Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 213 - Miscellaneous Taxable Sales › Rule 701-213.20 - Carpeting and Other Floor Coverings

Current through Register Vol. 47, No. 3, July 24, 2024
The sale of carpeting and other floor coverings to any person
				  constitutes a sale at retail of tangible personal property, and the sales price
				  of these sales is subject to sales or use tax unless the carpeting and other
				  floor coverings are purchased for resale or are otherwise exempt from
				  tax.
The sales price of floor coverings other than carpeting which
				  are shaped to fit a particular room or area and which are attached to the
				  supporting floor with cement, tacks, or by some other method making a permanent
				  attachment with the building or structure are considered to be building
				  materials and shall be taxable in the same manner as building materials which
				  are used or consumed in the performance of a construction contract. See rule
				  701-2192.
				  (423) and 701-subrule 219.3(3) for tax treatment.
The sale of carpeting is not to be treated as the sale of a
				  "building material." The sales price of rugs, mats, linoleum, and other types
				  of floor coverings which are not attached but which are simply laid on finished
				  floors and are not considered building materials is subject to tax unless the
				  floor coverings are purchased for resale or are otherwise exempt from
				  tax.
The sale of "carpeting" to owners, contractors,
				  subcontractors or builders is not the sale of a building material, but the sale
				  of ordinary tangible personal property, which can be purchased for resale by
				  owners, contractors, subcontractors or builders. "Carpeting" is any floor
				  covering made of fabric, usually of wool or synthetic fibers. For purposes of
				  this rule, "carpeting" also includes any pads, tack strips, adhesive, and other
				  materials other than subflooring necessary for installation of the carpeting.
				  Sellers of carpeting should charge purchasers sales tax unless the carpeting is
				  purchased for resale or some other exempt purpose, in which case the purchaser
				  must provide the seller with an exemption certificate upon demand.
The sales price of carpeting, with installation, is taxable
				  in the following manner:
1. If
				separate contracts exist for the sale of the carpeting and for the
				installation, only the sales price of the carpeting is subject to
				tax.
2. If the selling price of the
				carpeting and the installation charge are stated as one charge or lump sum, the
				entire charge is subject to sales tax.
3. If the invoice itemizes the installation
				charge separately from the selling price of the carpet, only the selling price
				of the carpet is subject to sales tax if the installer and the purchaser of the
				carpet intend that a sale of the carpet shall occur See 701-subrule 225.4(1)
				for more information.
In the following examples, assume that contractor A purchases
				  carpeting from supplier B for installation in customer C's home. Whether or not
				  A will purchase the carpeting from B for A's own consumption (and thus, A will
				  pay the tax to B) or A will purchase the property from B for resale to C (and
				  thus, C will pay the tax to A) depends upon any contracts existing between A
				  (the contractor) and C (the customer).
EXAMPLE A. A contracts with C to install carpeting in C's
				  home. Separate contracts exist between A and C for the sale of the carpeting
				  and for its installation. Under these circumstances, A purchases the carpeting
				  from B for resale to C. No tax is due upon the sales price of the transaction
				  between A and B; tax is due upon A's resale of the carpet to C, but not upon
				  A's charges for carpet installation, a nontaxable service.
EXAMPLE B. A charges C one lump sum for the carpeting and
				  installation. In this case, A collects sales tax from C on the entire lump sum.
				  The lump sum is treated, for sales tax purposes, as the sales price from the
				  sale of tangible personal property; so A purchases the carpet from B for resale
				  and without tax.
EXAMPLE C. A and C contract for the sale of the carpet
				  separate from its installation. A sends C one invoice for the installation and
				  sale of the carpet with the installation charge listed on the invoice
				  separately from the selling price of the carpet. Under these circumstances,
				  only the selling price of the carpet listed on the invoice is subject to sales
				  tax and A purchases the carpet from B for resale and thus, without obligation
				  to pay sales tax to B.
This rule is intended to implement Iowa Code section 423.2(1)
"b."