Iowa Administrative Code › Agency 701 - Revenue Department › Title I - Administration › Chapter 32 - Receipts Exempt From Use Tax › Rule 701-32.4 - Exemption for Vehicles Used in Interstate Commerce

Current through Register Vol. 47, No. 3, July 24, 2024
Trailers and semitrailers used initially in Iowa on and after
				  July 1, 1986, and registered under Iowa Code chapter 326, are exempt from tax.
				  These trailers and semitrailers are not subject to the record-keeping
				  requirement and other requirements of the next paragraph. See rule 32.10(423)
				  for an additional exemption for vehicles operated but not registered under Iowa
				  Code chapter 326.
For trailers and semitrailers registered under Iowa Code
				  chapter 326 and initially used in Iowa between July I, 1985, and June 30, 1986,
				  inclusive, and for any other vehicle registered under chapter 326, including
				  those purchased for lease, and truck and road tractors, a use tax is not to be
				  imposed provided that the vehicle is used in interstate commerce, accrues at
				  least 25 percent of its mileage outside of Iowa and is registered for a gross
				  weight of 13 tons or more. Mileage records must be maintained for each vehicle
				  by the vehicle owner on a fiscal year basis which begins on July I and ends on
				  June 30. For trailers and semitrailers, the requirements of this paragraph and
				  the subsequent paragraph are not applicable if the trailer is registered as of
				  July I, 1986, or is initially registered on or after that date. These trailers
				  and semitrailers are treated as if they have been used initially and registered
				  in Iowa on or after July 1,1986, and the first paragraph of this rule is
				  applicable to their use. The vehicle will be subject to use tax if the required
				  mileage outside Iowa is not attained during each fiscal year. For purposes of
				  determining eligibility for this exemption, mileage accrued in the year before
				  the first full fiscal year of operation must be added to the mileage accrued
				  during the first full fiscal year of operation and mileage accrued in the year
				  after the last full fiscal year of operation must be added to the mileage
				  accrued during the last full fiscal year of operation. The vehicle owner is
				  responsible for maintaining mileage records that prove eligibility for the
				  exemption.
For assessments issued pursuant to this rule on and after
				  July 1, 1998, if a vehicle meets the requirement that 25 percent of the miles
				  operated accrue in states other than Iowa in each year of the first four-year
				  period of operation, the exemption from use tax shall continue until the
				  vehicle is sold or transferred. If a vehicle is found not to have met the
				  exemption requirements of this paragraph in its first four years of operation,
				  or the exemption was revoked, the value of the vehicle upon which use tax shall
				  be imposed is the book or market value, whichever is less, at the time the
				  exemption requirements first were not met or at the time the exemption was
				  revoked. However, if exemption from use tax is claimed for a vehicle under this
				  paragraph and that vehicle is, subsequently, never used in an exempt fashion,
				  then the purchase price of the vehicle is the value upon which any assessed tax
				  shall be computed.
Example: company A purchases a vehicle stating that its
				  future use will be in interstate commerce; 25 percent of its miles traveled
				  accrue outside the state of Iowa. In fact, the vehicle is never driven outside
				  the state of Iowa. Use tax is computed on the purchase price of the vehicle
				  paid by company A.
Example
Iowa Miles
Non-Iowa Miles
Total
Percent Non-Iowa
1/1/86-6/30/86
45,000
5,000
50,000
10%
7/1/86-6/30/87
305,000
145,000
450,000
32%
350,000
150,000
500,000
30%
In this example, the vehicle was acquired on January 1,1986,
				  and traveled 50,000 miles through June 30, 1986, of which 5,000 miles were
				  outside Iowa. From July 1, 1986, through June 30, 1987, the vehicle traveled
				  450,000 miles of which 145,000 miles were outside Iowa. The use tax exemption
				  is applicable in this situation even though the vehicle traveled only 10
				  percent of its mileage outside Iowa in the year of acquisition since it
				  traveled 30 percent of its mileage outside Iowa in the year of acquisition plus
				  its first full fiscal year of operation.
This rule is intended to implement Iowa Code section
				  4234(10). as amended by
				  1998 Iowa Acts, House File 2541.