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1 24 or at the time it is withdrawn from inventory for construction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1 26 when the materials, supplies, and equipment are withdrawn from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1 28 The tax shall not be due when materials are withdrawn from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1 34 materials are withdrawn from inventory for use in construction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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