Text: HSB00538 Text: HSB00540 Text: HSB00500 - HSB00599 Text: HSB Index Bills and Amendments: General Index Bill History: General Index
PAG LIN 1 1 Section 1. Section 422.42, subsection 15, Code Supplement 1 2 2001, is amended to read as follows: 1 3 15. Sales of building materials, supplies, and equipment 1 4 to owners, contractors, subcontractors or builders, for the 1 5 erection of buildings or the alteration, repair, or 1 6 improvement of real property, are retail sales in whatever 1 7 quantity sold. If a contractor, subcontractor, or builder has 1 8 paid the tax on the purchase of building materials, supplies, 1 9 or equipment which are to be used in the performance of a 1 10 construction contract with a city, county, or school district, 1 11 the contractor, subcontractor, or builder shall grant the 1 12 city, county, or school district a credit, upon receipt of an 1 13 exemption certificate from the city, county, or school 1 14 district equal to the tax paid, to be applied against the 1 15 contractual payment obligation for the construction project. 1 16 The contractor, subcontractor, or builder is entitled to a 1 17 refund of the tax paid as provided in section 422.47, 1 18 subsection 2. Where the owner, contractor, subcontractor, or 1 19 builder is also a retailer holding a retail sales tax permit 1 20 and transacting retail sales of building materials, supplies, 1 21 and equipment, the person shall purchase such items of 1 22 tangible personal property without liability for the tax if 1 23 such property will be subject to the tax at the time of resale 1 24 or at the time it is withdrawn from inventory for construction 1 25 purposes. The sales tax shall be due in the reporting period 1 26 when the materials, supplies, and equipment are withdrawn from 1 27 inventory for construction purposes or when sold at retail. 1 28 The tax shall not be due when materials are withdrawn from 1 29 inventory for use in construction outside of Iowa and the tax 1 30 shall not apply to tangible personal property purchased and 1 31 consumed by the manufacturer as building materials in the 1 32 performance by the manufacturer or its subcontractor of 1 33 construction outside of Iowa. The tax shall not be due when 1 34 materials are withdrawn from inventory for use in construction 1 35 performed for a city, county, or school district in the state 2 1 if an exemption certificate is received from the city, county, 2 2 or school district and the tax shall not apply to tangible 2 3 personal property purchased and consumed by the manufacturer 2 4 as building materials in the performance by the manufacturer 2 5 or its subcontractor of construction performed for a city, 2 6 county, or school district in this state if an exemption 2 7 certificate is received from the city, county, or school 2 8 district. 2 9 For the purposes of this subsection, the sale of carpeting 2 10 is not a sale of building materials. The sale of carpeting to 2 11 owners, contractors, subcontractors, or builders shall be 2 12 treated as the sale of ordinary tangible personal property and 2 13 subject to the tax imposed under section 422.43, subsection 1, 2 14 and the tax imposed under section 423.2. If the contractor, 2 15 subcontractor, or builder uses the carpeting in the 2 16 performance of a construction contract with a city, county, or 2 17 school district, the contractor, subcontractor, or builder 2 18 shall grant the city, county, or school district a credit, 2 19 upon receipt of an exemption certificate from the city, 2 20 county, or school district equal to the tax paid, to be 2 21 applied against the contractual payment obligation for the 2 22 construction project. The contractor, subcontractor, or 2 23 builder is entitled to a refund of the tax paid as provided in 2 24 section 422.47, subsection 2. 2 25 Sec. 2. Section 422.45, subsection 7, Code Supplement 2 26 2001, is amended by adding the following new paragraph: 2 27 NEW PARAGRAPH. d. The amount of refund to a city, county, 2 28 or school district under this subsection shall not include any 2 29 credit or exemption received pursuant to an exemption 2 30 certificate given to a contractor as provided in section 2 31 422.42, subsection 15. 2 32 Sec. 3. Section 422.47, Code Supplement 2001, is amended 2 33 by adding the following new subsections: 2 34 NEW SUBSECTION. 