal opinion regarding the taxability of uniforms purchased by the Petitioner was issued. The informal opinion addressed the taxability of uniform and work clothing purchases by the Petitioner under the Petitioner's new purchase system and the opinion was for prospective purchases by the Petitioner only. In the informal opinion, the purchase of the uniforms under the new account system was said to be exempt from Iowa sales and use tax. Under the new purchase system, all employees of the Petitioner were given an account card to use to purchase uniforms and work clothing from various approved vendors. The card had a limit and all billing for uniform and work clothing purchases by the employees were billed directly to the Petitioner. This type of purchasing system is exempt from Iowa sales tax because by directly billing the Petitioner for the uniforms and work clothing, the purchases were considered to be purchased directly by the Petitioner, a governmental entity, and purchases by a governmental entity are exempt from Iowa sales and use tax pursuant to Iowa Code section 423.3(31)(2007).