Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 284 - Exempt Sales › Rule 701-284.11 - Educational Institution

Current through Register Vol. 47, No. 3, July 24, 2024
Goods, wares or merchandise purchased by any private
				  nonprofit educational institution in the state and used for educational
				  purposes shall be exempt from sales tax. The gross receipts from the sale of
				  textbooks and hot lunches to students shall be exempt from sales tax to the
				  extent the profits from the sales are used for educational purposes. The sales
				  of the yearbooks to schools which have executed contracts with yearbook
				  companies to purchase yearbooks are considered sales for resale and are exempt
				  from tax. The sales of yearbooks from the school to the students and others are
				  considered an educational activity and are exempt to the extent the profits
				  therefrom are expended for educational purposes.
Effective January 1, 2002, "educational institution" means an
				  institution which primarily functions as a school, college, or university with
				  students, faculty, and an established curriculum. The faculty of an educational
				  institution must be associated with the institution and the curriculum must
				  include basic courses which are offered every year. "Educational institution"
				  includes an institution primarily functioning as a library.
EXAMPLE 1: ABC Child Care (ABC) is a private nonprofit
				  organization that provides the service of caring for children newborn to six
				  years of age. In addition, ABC teaches the children basic learning skills such
				  as shapes, numbers, colors, and the alphabet. ABC teaches the same skills every
				  year using the same techniques. ABC is not a private educational institution.
				  ABC's primary purpose is to provide child care. The education of the children
				  is a secondary activity. Consequently, ABC would not qualify for exemption from
				  sales tax.
EXAMPLE 2: Little People's Preschool is a nonprofit private
				  organization that teaches children from the ages of three to six years old.
				  Little People's Preschool teaches the children basic learning skills such as
				  shapes, numbers, colors and the alphabet by using certified faculty and
				  accredited curriculum. Little People's Preschool is a private nonprofit
				  educational institution and is eligible to claim the exemption.
When purchases are made by any private nonprofit educational
				  institution and the institution is acting as an agent for the sale to any
				  student or other person, the sales are taxable if the proceeds from the sale
				  are not used for educational purposes.
When private nonprofit educational institutions contract with
				  food service companies to make sales of food or other sales at the educational
				  institution, certain sales by the food service company are taxable or exempt
				  depending on the circumstances.
Taxable Sales
A. All
				cash sales of meals or foods that could not be purchased in the same form or
				quantity in a retail store accepting food coupons (see rule
				701-20.1 (422,423) to
				20.6(422,423)), shall be taxable whether sold at snack bars, grills,
				cafeterias, restaurants, or cafes and whether or not sold to
				students.
B. All vending machine
				sales without exception.
C. Special
				event billings to colleges for feeding of guests not connected with the
				college.
D. Special event billings
				to colleges for feeding at banquets, parties, or social events not connected
				with the college.
E. Cash sales of
				any function where collection is made direct, whether or not to
				students.
F. Sales to fraternities
				or sororities for parties, banquets or social events not billed to
				college.
G. Special event feedings
				of commercial or social clubs such as chambers of commerce, Rotarians, Kiwanis,
				alumni, advertising clubs, or political groups, even though billed through the
				college.
Exempt Sales
A.
				Student board billing to include freshman days and student orientation when
				billed to the college and included in tuition.
B. Students and faculty casual board when
				billed to college.
C. Teas,
				conferences, and parties when given by faculty for students and billed to the
				college.
D. Athletic or training
				table feeding when billed to the college.
E. Special events sponsored by colleges for
				visiting dignitaries, or functions related to education and billed to the
				college.
F. Picnics for students on
				education field trips and billed to the college.
The above examples are not all-inclusive, only a general
				  guideline.
A private nonprofit educational institution consists of a
				  school, college, or university with students, faculty, and an established
				  curriculum, a group of qualifying organizations acting in concert, or
				  libraries.
This rule is intended to implement Iowa Code sections
				  422.42,
				  422.43,
				  422.45(3) as
				  amended by 2001 Iowa Acts, House File 736, section 2, 422.45(7), 422.45(8) as
				  amended by 2001 Iowa Acts, House File 736, section 3, 423.1, and
				  423.4.