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

Current through Register Vol. 47, No. 3, July 24, 2024
2005 Iowa Code subsection
				  4232(1). imposes a
				  tax upon the sales price from the sales of tangible personal property,
				  consisting of goods, wares or merchandise sold at retail in this state to
				  consumers and users. Also subject to tax are certain enumerated services. Those
				  services relating to the construction industry include carpentry; roof, shingle
				  and glass repair; electrical repair and installation; excavating and grading;
				  house and building moving; laboratory testing; landscaping; machinery operator
				  services; machine repair of all kinds; oilers and lubricators; painting,
				  papering, and interior decorating; pipe fitting and plumbing; wood
				  preparations; termite, bug, roach, and pest eradicators; tin and sheet metal
				  repair; welding; well drilling; and wrecking services. Under Iowa law,
				  contractors are consumers or users of certain tangible personal property.
				  Contractors may also be retailers of tangible personal property and taxable
				  enumerated services. It should be noted that these services are exempt from
				  taxation when performed on or in connection with new construction,
				  reconstruction, alteration, expansion, or remodeling of a building or
				  structure. The services of a general building contractor, architect or engineer
				  are exempt from tax when performed on or in connection with new construction,
				  reconstruction, alteration, expansion, or remodeling of a building or
				  structure. For the purposes of this exemption, a structure is defined as 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. See rule 219.12(423)
				  relating to structures.
This chapter details the obligation of contractors,
				  contractor-retailers, retailers, and repair persons to pay or collect sales tax
				  on the sales price from sales of building materials, supplies, equipment, and
				  other tangible personal property and the obligation of these parties to collect
				  tax or claim exemption for their performances of taxable services. How one is
				  classified, whether as a contractor, contractor-retailer, retailer, or repair
				  person is the basis for determining many of those obligations. It can be very
				  difficult for a person starting a business to determine if that business will
				  be engaged in contracting, retailing, a combination of the two, or providing
				  repair services. However, one status must be chosen. Any reasonable assessment
				  of a new business's status will be honored by the department. A status, 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. For instance, if 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, and 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. Changing the status of a business from job to job to
				  avoid the obligation to pay or collect tax is not a lawful activity.
2005 Iowa Code section
				  4235. imposes a
				  tax that is assessed upon tangible personal property purchased for use in this
				  state and on taxable services which are rendered, furnished or performed in
				  Iowa or where the product or result of such service is used in Iowa. "Use" of
				  tangible personal property in Iowa is defined to mean and include the exercise
				  by any person of any right or power over tangible personal property incident to
				  the ownership of that property.