Iowa Administrative Code › Agency 701 - Revenue Department › Title I - Administration › Chapter 18 - Taxable and Exempt Sales Determined by Method of Transaction or Usage › Rule 701-18.37 - 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 I, 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 I, 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 I, 1988. Prior to July I, 1988,
				all Iowa fuel tax paid on aviation gasoline used in aircraft was refundable
				under Iowa Code section
				452A17.. 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
				701-1512.
				(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.