Opinion ID: 2210491
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Heading: Use Tax Exemptions Under the Code.

Text: 701 Iowa Administrative Code section 17.1(4) states in relevant part that: a. There is no authority in the Iowa Code to grant a nonprofit corporation any type of blanket sales or use tax exemption on its purchases because the organization is exempted from federal or state income taxes. .... c. Nonprofit corporations and educational, religious, or charitable organizations can be held responsible for the payment of sales and use taxes as would any other individual, retailer, or corporation. Therefore, all nonprofit organizations not specifically exempted from the payment of sales or use tax based solely on the nature of their organization can be held accountable for the payment of such a tax on their purchases as would any other individual, retailer, or corporation unless the purchases fall directly under a specific exemption statute. Hope contends that Iowa Code sections 422.45(3), 422.45(8) and 423.4(4) (1977) grant it such an exemption. Iowa Code section 422.45 provides in part that: There are hereby specifically exempted from the provisions of this division and from the computation of the amount of tax imposed by it, the following: .... 3. The gross receipts from sales of educational, religious, or charitable activities, where the entire proceeds therefrom are expended for educational, religious, or charitable purposes,.... .... 8. The gross receipts of all sales of goods, wares, or merchandise, or services, used for educational purposes to any private nonprofit educational institution in this state.... Likewise, the use of such tangible personal property is exempt from Iowa use tax by virtue of Iowa Code section 423.4(4), which also provides in part that: The use in this state of the following tangible personal property is hereby specifically exempted from the tax imposed by this chapter: .... 4. Tangible personal property, the gross receipts from the sale of which are exempted from the retail sales tax by the terms of section 422.45.... When interpreting statutes, we are guided by familiar principles of statutory construction. Of course, the polestar is legislative intent. Iowa Dep't of Revenue v. Iowa Merit Employment Comm'n, 243 N.W.2d 610, 614 (Iowa 1976). Our goal then, is to ascertain that intent and, if possible, give it effect. Isaacson v. Iowa State Tax Comm'n, 183 N.W.2d 693, 695 (Iowa 1971). To ascertain the intent of the legislature, we look to what it said, rather than what it should or might have said. State v. Hesford, 242 N.W.2d 256, 258 (Iowa 1976). Words are given their ordinary meaning unless defined differently by the legislature or possessed of a particular and appropriate meaning in law. Id. However, we must avoid legislating in our own right and placing upon statutory language a strained, impractical or absurd construction. Doe v. Ray, 251 N.W.2d 496, 501 (Iowa 1977). Administrative rules have the force of law and are presumed valid. Richards v. Iowa Dep't of Revenue, 360 N.W.2d 830, 833 (Iowa 1985). Weight should be given to the department's interpretation of the statutes, particularly when they are of long standing, but this court is not bound by that interpretation. Sommers v. Iowa Civil Rights Comm'n, 337 N.W.2d 470, 473 (Iowa 1983). Moreover, we must strictly construe exemption statutes and any doubts must be resolved against the exemption and in favor of taxation. American College Testing Program, Inc. v. Forst, 182 N.W.2d 826, 827 (Iowa 1970).
