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Iowa will have its fourth annual Sales Tax Holiday on Friday and Saturday, August 6-7, 2004. Like last year, the exemption only applies to certain clothing and footwear with a selling price under $100. Clothing is defined as “any article of wearing apparel and typical footwear intended to be worn on or about the human body” and excludes accessories, jewelry, umbrellas, scarves, and any apparel or footwear worn primarily for athletic activity. Further details are available at Businesses do not need to report or record the sales separately but will need to keep a copy of their return and the exemption worksheet. (Release, Iowa Department of Revenue, June, 2004)


In order for construction contractors to buy building materials exempt from tax they must receive both an authorization letter and exemption certificate from an exempt entity. Before issuing the authorization letter and exemption certificate, the exempt entity must register the project through the Department of Revenue's online system and wait to receive approval. Unless the appropriate exemption certificates are issued, construction contractors are required to pay sales and use tax on all purchases of building materials for new construction, reconstruction and alteration except for wind energy conversion equipment. (Iowa Department of Revenue, Tax e-News, April 2, 2004)


An Iowa Appellate Court affirms the decision that fees charged for storm water drainage are taxable to nonresidential commercial operations because rainwater collection is a taxable sewage service. The term "sewage services," which is not defined by statute, was interpreted by an administrative rule as, "The service of collecting rainwater and other liquid or solid refuse or excreta for drainage or purification by means of pipes, channels or conduits usually placed underground." (Iowa Supreme Court, No. 81/02-0939, July 16, 2003)


The Iowa Department of Revenue has enacted a tax holiday beginning August 1, 2003 and ending August 2, 2003. During the tax holiday no sales tax will be collected on certain items of clothing and/or footwear. Items costing less than $100 are exempt. This exemption applies to each item under $100, no matter how many are purchased on one invoice. Businesses open those days are required to participate. (Release, Iowa Department of Revenue and Finance, June 2003.)


Iowa has introduced legislation proposing a sales tax rate increase from the current 5% to 6%. The 1% increase would be deposited into a school district sales tax fund and distributed to school districts throughout the state for property tax relief or school infrastructure purposes. (H.F. 212, introduced February 17, 2003)



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