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The state recently provided guidance with respect to computer purchases by professional companies. In a policy letter issued by the Iowa Department of Revenue, the state indicated that purchases of computers by commercial enterprises for processing or data storage are exempt from sales and use tax. The taxpayer, an architectural company, did not qualify as a commercial enterprise, but rather a professional corporation. Factors used for this interpretation included: the incorporation under Chapter 496C and using “P.C.—Professional Corporation” as part of the entity’s name, or deriving all/substantially all of its revenue from the practice of a licensed profession. The firm’s unlicensed support staff did not change the interpretation. Therefore, the firm did not qualify for the computer purchase exemption.

In a recent Declaratory Order, the state provided a similar interpretation, but this time the entity was an accounting firm. The accounting firm was considered a professional corporation as it provided accounting services, employing professionals with four-year degrees that require extensive training and experience. Therefore, any purchase of computers and computer equipment made by accounting firms are also subject to Iowa sales and use tax. (Policy Letter 07300004, Iowa Department of Revenue, January 9, 2007); (Iowa Department of Revenue, IA —Declaratory Order 07-30-6-0009, Sales and Use (Feb. 23, 2007)


Effective January 1, 2009, a purchaser, purchaser’s seller or certified service provider (CSP), or purchaser holding a direct pay permit will not be liable for sales/use tax, local option sales tax, or interest/penalties for nonpayment of tax, if they relied on certain state-provided information contained in the state’s taxability matrix, taxability databases, or any other location where erroneous data regarding tax rates, boundaries, or taxing jurisdiction assignments appears. (S.F. 592, Laws 2007, effective July 1, 2007)


A tax amnesty program, set forth by the Iowa Department of Revenue, will commence on September 4, 2007 and end on October 31, 2007. Upon written application, an authorized taxpayer will be able to pay delinquent taxes in full, plus fifty percent of the interest that is due without being liable for further interest, penalties, or civil or criminal prosecution. Applicable taxpayers include those who, as of December 31, 2006, have delinquent tax liabilities, including tax due on unfiled returns, tax liabilities owned to the Department, or tax liabilities not reported or established but delinquent. Any taxpayer participating in the program must renounce all administrative and judicial rights to challenge the imposition of the tax and its amount, except for federal audit adjustments completed after May 24, 2007. Furthermore, amnesty will not be granted to a taxpayer who is the subject of an active criminal investigation or who is a party to a criminal proceeding involving nonpayment or fraud in relation to any Iowa tax. (S.F. 580, Laws 2007, effective May 24, 2007)


New rules passed in a series of Iowa bills provide a use tax credit for the purchase and replacement costs incurred by an electric utility transitioning to soy-based transformer fluid. Soy-based transformer fluid is defined as a non-conductible fluid that is made of at least 98% soy-based products. The charges must be within June 30, 2006 and January 1, 2007. The credit is limited to $2 per gallon, up to 60,000 gallons. Any excess credit is refundable. (S.F. 2402, Laws 2006, Effective November 29, 2006)


Clothing and footwear less than $100. Also applies to items put on lay away or ordered by mail during the holiday. Does not include protective gear, athletic gear or accessories. See Details



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