[Author: Tom Junge, Iowa Field Director, 2013 | Keywords: Sales Tax, Subscriptions, ATV]
Several changes have been made to Iowa Sales Tax Laws over the years that directly affect Iowa-Nebraska Equipment Dealer Association members. Following is a brief review of some of these changes.
In May 2012, The Iowa Department of Revenue issued an opinion that subscription fees, buy-in agreements, and warranty fees were not taxable under Iowa law.
On the other hand, service agreements that contain presold labor, AMS visits, phone support, etc., are subject to sales tax. If the agreement is selling any type of labor it should be taxed.
Snowblowers, Rear or Front Mounted Blades & Rotary Cutters (effective July 1, 2012)
The subject matter of rule 701—226.1(423) is the exemption for farm machinery and equipment and items used in agricultural production attached to and towed by self-propelled implements of husbandry. The amendment in Item 1 exempts from sales tax, and defines, snow blowers, rear- or front-mounted blades, and rotary cutters if they are used in agricultural production and are to be attached to or towed by a self-propelled implement of husbandry.
IA Code 226.1(2)
Attachments to self-propelled implements of husbandry.
a. Exempt from the tax under this rule are the following items if, and only if, they are used in agricultural production:
- A snow blower that is to be attached to a self-propelled implement of husbandry; or
- A rear-mounted or front-mounted blade that is to be attached to or towed by a self-propelled implement of husbandry; or
- A rotary cutter that is to be attached to a self-propelled implement of husbandry.
b. Used in agricultural production.
Under this subrule, the items must be used in agricultural production, and not “directly and primarily” used in production of agricultural products as is required under subrule 226.1(1).
Example: Farmer Jones purchases a front-mounted blade that will be attached to a self-propelled implement of husbandry (e.g., farming tractor). Farmer Jones primarily uses the blade to prepare previously uncultivated land—a use that is not for agricultural production. However, Farmer Jones sporadically uses the front-mounted blade for agricultural production. Even though Farmer Jones does not directly and primarily use the front-mounted blade in agricultural production, the front-mounted blade is exempt from sales or use tax because the blade is occasionally used in agricultural production and it is attached to a self-propelled implement of husbandry.
All-Terrain Vehicles (ATVs) & Utility Vehicles
ATVs are exempt from sales tax if they are used “directly & primarily in agricultural production.” The Department defines agricultural production as “a farming operation undertaken for profit by the raising of crops or livestock.” Direct and primary use means the ATV is used to initiate, sustain, or terminate the agricultural production process 51 percent of the total time it is used. Some examples of how ATVs may be used in agricultural production include:
- Hauling food and water to livestock
- Herding livestock
- Unloading and moving seed, fertilizer, or dirt to crop site
- Fertilizing and applying chemicals to crops
Replacement Parts Expansion
This change occurred a few years back due to tractors now being standard with cabs:
“For periods beginning on and after July 1, 2008, the sale or lease of a replacement part is exempt from tax if the replacement part is used in any repair or reconstruction of the exempt piece of farm machinery or equipment used in the production of agricultural products. Nonexclusive examples of replacement parts to machinery and equipment which would be exempt include: air-conditioning parts, computer equipment parts, fire equipment parts, glass parts, mirrors, headlights, communication systems, and global positioning equipment parts.”