Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 221 - Miscellaneous Nontaxable Transactions › Rule 701-221.4 - Advertising Agencies, Commercial Artists and Designers as an Agent or as a Nonagent of a Client

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
In general.
a. A true agency
				relationship depends upon the facts with respect to each transaction. An agent
				is one who represents another, called the principal, in dealings with third
				persons. Advertising agencies, commercial artists, and designers (collectively
				referred to herein this subrule as "agencies" or "agency") may act as agents on
				behalf of their clients in dealing with third persons, or they may act on their
				own behalf. To the extent agencies act as agents of their clients in acquiring
				tangible personal property, these agencies are neither purchasers of the
				property with respect to the supplier nor sellers of the property with respect
				to their principals.
b. When
				agencies act as agents of their clients in purchasing property for their
				clients, the tax applies to the sales price from the sale of such property to
				the agencies. Unless such agencies act as true agents, they will be regarded as
				the retailers of tangible personal property furnished to their clients and the
				tax will apply to the total sales price received for such property.
c. To establish that a particular acquisition
				is made in the capacity of an agent for a client, the agency shall act as
				follows:
(1) The agency must clearly disclose
				to the supplier the name of the client for whom the agency is acting as an
				agent.
(2) The agency must obtain,
				prior to the acquisition, and retain written evidence of agent status with the
				client.
(3) The price billed to the
				client, exclusive of any agency fee, must be the same as the amount paid to the
				supplier. The agency may make no use of the property for its own account, such
				as commingling the property of a client with another, and the reimbursement for
				the property should be separately invoiced or shown separately on the invoice
				to the client.
d. Some
				charges may represent reimbursement for tangible personal property acquired by
				the agency as agents for its clients and compensation for performing of agency
				services related thereto. When an agency establishes that it has acquired
				tangible personal property as an agent for its clients, tax does not apply to
				the charge made by the agency to its client for reimbursement charges by a
				supplier or to the charges made for the performance of the agency's services
				directly related to the acquisition of personal property. Such agencies acting
				as agents shall not issue resale certificates to suppliers.
e. Agencies act as retailers of all items of
				tangible personal property produced or fabricated by their own employees when
				they sell to their clients. Agencies are not agents of their clients with
				respect to the acquisition of materials incorporated into items of tangible
				personal property prepared by their employees and sold at retail to their
				clients.