[Source: INEDA, 10.2018 | Keywords: Construction, Sales Tax]
As a reminder, certain types of construction equipment are exempt from the local option sales tax and the local school infrastructure sales tax. That equipment is defined as:
… self‑propelled building equipment, pile drivers, motorized scaffolding, or attachments customarily drawn or attached to self‑propelled building equipment, pile drivers, and motorized scaffolding, including auxiliary attachments which improve the performance, safety, operation, or efficiency of the equipment and replacement parts and are directly and primarily used by contractors, subcontractors, and builders for new construction, reconstruction, alterations, expansion, or remodeling of real property or structures ……
The above language took effect May 20, 1999.
Example of equipment would be dozers, graders, asphalt & concrete pavers, cranes, rollers, skid steers, backhoes, excavators, and equipment drawn by self‑propelled equipment such as rollers. The extent of equipment covered is not limited to these specific examples.
This exemption only applies to local option sales taxes, not the state sales tax.
The key tests for this provision to be applicable are that it must be equipment or parts specifically described above and it must be equipment directly and primarily used by contractors, subcontractors or builders for the purposes specifically described above.
In addition, a purchaser claiming that the purchase is exempt from the local option sales taxes must fill out an Iowa Sales Tax Exemption Certificate. Please note that this certificate does not reflect a category for construction equipment and local option sales taxes. We recommend that you check the “other” box under the section “Purchaser is doing business as a” and write in either “contractor, subcontractor or builder.” Under the section “Purchaser is claiming exemption for the following reason” check the “other” box and write in “qualifying self‑propelled building equipment or parts under Section 42213.8 and Section 422E.3.” It is also very important that you describe the equipment or part being purchased..
The Iowa Department of Revenue and Finance also allows contractors to complete a blanket exemption certificate to be filed with equipment dealers.