Iowa Administrative Code › Agency 701 - Revenue Department › Title I - Administration › Chapter 15 - Determination of a Sale and Sale Price › Rule 701-15.12 - Excise Tax Included in and Excluded From Gross Receipts

Current through Register Vol. 47, No. 3, July 24, 2024
(1) An excise tax which is not an Iowa sales
				or use tax may be excluded from the gross receipts or purchase price of the
				sale or use of property or taxable services only if all of the following
				conditions exist:
a. The excise tax is
				imposed upon the identical sale which the Iowa sales tax is imposed upon or
				upon the sale which measures the taxable use or upon a use identical to the
				Iowa taxable use and not upon some event or activity which precedes or occurs
				after the sale or use.
b. The legal
				incidence of the excise tax falls upon the purchaser who is responsible for
				payment of the Iowa sales tax. The purchaser must be obligated to pay the
				excise tax either directly to the government in question or to another person
				(e.g., the retailer) who acts as a collector of the tax. See
Gurley v.
				Rhoden,
421 U.S. 200, 95 S. Ct. 1605, 44 L.Ed.2d 110 (1975) for a
				description of the circumstances under which the legal, as opposed to the
				economic, burden of an excise tax falls upon the purchaser.
c. The name of the tax is specifically stated
				and the amount of the tax separately set out on the invoice, bill of sale, or
				upon another document which embodies a record of the sale.
EXAMPLE 1. The federal government imposes an excise tax upon
				  the act of manufacturing tangible personal property within the United States.
				  The amount of the tax is measured as a percentage of the price for the first
				  sale of the property, which is usually to a wholesaler. However, one particular
				  manufacturer sells its manufactured goods at retail in Iowa. Even if this tax
				  meets the requirements for exclusion of paragraphs
"b"
and
"c"
above, it is not excludable because it does not meet the
				  requirements of paragraph
"a."
The tax is not imposed upon the
				  act of sale but upon the prior act of manufacture. The tax is merely measured
				  by the amount of the proceeds of the sale.
EXAMPLE 2. The federal government imposes an excise tax of 4
				  percent on a retailer's gross receipts from sales of tangible personal
				  property. The law allows the retailer to separately identify and bill a
				  customer for the tax. However, if a retailer fails to pay the tax, the
				  government cannot collect it from a purchaser and if the government assesses
				  tax against the retailer and secures a judgment requiring the retailer to pay
				  the tax, the retailer who has failed to collect the tax from a purchaser on the
				  initial sale has no right of reimbursement from the purchaser. This tax is not
				  excludable from Iowa excise tax. Its economic burden falls upon the purchaser.
				  However, since neither the government nor the retailer has any legal right to
				  demand payment of the tax from a purchaser, the legal incidence of the tax is
				  not upon the purchaser; and the tax would not meet the requirements of
				  paragraph
"b"
above.