2. A construction contractor may make 2 35 application to the department for a refund of the tax paid 3 1 under this division or the tax paid under chapter 423 on the 3 2 sales or use of building materials, supplies, equipment, or 3 3 carpeting under the following conditions: 3 4 a. The building materials, supplies, equipment, or 3 5 carpeting are incorporated into an improvement to real estate 3 6 in fulfillment of a written contract with a city, county, or 3 7 school district and a credit has been granted the city, 3 8 county, or school district by the construction contractor as 3 9 provided in section 422.42, subsection 15. 3 10 b. The contractor has paid to the department or to a 3 11 retailer the full five percent tax. 3 12 c. The claim is filed on forms provided by the department 3 13 and is filed within one year of the date the tax is paid. 3 14 A contractor who makes an erroneous application for refund 3 15 shall be liable for payment of the excess refund paid plus 3 16 interest at the rate in effect under section 421.7. In 3 17 addition, a contractor who willfully makes a false application 3 18 for refund is guilty of a simple misdemeanor and is liable for 3 19 a penalty equal to fifty percent of the excess refund claimed. 3 20 Excess refunds, penalties, and interest due under this 3 21 subsection may be enforced and collected in the same manner as 3 22 the tax imposed by this division. 3 23 NEW SUBSECTION. 5. The department shall issue a 3 24 construction project exemption certificate to a city, county, 3 25 or school district to be used by the city, county, or school 3 26 district to receive the credit or tax exemption as provided in 3 27 section 422.42, subsection 15. The exemption certificate 3 28 shall specify the construction project to which it applies and 3 29 shall be valid only for that project. The city, county, and 3 30 school district shall apply for a construction project 3 31 exemption certificate upon forms prescribed by the director. 3 32 The application shall, to the extent practicable, describe the 3 33 project and the building materials, supplies, equipment, and 3 34 carpeting that will become an integral part of the project. 3 35 If the department determines that section 422.45, subsection 4 1 7, would apply to any sales or use tax that has been or would 4 2 be paid on the building materials, supplies, equipment, and 4 3 carpeting, the department shall issue a construction project 4 4 exemption certificate. 4 5 EXPLANATION 4 6 Under present law, cities, counties, and school districts 4 7 that hire construction contractors to erect buildings or make 4 8 other improvements to real property pay the state sales and 4 9 use taxes pursuant to the construction contract and then apply 4 10 to the state for a refund of those taxes paid. This bill 4 11 provides a procedure where cities, counties, and school 4 12 districts will not have to apply for the refund. The 4 13 procedure allows construction contractors to grant a city, 4 14 county, or school district a credit, equal to the amount of 4 15 the tax paid, against the contractual payment obligation and 4 16 the contractor would then recoup the credit by applying for a 4 17 refund from the state. In the case where the construction 4 18 contractor has not paid the tax, the contractor would not 4 19 include the tax in the contractual payment obligation. In 4 20 order for the city, county, or school district to receive the 4 21 credit or tax exemption, the city, county, or school district 4 22 must apply for and receive an exemption certificate for the 4 23 construction project. 4 24 For a contractor to receive the refund of sales tax paid, 4 25 the contractor would have to establish that the building 4 26 materials were used in a construction contract for a city, 4 27 county, or school district; the tax was paid by the 4 28 contractor; and the claim is filed within one year from the 4 29 payment of the tax. If the contractor makes an erroneous 4 30 application for refund, interest shall be charged on the 4 31 amount of any excess refund paid. If the contractor willfully 4 32 makes a false application for refund, the contractor is guilty 4 33 of a simple misdemeanor and is liable for a penalty of 50 4 34 percent of the excess refund claim. 4 35 LSB 5217HC 79 5 1 mg/sh/8
Text: HSB00538 Text: HSB00540 Text: HSB00500 - HSB00599 Text: HSB Index Bills and Amendments: General Index Bill History: General Index
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