701—252.4(423G) Charges and fees included in the provision of water service.
	252.4(1) Sales integral to the ability to furnish water service. The water service excise tax applies to the sale of water by piped distribution to consumers or users, including sales of accompanying services that are integral to furnishing water by piped distribution, even if the water service and accompanying services are billed separately.
	252.4(2) Examples of sales integral to the provision of water service. Sales of services to customers or users that are considered integral to the furnishing of water by piped distribution include, but are not limited to, the following:
	a. 	Sales of nonitemized tangible personal property included with the sale of water service or an accompanying service that is integral to the provision of water service. See subparagraph 252.4(4)“a”(2).
	b. 	The sales price of water sold, regardless of whether the water is metered.
	c. 	Service, account, or administrative charges or fees for water service, including but not limited to new customer account charges and minimum charges for access to water service, whether the customer uses the water service or not.
	d. 	Fees for connection, disconnection, or reconnection to or from a water utility’s facilities, including tap fees.
	e. 	Fees for maintenance, inspection, and repairs of the water distribution system, water supplies, and facilities, including but not limited to fees for labor or materials.
	f. 	Fees for using or checking water meters.
	g. 	Water distribution system infrastructure and improvement fees.
	252.4(3) Examples of sales that are not water service or are not integral to the provision of water service. Sales of services that are not integral to the furnishing of water by piped distribution include, but are not limited to, the following:
	a. 	Residential service contracts regulated under Iowa Code chapter 523C.
	b. 	Sales or rentals of tangible personal property, other than water, sold for a separately itemized price. See subparagraph 252.4(4)“a”(1).
	c. 	Returned check fees.
	d. 	Deposits, including but not limited to check and meter deposits.
	e. 	Fees for printed bills, statements, labels, and other documents.
	f. 	Fees for late charges and nonpayment penalties.
	g. 	Leak detection fees.
	252.4(4) Sales generally not subject to water service excise tax. Water utilities may make sales that may or may not be integral to the sale of water service but that are not subject to water service excise tax because those nonintegral sales are subject to sales tax under Iowa Code section 423.2 as the sale of tangible personal property or as enumerated non-water services.
	a. 	Sales of tangible personal property. Whether the sale of tangible personal property that is integral to water service is subject to the water service excise tax depends on whether the tangible personal property is sold to the consumer or user for a separately itemized price.
	(1)	Itemized tangible personal property. Sales or rentals of tangible personal property by a water utility for a separately itemized price are not subject to the water service excise tax but may be subject to sales and use tax.
	(2)	Nonitemized tangible personal property. If the sale of tangible personal property is not itemized but is instead bundled with the sale of water service, including sales of services listed in subrule 252.4(2), then the entire sales price is subject to the water service excise tax.
	b. 	Painting of hydrants. The painting of hydrants constitutes painting services under Iowa Code section 423.2(6)“aj.” Painting is subject to sales tax and is not subject to water service excise tax.
	c. 	Plumbing and pipefitting. Some repairs of a water distribution system may constitute plumbing and pipefitting under Iowa Code section 423.2(6)“an.” Plumbing and pipefitting services are subject to sales tax and are not subject to water service excise tax.
	252.4(5) Exemptions. The exemptions from sales tax under Iowa Code section 423.3 also apply to sales subject to water service excise tax. For example, a water utility that purchases water service from a different water utility may be eligible to claim the sale for resale exemption pursuant to Iowa Code section 423.3(2).
This rule is intended to implement Iowa Code sections 423G.4 and 423G.5.
[ARC 4217C, IAB 1/2/19, effective 2/6/19; ARC 6508C, IAB 9/7/22, effective 10/12/22; Editorial change: IAC Supplement 10/18/23]