701—224.3 (423) Imposition of tax.
	 224.3(1) Taxable telecommunication service and ancillary service. The gross receipts from the sale of telecommunication service and ancillary service are subject to the sales or use tax. The following is a nonexclusive list of telecommunication services subject to the Iowa sales and use tax:
	  a.   	 Air-to-ground radio telephone service;
	  b.   	 Ancillary services except detailed communications billing service;
	  c.   	 Conference bridging service;
	  d.   	 Fixed wireless service;
	  e.   	 Mobile wireless service;
	  f.   	 Pay telephone service;
	  g.   	 Postpaid calling service;
	  h.   	 Prepaid calling service;
	  i.   	 Prepaid wireless calling service;
	  j.   	 Private communication service;
	  k.   	 Residential telecommunication service.
	 224.3(2) Other taxable services and circumstances. The following is a description of services and circumstances under which certain charges associated with telecommunication service are subject to tax:
	  a.   	 Long distance charges. Charges imposed or approved by the utilities division of the department of commerce which are necessary to secure long distance service in this state, for example, “end user intrastate access charges,” are taxable. These charges are taxable whether they result from an expense incurred from operations or are imposed by the mandate of the utilities division and unrelated to any expense actually incurred in providing the service.
	  b.   	 Gross receipts from services performed by another company. Gross receipts collected by a company (selling company) from the end users of telecommunication services and ancillary services performed in this state by another company (providing company) are considered to be the taxable gross receipts of the selling company. The situation is similar to a consignment sale of tangible personal property. Tax must be remitted by the selling company.
	  c.   	 Directory assistance. Charges for directory assistance service rendered in this state are subject to tax.
	  d.   	 Electrical installation and repair. The gross receipts from the installation or repair of any inside wire that provides electrical current that allows an electronic device to function are subject to tax. These gross receipts are from the enumerated service of electrical repair or installation. The gross receipts from “inside wire maintenance charges” for services performed under a service or warranty contract are also subject to tax. Depending upon the circumstances, these gross receipts are for the enumerated service of “electrical repair” or are incurred under an “optional service or warranty contract” for an enumerated service. In either event, the receipts are subject to tax.
	  e.   	 Electrical installation or repair: billing methodology. The gross receipts for the repair or installation of inside wire or the repair or installation of any electronic device, including a telephone or telephone switching equipment, are subject to tax regardless of the method used to bill the customer for the service. These methods include but are not limited to:
	 (1) 	 A flat fee or a flat hourly charge that covers all costs including labor and materials;
	 (2) 	 A premises visit or trip charge;
	 (3) 	 A single charge covering and not distinguishing between charges for labor and materials;
	 (4) 	 A charge with labor and material segregated; or
	 (5) 	 A charge for labor only.
	  f.   	 Nonitemized taxes and charges. Any federal taxes or charges that are not separately stated or billed are subject to Iowa sales tax.
	  g.   	 Rental of tangible personal property. The gross receipts from the rental of any device for home or office use or to provide a telecommunication service to others are taxable as the rental of tangible personal property. The gross receipts from rental include rents, royalties, and copyright and license fees. Any periodic fee for maintenance of the device which is included in the gross receipts for the rental of the device is also subject to tax.
	  h.   	 Sales of tangible personal property. The sale of any device, new or used, is subject to tax both when the device is in place on the customer’s premises at the time of the sale and if the device is sold to the customer elsewhere. The sale of an entire inventory of devices may or may not be subject to tax, depending upon whether it qualifies for the casual sales exemption. See Iowa Code section 423.3. Other exemptions may be applicable as well.
	  i.   	 Mandatory charges or fees. Any mandatory handling or other charges billed to a customer for sending the customer an electronic device by mail or by a delivery service are subject to tax. Charges for a mandatory service rendered in connection with the sale of tangible personal property are considered by the department to be a part of the gross receipts from the sale of the property itself and therefore subject to tax.
	  j.   	 Deposits. Any portion of a deposit utilized by a company as payment for the sale of tangible personal property or a taxable service is subject to tax as part of gross receipts.
	  k.   	 Municipal utilities. Sales of telecommunication service and ancillary service to any tax-levying body used by or in connection with the operation of any municipally owned utility engaged in selling gas, electricity or heat to the general public are subject to tax. These sales are an exception to the exemption for federal and state government. See subrule 224.4(5).
	  l.   	 Fax. The service of sending or receiving any document commonly referred to as a “fax” from one point to another within this state is subject to sales tax.
Example A. Klear Kopy Services is located in Des Moines, Iowa. Klear Kopy charges a customer $2 to transmit a fax (via Klear Kopy’s fax machine) to Dubuque, Iowa. The $2 is taxable gross receipts. Midwest Telephone Company charges Klear Kopy $500 per month for the intrastate communication service on Klear Kopy’s dedicated fax line. The $500 is also gross receipts from a taxable communication service.
Example B. The XYZ Law Firm is located in Des Moines, Iowa. The firm owns a fax machine and uses the fax machine in the performance of its legal work to transmit and receive various documents. The firm does not perform faxing services but will, on billings for legal services to clients, separately state the amount of a billing which is attributable to expenses for faxing. For example, “bill to John Smith for August 1997, $1,000 for legal services performed, fax expenses which are part of this billing—$30.” The $30 is not gross receipts for the performance of any taxable service because the faxing service is only incidental to the performance of the nontaxable legal services.
[ARC 9814B, IAB 10/19/11, effective 11/23/11]