Tangible personal property is exempt from Iowa use tax where the entire proceeds from sales of educational, religious, or charitable activities are expended for educational, religious, or charitable purposes. See Iowa Code §§ 422.45(3), 423.4(4) (1977). The Iowa Administrative Code lists criteria to test whether activities are educational, religious, or charitable, see 701 Iowa Admin.Code §§ 17.1(1)(a)-(c), and whether the entire proceeds are expended for such purposes. See 701 Iowa Admin. Code § 17.1(2). Hope contends that the department erred in assessing a use tax against the church for items purchased by it from Fortress Church Supply Stores, Augsburg Publishing House, Concordia Publishing House, The Lutheran Magazine and The Lutheran Church in America because the entire proceeds from their sale of educational, religious, or charitable activities are expended for educational, religious, or charitable purposes. The claim is that because the sellers of the items sought to be taxed are not-for-profit corporations that use their profits for religious activities, they come within the parameters of the sales tax statutory exemption and perforce include Hope within the use tax exemption. Our review shows that Hope has not supported its proposition with legal authority and has also failed to provide sufficient factual data to prove its underlying premise. The only evidence offered by Hope in support of its position is the testimony of its pastor and three affidavits from officials of Hope's major suppliers. Hope did not meet its burden of proof in establishing its right to an exemption from Iowa's use tax under Iowa Code sections 422.45(3) and 423.4(4). Pursuant to these Code sections and 701 Iowa Administrative Code sections 17.1(1) and (2), Hope must show that the organization's activities are educational, religious, or charitable, and that the entire proceeds therefrom are in fact expended for such purposes. The evidence in this regard does not show how Hope has met these standards. Affidavits which merely state conclusions with no supporting documents or records cannot sustain Hope's burden. Additionally, even if the gross receipts of these suppliers could be considered to be from the sale of educational, religious, or charitable activities, the department was correct in holding that Hope did not meet its burden to establish the right to a use tax exemption under Iowa Code sections 422.45(3) and 423.4(4), since it failed to show with particularity how the entire proceeds were expended by its suppliers.
Tangible personal property used for educational purposes by a private Iowa nonprofit educational institution is exempt from the state's use tax. See Iowa Code §§ 422.45(8) and 423.4(4). Iowa Code section 422.45(8) provides an exemption for the gross receipts of all sales of goods, wares, or merchandise, or services, used for educational purposes to any private nonprofit educational institution in Iowa. A private nonprofit educational institution is defined in 701 Iowa Administrative Code section 17.11 as follows: [A] school, college, or university with students, faculty, and an established curriculum, a group of qualifying organizations acting in concert, or libraries. See also American College Testing Program, 182 N.W.2d at 827. Hope contends that it meets this definition of a private nonprofit educational institution because it has students, faculty, and an established curriculum. The department, on the other hand, contends that Hope provides religious instruction as a normal consequence of being a religious organization and does not qualify as a private nonprofit educational institution for purposes of the Iowa Code section 422.45(8) use tax exemption. We cannot construe the exemption strictly and include Hope within the term educational institution. To do so would place a strained, impractical or absurd construction upon the statute in contravention to our own principles of statutory construction. Doe, 251 N.W.2d at 501. Hope cites our case of Community Drama Association v. Iowa State Tax Commission, 252 Iowa 854, 862, 109 N.W.2d 23, 28 (1961), in support of its proposition that many jurisdictions have accepted a broad meaning of the term educational institution. In Community Drama, this court held that a community theater was engaged in educational activities which qualified for an exemption from sales tax. Id. We noted, however, that the determination of what are educational activities is a factual problem not amenable to an all-inclusive rule. Id. There is a distinction between being engaged in educational activities for educational purposes and educational institutions. Concededly Hope's activities are somewhat related to an educational process, but this fact alone does not qualify it as an educational institution. The evidence in this case does not show that Hope qualifies as an educational institution for purposes of an Iowa Code section 422.45(8) tax exemption as defined in 701 Iowa Administrative Code section 17.11 and American College Testing Program. Hope is a church. As a natural consequence thereof, Hope provides religious instruction for such things as Sunday school, vacation Bible school and confirmation. Hope has no educational requirements which must be met by any of its instructors prior to instructing. The instructors make their own decisions about course material with apparently no established guidelines or set progressive curriculum for each year. In fact, the adult students choose their own material. Such a loose arrangement does not meet the standards of a 701 Iowa Administrative Code section 17.11 private nonprofit educational institution. Since Hope did not meet its burden to show that it qualifies as a private nonprofit educational institution within the meaning of Iowa Code section 422.45(8) (1977), it is not entitled to an exemption under that section. AFFIRMED.