Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 219 - Sales and Use Tax on Construction Activities › Rule 701-219.1 - General Information and Definitions

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
Definitions.
For
				purposes of this chapter, terms mean the same as defined in Iowa Code section
				423.1 and as defined in this
				rule.
"Building equipment"
means any vehicle,
				  machine, tool, implement, or other device used by a contractor in erecting
				  structures for others, or reconstructing, altering, expanding, or remodeling
				  property of others, which does not become a physical component part of the
				  property upon which work is performed, and which is not necessarily consumed in
				  the performance of such work.
"Building materials"
means materials used in
				  construction work and is not limited to materials used in a construction
				  contract. The term may also include any type of materials used for
				  reconstruction, alteration, expansion, or remodeling of the premises or
				  anything essential to the completion of a building or other structure for the
				  use intended. Building materials generally consist of items that are
				  incorporated into real property, lose their identity as tangible personal
				  property, and cannot be removed without altering the realty, or that are
				  consumed by the contractor during the performance of the construction
				  contract.
"Building supplies"
means anything that is
				  furnished for and used directly in the carrying on of the work of an owner,
				  contractor, subcontractor, or builder and which is used or consumed in the
				  course of completing the project. Such items do not have to enter into and
				  become a physical part of the structure like building materials, but they do
				  become as much a part of the structure as the labor that is performed on
				  it.
"Construction contract"
means an agreement
				  between a contractor and a sponsor under the terms of which the contractor
				  agrees to provide labor, materials, supplies, and equipment to build a
				  structure for the sponsor.
"Fabricated cost"
means and includes the
				  cost of all materials as well as the cost of labor, power, transportation to
				  the plant, and other plant expenses but not installation on the job
				  site.
"Prefabricated structure"
means any
				  structure assembled in a factory and capable of transport to the location where
				  it will be used in the performance of a construction contract by placement on a
				  foundation either by the buyer or a designated contractor.
"Repair"
means the same as mend, restore,
				  maintain, replace and service. A repair contemplates an existing structure or
				  tangible personal property that has become imperfect and constitutes the
				  restoration to a good and sound condition.
"Structure"
means that which is artificially
				  built up or composed of parts joined together in some definite manner and which
				  also has some obvious or apparent functional use or purpose. Nonexclusive
				  examples of structures include buildings; roads, whether paved or otherwise;
				  dikes; drainage ditches; and ponds.
(2)
Classification and
				obligations.
The classification of persons and business determines
				their obligations to pay or collect sales or use tax or claim an exemption on
				the sales price from sales of building materials, supplies, equipment, other
				tangible personal property, and labor.
a.
Classification types.
Persons and businesses can be classified
				as an owner, contractor, contractorretailer, retailer, or
				repairperson.
b.
Classification.
A specific classification must be chosen and
				once chosen should not be changed unless it has become clear from an extended
				course of dealing that the business has become something other than what it was
				established to be.
c.
Assessment for new businesses.
It can be difficult for a
				person starting a business to determine whether that business will be engaged
				in contracting, retailing, a combination of the two, or providing repair;
				however, any reasonable assessment of a new business's status will be honored
				by the department.
d.
Prohibited.
Changing the status of a business from job to job
				to avoid the obligation to pay or collect tax is not a lawful
				activity.
e.
Example.
A business is founded to engage in contracting and
				purchases construction materials based on the fact that it is a contractor, but
				the founder must sell construction materials at retail if the business is to
				survive. If, after two years' operation, half the revenue is from construction
				contracts and half from retail sales, then the business has become a
				contractor-retailer and henceforth should purchase construction materials based
				on that status.
This rule is intended to implement Iowa Code chapter
				  423.