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Iowa Considers Expanding Sales Tax Exemptions


 Iowa considers expanding sales tax exemption to many business inputs.

Expanding the items eligible for Iowa’s machinery and equipment sales tax exemption would have a positive impact on jobs, according to the Iowa Department of Revenue. Manufacturers would reduce their sales tax burden by an estimated $5-$6 million annually between 2017 and 2020, which would create revenue for job expansion. Under current rules, machinery and equipment is often considered to be real property and therefore does not qualify for the machinery and equipment sales tax exemption.

ARC 2178C, Notice of Intended Action explains:

“The proposed amendments implement a policy that eliminates, to the extent permitted by Iowa Code section 423.3(47), administratively burdensome distinctions that do not reflect modern manufacturing in Iowa. The proposed changes are prospective and will only apply to sales occurring as part of a contract entered into on or after January 1, 2016.”

ARC 2178C would expand the sales tax exemption to include computers, machinery and equipment used in a variety of processing and manufacturing capacities, from maintaining “the integrity of the product” to the “recycling or preprocessing of waste products.” For a complete list, refer to ARC 2178C, Notice of Intended Action.

If adopted, the new policy will take effect January 1, 2016.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.