Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 285 - Taxable and Exempt Sales Determined by Method of Transaction or Usage › Rule 701-285.37 - Motor Fuel, Special Fuel, Aviation Fuels and Gasoline

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
In
				general.
The gross receipts from the sale of motor fuel and special
				fuel are exempt from sales tax under Iowa Code section
				422.45(11) if
				(1) the fuel is consumed for highway use, in watercraft, or in aircraft, (2)
				the Iowa fuel tax has been imposed and paid, and (3) no refund or credit of
				fuel tax has been made or will be allowed. However, beginning July 1, 1985, the
				gross receipts from the sale of special fuel for diesel engines used in
				commercial watercraft on rivers bordering Iowa are exempt from sales tax, even
				though no fuel tax has been imposed and paid, providing the seller delivers the
				fuel to the owner's watercraft while it is afloat. Prior to July 1, 1988,
				retail sales of aviation gasoline were not exempt from sales tax under Iowa
				Code subsection 422.45(11). See
				subrule 18.37(4).
(2)
Refunds or credits of motor fuel and special fuel.
Claims for
				refund or credit of fuel taxes under the provisions of Iowa Code chapter 452A
				must be reduced by any sales or use tax owing the state unless a sales tax
				exemption is applicable. Generally, refund claims or credits are allowed where
				fuel is purchased tax paid and used for purposes other than to propel a motor
				vehicle or used in watercraft.
(3)
Refunds of tax on fuel purchased in Iowa and consumed out of
				Iowa.
Even though fuel is purchased in Iowa, fuel tax paid in Iowa,
				and the fuel tax is subject to refund under the provisions of division III of
				Iowa Code chapter 452A relating to interstate motor vehicle operations, the
				refund of the fuel tax does not subject the purchase of the fuel to sales tax.
				Subjecting the purchase to sales tax has the effect of imposing sales tax when
				fuel is consumed in interstate commerce while fuel consumed on Iowa highways in
				intrastate commerce is exempt from sales tax pursuant to Iowa Code subsection
				422.45(11). The effect for sales tax purposes is to impose a greater tax burden
				on non-Iowa highway fuel consumption than Iowa highway fuel consumption thereby
				discriminating against interstate commerce. In addition, the effect of imposing
				sales tax on interstate excess purchases where intrastate highway use is not
				subject to the tax constitutes an export duty for purchasing fuel in Iowa and
				exporting it for use in another state. Such effects are in violation of the
				commerce clause of the United States Constitution.
Boston Stock
				Exchange v. State Tax Commission,
1977,
				429 U.S.
				319,
				97 S.Ct. 599,50 L.Ed.2d 514 and
Coe v. Errol,
1886,
				116 U.S.
				517,
				6 S.Ct. 475, 29L.Ed.
				715.
(4)
Aviation
				gasoline.
Tax treatment prior to July 1, 1988. Prior to July 1, 1988,
				all Iowa fuel tax paid on aviation gasoline used in aircraft was refundable
				under Iowa Code section
				452A.17. Generally, aviation
				gasoline is not purchased for highway use or for use in watercraft, therefore,
				the exemption from sales and use tax found in Iowa Code subsection
				422.45(11) was
				generally not applicable to purchases of aviation gasoline. However, Iowa Code
				subsection 422.52(4) provides for the collection of sales tax by way of
				deduction from motor fuel tax refunds allowable under Iowa Code chapter 452A.
				Therefore, sales tax is not assessed at the retail level but only in instances
				where the fuel tax paid on aviation gasoline has been refunded. If no
				application for a fuel tax refund relating to aviation fuel has been made, no
				sales tax is assessed on the aviation gasoline purchase.
(5)
Ethanol.
For tax periods
				after April 30, 1981. Retail sales of ethanol are exempt from Iowa sales or use
				tax.
(6)
Tax base.
The basis for computing the Iowa sales tax will be the retail selling price of
				the fuel less any Iowa fuel tax included in such price. Federal excise tax
				should not be removed from the selling price in determining the proper sales
				tax due.
W.M. Gurley v. Arny Rhoden
supra. Also see rule
				701-15.12(422,423).
This rule is intended to implement Iowa Code sections
				  422.31,
				  422.43,
				  422.45(11),
				  422.45(22),
				  422.52(4),
				  423.1,
				  452A.3, and
				  452A.17.