IOWA SALES USE TAX BASICS PART 1 Terry

IOWA SALES / USE TAX BASICS PART 1 Terry O’Neill Taxpayer Service Specialist

Sales Tax Use Tax Just what is the Difference? 2

Sales Tax • Sale is made from an Iowa location and • Delivery of product occurs in Iowa or • Service is performed in Iowa 3

Sales Tax COLLECTED by the RETAILER PAID by the FINAL CONSUMER REMITTED to the State by RETAILER 4

Use Tax Requires Out of State Vendor d n a Iowa Purchaser 5

Use Tax May be Collected by the Retailer or Paid to the State by the Purchaser 6

What is Taxable? All tangible personal property unless a specific exemption has been written into Iowa Law. 7

Taxation is the Rule for Tangible Personal Property 8

Exemption is the Rule for Services Unless listed in Iowa law 9

Which Services are Taxable? List of taxable services on our website: https: //tax. iowa. gov/iowa-sales-and-use-taxtaxable-services-0 10

https: //tax. iowa. gov 11

Common Taxable Services • • • Appliance / Machine Repair Barber / Beauty / Cosmetology Carpentry Electrical Repair / Installation Janitorial / Cleaning / Building Maintenance Lawn Care / Landscaping / Tree Trimming & Removal Painting / Papering / Interior Decorating Pet Grooming Photography (sale of tangible personal property) Plumbing Vehicle Repair 12

Barber / Beauty / Cosmetology • Hair cutting / styling / coloring • Manicuring & pedicuring • Applying facial & skin preparations • Hair removal • Wig care • All other similar activities to enhance the appearance of the individual 13

Janitorial / Cleaning / Building Maintenance Includes: • Window washing • Floor cleaning, vacuuming, and waxing • Cleaning of walls and woodwork • Cleaning of restrooms Does Not Include: • Services performed in a private residence, including apartment or multiple housing unit and the person paying for the services is an occupant of the residence 14

Lawn Care / Landscaping / Tree Trimming & Removal Lawn Care: • Mowing • Trimming • Watering • Fertilizing • Seeding • Sodding • Killing insects, moles, weeds, or fungi 15

Lawn Care / Landscaping / Tree Trimming & Removal Landscaping: • Excavating • Planting • Pruning • Placing sand, rock, wood chips 16

Lawn Care / Landscaping / Tree Trimming & Removal: • Trimming or removing any part of a tree or shrub § Branches § Trunk § Stump 17

Painting / Papering / Interior Decorating Painting Includes: • Surface preparation • Covering interior or exterior surfaces of tangible personal property or real property with: § coloring matter and mixture of pigment or sealant § some suitable liquid to form a solid adherent when spread on in thin coats § For decoration, protection or preservation purposes Painting Does Not Include: • Automobile undercoating • Coating of railroad cars or storage tanks • Plating of tangible personal property with metals like chromium, bronze, tin, galvanized metal, or platinum 18

Pet Grooming Includes: • Washing • Combing • Currying • Hair cutting • Nail clipping Does Not Include: • Livestock grooming • Grooming as an integral part of veterinary care 19

Photography Treated as the sale of a product (tangible personal property) not as a service. • Charges to obtain the product are taxable o Finished photograph itself o Additional charges to create the photograph(s) e. g. “sitting fees” • Does not include separately stated transportation charges • Products delivered electronically are not subject to tax • Point of delivery determines where tax applies 20

Vehicle Repair • Repair includes fixing or renovating existing parts and replacing defective parts § Motor § Engine § Accessories § Body § Interior • Does not include installation of new parts or accessories which are not replacements 21

Exemptions for Services • Performed on or connected with o new construction, reconstruction o alteration, expansion, or remodeling of a building or structure • Performed for an employer • Purchased for resale • Recondition or repair tangible personal property when that property is normally sold in the regular course of the retailer’s business 22

What’s the Tax Rate? • 6% State Sales/Use Tax • 1% Local Option Sales Tax (LOST) 23

Important Rule Tax Cannot be Absorbed by -Nor Paid by- The Retailer 24

Sales Tax can be Included in Total Sales Price …if posted 25

Iowa Tax Permits • Retail Sales 1 -85 -000000 • Retailer’s Use 2 -00 -000000 • Consumer’s Use 9 -64 -000000 • Direct Pay 1 -77 -900000 26

Do I Need an Iowa Sales Tax Permit? • Located in Iowa? Yes. AND • Makes taxable sales in Iowa? Yes. You need an Iowa sales tax permit. 27

Iowa Sales Tax Permits • Illegal to make taxable sales without a permit • Each retail location must have its own permit • File Returns – Individual – Request Consolidated 28

How Do I Apply for a Permit? Complete the Department’s Business Tax Registration form online at: https: //www. idr. iowa. gov/CBA/start. asp

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Do I Need to Renew Every Year? No. Once issued, a permit is effective until it is cancelled by the retailer or revoked by the Iowa Department of Revenue 31

How Often and When Do I File? • Filing frequency is based on how much tax you expect to collect. • Indicate this amount on your application when you register for your permit. 32

Iowa Sales Tax Filing Frequency Requirements Semi monthly $5, 000 per month Monthly Under $5, 000 per month Quarterly Under $500 per month Annually Under $120 per year 33

Filing Returns & Making Payments Iowa sales & use tax returns are filed electronically through the Department’s online service e. File & Pay. You will always need your BEN, User ID, Password

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Some Key Reminders • Statute of Limitations is 3 years • Tax permits do not need to be posted • Iowa has no “exempt numbers” • Permits are not a license to buy exempt 37

Always Exempt Anything Purchased for Resale Tangible Personal Property and Services Tangible Personal Property 38

Always Exempt Sales Into Interstate Commerce Freight Handling Shipping Transportation Trip Charges 39

Exemption Certificates 40

Exemption Certificates 41

Resources

https: //tax. iowa. gov 44

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Need More Information? • More details can be found on our website: Iowa Sales and Use Tax Guide • Call us: 8 a. m. - 4: 15 p. m. CT 515 -281 -3114 / 800 -367 -3388 • Email us at idr@iowa. gov 49

Protect Yourself from Identity Theft • IDR will always identify itself. • We will NEVER ask you to provide your full Social Security Number by email or regular mail. • We do not send emails asking for personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

Protect Yourself from Identity Theft If you are unsure the communication you received is official: • Do not provide any personal or confidential information. • Contact us. We will confirm whether the communication you received was from the Iowa Department of Revenue.

Purpose of this Presentation This presentation is intended for general educational purposes only. Anyone involved in an audit or protest must contact the Department representative they are working with on that issue.

Thank You!! 53