House Study Bill 655 HOUSE FILE BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON VAN FOSSEN) Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act exempting from sales and use taxes certain equipment used 2 in transmitting telecommunications services. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 5894HC 81 5 mg/cf/24 PAG LIN 1 1 Section 1. Section 423.3, Code Supplement 2005, is amended 1 2 by adding the following new subsection: 1 3 NEW SUBSECTION. 47A. a. Subject to paragraph "b", the 1 4 sales price from the sale or rental of central office 1 5 equipment or transmission equipment primarily used by local 1 6 exchange carriers and competitive local exchange service 1 7 providers as defined in section 476.96; by franchised cable 1 8 television operators, mutual companies, municipal utilities, 1 9 cooperatives, and companies furnishing communications services 1 10 which are not subject to rate regulation as provided in 1 11 chapter 476; by long distance companies as defined in section 1 12 477.10; or for a commercial mobile radio service as defined in 1 13 47 C.F.R. } 20.3 in the furnishing of telecommunications 1 14 services on a commercial basis. For the purposes of this 1 15 subsection, "central office equipment" means equipment 1 16 utilized in the initiating, processing, amplifying, switching, 1 17 or monitoring of telecommunications services. "Transmission 1 18 equipment" means equipment utilized in the process of sending 1 19 information from one location to another location. "Central 1 20 office equipment" and "transmission equipment" also include 1 21 ancillary equipment and apparatus which support, regulate, 1 22 control, repair, test, or enable such equipment to accomplish 1 23 its function. 1 24 b. The exemption in this subsection shall be phased in by 1 25 means of a reduction in the tax rate as follows: 1 26 (1) If the sale or rental occurs between July 1, 2006, and 1 27 June 30, 2007, the rate of tax is four percent of the sales 1 28 price. 1 29 (2) If the sale or rental occurs between July 1, 2007, and 1 30 June 30, 2008, the rate of tax is three percent of the sales 1 31 price. 1 32 (3) If the sale or rental occurs between July 1, 2008, and 1 33 June 30, 2009, the rate of tax is two percent of the sales 1 34 price. 1 35 (4) If the sale or rental occurs between July 1, 2009, and 2 1 June 30, 2010, the rate of tax is one percent of the sales 2 2 price. 2 3 (5) If the sale or rental occurs on or after July 1, 2010, 2 4 the rate of tax is zero percent of the sales price. 2 5 EXPLANATION 2 6 This bill exempts from sales and use taxes central office 2 7 equipment and transmission equipment sold or rented for use in 2 8 transporting communications services by local exchange 2 9 carriers, competitive local exchange service providers, 2 10 certain franchised cable television operators, mutual 2 11 companies, cooperatives, municipal utilities and other 2 12 entities not subject to rate regulation, long distance 2 13 companies, and commercial mobile radio services. However, the 2 14 exemption is phased in by means of a tax rate reduction over a 2 15 five=year period beginning July 1, 2006. After June 30, 2010, 2 16 the equipment sales or rentals will be completely tax exempt. 2 17 The bill defines central office equipment as equipment used in 2 18 initiating, processing, amplifying, switching, or monitoring 2 19 of telecommunications services and any ancillary equipment and 2 20 transmission equipment as equipment utilized in the process of 2 21 sending information from one place to another. 2 22 LSB 5894HC 81 2 23 mg:rj/cf/24