[Author: Will Rogers, 07.17 | Keywords: Dealer Advocacy & Governmental Affairs, Consumer’s Use Tax]
Earlier this spring, one of our Iowa members received notice that the Iowa Department of Revenue (I-DOR) had selected their business for a Consumerís Use Tax (CUT) audit. As part of the audit, the I-DOR was able to require 10 yearsí worth of receipts from various purchases made by the dealership. In addition, the I-DOR also asked for documentation on sales tax dating back 10 years. As a business owner, you should be aware of Iowaís Consumerís Use Tax and what you need to do in order to comply with the law.
Iowa’s CUT is imposed on the purchase price of items when made tax-free via the internet, mail-order catalogs, television shopping programs or toll-free 800 numbers; magazine subscriptions; and untaxed purchases made while in another state and shipped or otherwise brought into Iowa. These items include, but are not limited to, electronics such as computers and printers; office supplies like printer paper; consumables including paper towels, dry sweep, cleaners; and any items typically sold in bulk and directly used by your business.
Anyone – individuals and businesses – who makes these types of purchases are required to pay CUT to the Iowa Department of Revenue of 6% of the purchase price. Simply put, if it is a taxable item and you didn’t pay sales tax on the item when you bought it, then you will likely need to pay the CUT.
Businesses making taxable purchases on a regular basis should register with the I-DOR and file a CUT return quarterly. If you do have a CUT permit number but only make occasional purchases or have no liability regarding the CUT, you should still file a return every year. The main reason for doing so is to keep the statute of limitations to three years of documentation. If you have a CUT permit and don’t file a return every year, the I-DOR can audit 10 years’ worth of receipts.
In addition, some businesses may not have a CUT permit and only occasionally make purchases for their own use and still owe the CUT. If this type of purchase is not typical for your business, instead of separately registering for consumer’s use tax you can report the purchase on line 2 Goods Consumed of your quarterly sales tax return or file and pay the tax as outlined.
Be sure to closely review every invoice to ensure that the vendors you use are properly collecting the sales tax. If you fail to pay the CUT in a timely manner, your business can be liable for the taxes owed, plus penalty and interest.
For more information regarding Iowa’s CUT please contact me at 800.622.0016 or [email protected]
About the Author
For more than nine years, Will has advocated for our members on both the state and national legislative fronts and has led I-NEDA’s educational efforts. In his free time, Will enjoys “dabbling” in politics, gardening, spending time with his wife and daughter, and managing his ever-growing collections (U.S. postage stamps, beer cans, comic books…).