Iowa Enacts Changes to Definition of Manufacturer and Manufacturing

Iowa has enacted legislation that makes changes to the terms “Manufacturer” and “Manufacturing” for purposes of the state’s manufacturing exemption. The new provision does include Contract Manufacturers. Per the legislation, “Manufacturer” does not include persons who are not commonly understood as manufacturers, including but not limited to persons engaged in any of the following activities:

  • Construction contracting
  • Repairing tangible personal property or real property
  • Providing health care
  • Farming, including cultivating agricultural products and raising livestock
  • Transporting for hire

Additionally, the legislation states that “Manufacturing” does not include activities occurring on premises primarily used to make retail sales. This law change seems to be in direct conflict with the finding in the Sherwin Williams case which found that a manufacturer did not need to primarily be a manufacturer.  The court found that a retailer that used specific equipment in the same manner and for the same purpose as a manufacturer could qualify for the manufacturing exemption. Based on this change, it appears that the Department of Revenue has acknowledged that the Sherwin Williams decision did qualify retailers who performed manufacturing activities to qualify for the exemption. Any retailers who have not yet filed refund claims or who have had refund claims denied should pursue actions promptly. (S.F. 2417, Laws 2018, effective May 30, 2018)

Posted on June 25, 2018