Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 203 - Elements Included in and Excluded From a Taxable Sale and Sales Price › Rule 701-203.4 - Excise Tax Included in and Excluded From Sales Price

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 sales price
				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 sales price on which the Iowa sales
				tax is imposed or upon the purchase price which measures the amount of 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 also 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 excise tax is specifically stated, and the amount of the excise tax
				is separately set out on the invoice, bill of sale, or 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 selling but upon the prior act of manufacturing. 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 sales price 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 that
				  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.