Iowa has issued a sales tax change to their guidance for sellers of recreational activities that will take effect January 4, 2023. The Iowa Department of Revenue has issued guidance on this matter to ease confusion and provide certainty about various scenarios that are subject to sales tax. Iowa previously imposed sales tax on “all commercial recreation”, with certain instances being excluded – depending on the level of instruction involved, whether the instructor was teaching some skill otherwise unknown to most people, the type and amount of training the instructor received before providing the instruction, and how the seller billed the customer for the instruction. Iowa’s new ruling is intended to clear up the vague language and enforce the abidance of the statute; the new rule now omits the consideration of instruction. As of January 4, 2023, all the following will be subject to sales tax:
These instances are subject to sales tax unless they are offered as part of primary, secondary, or post-secondary education – including art/music classes, sports teams, etc. The definition of “recreation” remains the same, applying to activities pursued for pleasure. The new ruling alters the distinctions previously imposed, where the types of recreation subject to sales tax will no longer depend on instruction-related considerations. (IAC rule 701–216.3(423), Iowa Department of Revenue, effective January 4, 2023)