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 that 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 that measures the amount of taxable use or upon a use identical
				to the Iowa taxable use and not upon some event or activity that 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.
Gurley v. Rhoden
, 421 U.S. 200, 95 S. Ct. 160 5, 44 L.Ed.2d
				110 (1975) contains 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 that
				embodies a record of the sale.
EXAMPLE 1: The federal government imposes an excise tax upon
				  the act of manufacturing certain 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
				  203.4(1)
"b"
and
"c,"
it is not excludable
				  because it does not meet the requirements of paragraph
				  203.4(1)
"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
				  203.4(1)
"b."