Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 285 - Taxable and Exempt Sales Determined by Method of Transaction or Usage › Rule 701-285.43 - Written Contract

Current through Register Vol. 47, No. 3, July 24, 2024
On and after July 1, 1985, the gross receipts from certain
				  additional services are subject to tax. However, these newly taxable services
				  are exempt from tax if performed pursuant to a written services contract in
				  effect on April 1, 1985. The exemption from taxation for these services expires
				  June 30, 1986. The services to which this "written contract" exemption is
				  applicable are the following: cable television; campgrounds; gun repair;
				  janitorial and building maintenance or cleaning; lawn care, landscaping and
				  tree trimming and removal; lobbying service; pet grooming; reflexology;
				  security and detective services; tanning beds or salons; water conditioning and
				  softening; the rental of recreational vehicles, recreational boats or motor
				  vehicles subject to registration which are registered for a gross weight of 13
				  tons or less; and fees paid to cities and counties for the privilege of
				  participating in any athletic sports.
A "written contract" is one which is entirely in writing, so
				  that all of its essential terms and provisions exist in writing, and oral
				  statements are not necessary to set out any essential term or provision, such
				  as who the parties to the contract are or what their rights and duties are
				  under the contract. However, if it is necessary to resort to oral statements to
				  explain the meaning of a written provision in a contract, a "written contract"
				  can still exist. A written contract need not consist of one document or
				  instrument only. It can consist of two or more writings, if all the necessary
				  provisions of the contract are contained in those writings. For the purposes of
				  this rule, the following must be stated in writing if a written contract is to
				  exist: The nature and specification of the service to be provided, the name of
				  the party providing the service, the name of the party receiving the service,
				  the "consideration" (amount and method of payment) for providing the service,
				  the signature of one or both of the parties to the contract, depending upon
				  circumstances, and the date upon which the contract became effective.
The written contract must be in effect on April 1, 1985, if
				  the service to which the contract pertains is to be exempt from tax. If a
				  contract is signed by only one of the parties to it, that contract is still a
				  "written contract" if the party which has not signed the contract acquiesces in
				  the promises which the party who has signed the document makes within it.
McDermott v. Mahoney,
139 Iowa 292, 115 N.W. 32, (Iowa
				  1908).
EXAMPLE: A security agency sends a proposed agreement to a
				  potential customer promising to provide the services of a uniformed security
				  guard for the customer's business premises beginning March 15, 1985, and
				  continuing until March 15, 1987. The agreement is signed by the security
				  agency's president and dated February 15, 1985. The agreement is received by
				  the potential customer's president, who does not sign it, but, on March 15,
				  1985, allows the security agency's uniformed guard on the premises, and makes
				  payment for those services as stipulated in the agreement. This agreement is a
				  "written contract"; the services of the uniformed guard are not subject to tax
				  for the period beginning July 1, 1985, and ending June 30, 1986. The services
				  performed between July 1, 1986, and March 15, 1987, would be subject to
				  tax.
This rule is intended to implement Iowa Code subsection
				  422.43(11).