Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 220 - Exemptions Primarily of Benefit to Consumers › Rule 701-220.2 - Motor Fuel, Special Fuel, Aviation Fuels and Gasoline

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
In
				general.
The sales price from the sale of motor fuel, including
				ethanol, and special fuel is exempt from sales tax under 2005 Iowa Code section
				423.3(55)
				 if (a) the fuel is consumed for highway use,
				in watercraft, or in aircraft, (b) the Iowa fuel tax has been imposed and paid,
				and (c) no refund or credit of fuel tax has been made or will be allowed. The
				sales price from the sale of special fuel for diesel engines used in commercial
				watercraft on rivers bordering Iowa is 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.
(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 outside of Iowa.
Even though fuel is purchased in
				Iowa, fuel tax is 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 of the fuel 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 2005 Iowa Code subsection
				423.3(55).
				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,
				29 L.Ed. 715.
(4)
Tax
				base.
The basis for computing the Iowa sales tax will be the retail
				sales price of the fuel less any Iowa fuel tax included in such price. Federal
				excise tax should not be removed from the sales price in determining the proper
				sales tax due. W. M. Gurley v. Arny Rhoden supra. Also reference rule
				701-15.12 (422,423).
This rule is intended to implement Iowa Code subsection
				  423.3(55).