Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 252 - State-imposed Water Service Excise Tax › Rule 701-252.5 - When Water Service Is Furnished for Compensation

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
Itemized sales of water
				service.
Water service is furnished for compensation when water
				service is sold for a separately itemized price.
EXAMPLE: Itemized sale of water service. Z is an entity that
				  provides water from a well by piped distribution to various homes in the
				  community. Each home that is connected to the well pays $20 per month, which is
				  used by Z for maintaining the water distribution system. Z is a water utility
				  making sales of water service and must collect and remit water service excise
				  tax on the $20 monthly fee charged to each of Z's members. See
In the
				  Matter of Lakewood Utils.,
Iowa Dep't of Revenue, Docket No.
				  78-161-6A-RC (Feb. 8, 1980).
EXAMPLE: Sale for resale. An apartment owner purchases water
				  from a city water utility and distributes the water to each unit through a
				  system of pipes. The city meters the apartment owner's use of water each month
				  and charges the apartment owner for the water service. The apartment owner
				  separately bills each of the tenants $40 per month for water service, including
				  the cost of water and maintenance on the water distribution system. The
				  apartment owner is a water utility and must collect and remit water service
				  excise tax on the $40 monthly charge for water service. The apartment owner may
				  purchase the water from the city tax exempt as a sale for
				  resale.
(2)
Water
				service sold for an identifiable price.
Water service is furnished for
				compensation when the price of the water service is identifiable from an
				invoice, bill, catalogue, price list, rate card, receipt, agreement, or other
				similar document, including where the total sales price increases when water
				service is included in the sale.
EXAMPLE: Cost varies with inclusion of water service. A
				  campground provides three campsite packages to its customers:
Package A includes only campsite access for $10 per
				  night.
Package B includes campsite access and an electrical hookup
				  for $20 per night.
Package C includes campsite access, an electrical hookup, and
				  water service for $30 per night.
Sales of package C by the campground include sales of water
				  service. The campground must collect and remit water service excise tax on
				  $10-the identifiable sales price of water service.
(3)
Water service not furnished for
				compensation; incidental sales.
No sale of water service for
				compensation occurs where water service is not sold for a separately itemized
				or identifiable price and is incidental to the rental of real property.
EXAMPLE: Water service sold with real estate rental for one
				  nonitemized price. A manufactured housing community (MHC) owner owns a well and
				  pipes water to the lots. The MHC owner charges tenants $500 per month for each
				  lot rental. Water from the well is included in the $500 rental charge. The MHC
				  owner does not do any of the following: charge a flat water fee, charge tenants
				  based on their actual water used, or offer comparable lots at a lower price
				  that do not have access to water service. The MHC owner is not required to
				  collect or remit water service excise tax because water is not being furnished
				  for compensation; it is incidental to the rental of real property.
EXAMPLE: Water service sold with real estate rental for one
				  nonitemized price. A manufactured housing community (MHC) purchases water from
				  a city water utility and distributes the water to each lot in the community
				  through a system of pipes. The city meters the MHC's use of water each month
				  and charges the MHC for the water service and the applicable water service
				  excise tax. The MHC charges its tenants $500 for lot rental. As in the previous
				  example, the MHC owner does not do any of the following: charge a flat water
				  fee, charge tenants based on their actual water used, or offer comparable lots
				  at a lower price that do not have access to water service. The MHC owner is not
				  required to collect or remit water service excise tax because water is not
				  being furnished for compensation; it is incidental to the rental of real
				  property.
This rule is intended to implement Iowa Code section
				  423G.3.