Iowa Administrative Code › Agency 701 - Revenue Department › Title I - Administration › Chapter 18 - Taxable and Exempt Sales Determined by Method of Transaction or Usage › Rule 701-18.31 - Tangible Personal Property Purchased by One Who Is Engaged in the Performance of a Service

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
In
				general. (Effective July 1, 1990)
a.
				On and after July 1, 1990, tangible personal property purchased by one who is
				engaged in the performance of a service is purchased for resale and not subject
				to tax if (1) the provider and user of the service intend that a sale of the
				property will occur, and (2) the property is transferred to the user of the
				service in connection with the performance of the service in a form or quantity
				capable of a fixed or definite price value, and (3) the sale is evidenced by a
				separate charge for the identifiable piece or quantity of property.
b. Prior to July 1, 1990, in those
				circumstances in which tangible personal property is purchased by one who is
				engaged in the performance of a service and the property is transferred to the
				customer in conjunction with a performance of the service in a form or quantity
				which is capable of any fixed or definite price value, but the actual sale of
				the property is not indicated by a separate charge for the identifiable item,
				the burden of proving that the property was purchased for resale by one engaged
				in the performance of a service and not subject to tax at the time of purchase
				is upon the person engaged in the performance of a service who asserts
				this.
c. Tangible personal property
				which is not sold in the manner set forth in
"a "
or
"b
				"
above is not purchased for resale and thus is subject to tax at the
				time of purchase by one engaged in the performance of a service. Such tangible
				personal property is considered to be consumed by the purchaser who is engaged
				in the performance of a service and the person performing the service shall pay
				tax upon the sale at the time of purchase.
Example: An investment counselor purchases envelopes. These
				  envelopes are used to send out monthly reports to the investment counselor's
				  clients regarding their accounts. Tax is due at the time the investment
				  counselor purchases the envelopes if the clients are not billed for these
				  items. Each envelope is transferred to a client in a form or quantity which is
				  capable of a fixed or definite price value. However, there must also be an
				  actual sale to the client (customer) of an item of personal property in order
				  that there be a "resale" of the item.
An automobile repair shop purchases solvents which are used
				  in cleaning automobile parts and thus in performing its automobile repair
				  service. Tax is due at the time the automobile repair shop purchases the
				  solvent since the solvents are not sold to the customer and, in this case, the
				  item is not transferred to a customer in a form or quantity which is capable of
				  a fixed or definite price value. Thus, the solvent is deemed consumed by the
				  purchaser engaged in the performance of the service.
Example: A retailer purchases television tubes tax-free where
				  the retailer makes a separate charge for the tube to the customer and since the
				  tube is transferred to the customer in a form or quantity capable of a fixed or
				  definite price value.
Example: A beauty or barber shop purchases shampoo and other
				  items to be used in the performance of its service. Tax is due at the time the
				  beauty or barber shop purchases such items from its supplier, where the
				  customers of the beauty or barber shop are not separately billed for the item,
				  and because it is not transferred to the customer in a form or quantity capable
				  of a fixed or definite price value, it is being consumed by the beauty or
				  barber shop.
Example: A car wash purchases water, electricity, or gas used
				  in the washing of a car. The car wash would be the consumer of the water,
				  electricity, or gas and tax is due at the time of purchase. The items purchased
				  by the car wash are not transferred to the customer in a form or quantity
				  capable of a fixed or definite price value, and the customer is not billed for
				  the item.
Example: An accounting firm purchases plastic binders which
				  are used to cover the reports issued to its customers. These binders would be
				  subject to tax at the time of purchase by the firm where the customer of the
				  firm is not billed for the item, there being no sale to the customer in such a
				  case.
Example: A meat locker purchases materials such as wrapping
				  paper and tape which it uses to wrap meat for customers who provide the locker
				  with the meat. These materials would be subject to tax at the time of purchase
				  by the meat locker because they are not sold to the customer in a form or
				  quantity capable of a fixed or definite price value.
Example: A jeweler purchases materials such as main springs
				  and crystals to be used in the performance of a service. These items are
				  purchased by the jeweler for resale where they are transferred to the customer
				  in a form or quantity capable of a fixed or definite price value and each item
				  is actually sold to the customer as evidenced by a separate charge
				  therefor.
Example: A lawn care service applies fertilizer, herbicides,
				  and pesticides to its customers' lawns. The following are examples of invoices
				  to customers which are suitable to indicate a lawn care service's purchase of
				  the fertilizer, herbicides, and pesticides for resale to those customers:
				  "Chemicals...31 Gal....$60"; "Fertilizer..50 lbs....$100"; and "Materials
				  applied to lawn...4 bushel...$40". The following are examples of information
				  placed upon an invoice which would not indicate a purchase for resale to the
				  customers invoiced: "Fifty percent of the charge for this service is for
				  materials placed on a lawn," or "Lawn chemicals...$30" or "Fifty pounds of
				  fertilizer was applied to this lawn."