HF 2510 (LSB 5763HH (5) 83)

HOUSE FILE 2510

BY  STECKMAN

A BILL FOR

An Act relating to retailers maintaining a place of business in this state for purposes of the collection of sales and use taxes.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 423.1, Code 2009, is amended by adding the following new subsection:
   NEW SUBSECTION.  0A.  “Affiliate” means any entity to which any of the following applies:
   a.  Directly, indirectly, or constructively controls another entity.
   b.  Is directly, indirectly, or constructively controlled by another entity.
   c.  Is subject to the control of a common entity. A common entity is one which owns directly or individually more than ten percent of the voting securities of the entity.
    Sec. 2.  Section 423.1, subsection 43, Code 2009, is amended by striking the subsection and inserting in lieu thereof the following:
   43.  “Retailer maintaining a place of business in this state” or any similar term includes all of the following:
   a.  A retailer having or maintaining within this state, directly or indirectly by a subsidiary, an office, distribution house, sales house, warehouse, or other such place of business.
   b.  A retailer’s representative operating within this state under the authority of the retailer or the retailer’s subsidiary.
   c.  A solicitor operating in the state with the consent or at the direction of a retailer.
   d.  This subsection applies irrespective of whether a place of business, representative, or solicitor is located or operates here permanently or temporarily or whether the retailer or the retailer’s subsidiary is admitted to do business within this state pursuant to chapter 490.
    Sec. 3.  Section 423.1, Code 2009, is amended by adding the following new subsections:
   NEW SUBSECTION.  51A.  “Solicitor” means a person, including an independent contractor, who directly or indirectly solicits business for a retailer, refers potential customers to a retailer, or otherwise regularly engages in activity which is significantly associated with the retailer’s ability to establish or maintain a market in the state or which effects a substantial amount of sales by the retailer in the state.
   NEW SUBSECTION.  52A.  “State agency” means an authority, board, commission, department, instrumentality, or other administrative office or unit of this state, or any other state entity reported in the Iowa comprehensive annual financial report, including public institutions of higher education.
   NEW SUBSECTION.  62.  “Voting security” means a security to which any of the following applies:
   a.  Confers upon the holder the right to vote for the election of members of the board of directors or similar governing body of the entity.
   b.  Is convertible into, or entitles the holder to receive upon its exercise, a security that confers such a right to vote.
   c.  Is a general partnership interest.
    Sec. 4.  NEW SECTION.  423.1A  Presumption of solicitation.
   1.  A person shall be presumed to be a solicitor for purposes of this chapter if all of the following conditions are met:
   a.  The person has entered into an agreement with a retailer whereby a commission or other consideration is paid by the retailer to the person for directly or indirectly referring potential customers to the retailer by digital or electronic means. For purposes of this section, “digital or electronic means” includes a link on an internet site or any substantially similar mechanism designed for use on a personal computer or other personal digital device that provides the ability to direct potential customers from the person to the retailer for the purpose of making a sale at retail.
   b.  The retailer has total gross receipts attributable to agreements such as those described in paragraph “a” in excess of ten thousand dollars for the twelve-month period ending on the last day of the most recent calendar quarter.
   2.  The presumption created in subsection 1 may be rebutted by a showing of proof that a person with whom the retailer has an agreement did not directly or indirectly engage in referrals in the state or that the activities of the person on behalf of the retailer were de minimis. Maintaining a digital or electronic means of referral shall not be considered de minimis.
   3.  This section shall not be interpreted or construed in any way to limit the definition of “solicitor” or other definitions provided in section 423.1.
    Sec. 5.  Section 423.2, subsection 10, Code 2009, is amended to read as follows:
   10.  a.  Any person or that person’s affiliate, which is a retailer in this state or a retailer maintaining a place of business in this state under this chapter, that enters into a contract with an agency of this state must register, collect, and remit Iowa sales tax under this chapter on all sales of tangible personal property and enumerated services.
   b.  Every bid submitted and each contract executed by a state agency shall contain a certification by the bidder or contractor stating that the bidder or contractor is registered with the department and will collect and remit Iowa sales tax due under this chapter. In the certification, the bidder or contractor shall also acknowledge that the state agency may declare the contract or bid void if the certification is false. Fraudulent certification, by act or omission, may result in the state agency or its representative filing for damages for breach of contract.

   For the purposes of this subsection, the following definitions apply:

   a.  “Affiliate” means any entity to which any of the following applies:
   (1)  Directly, indirectly, or constructively controls another entity.
   (2)  Is directly, indirectly, or constructively controlled by another entity.
   (3)  Is subject to the control of a common entity. A common entity is one which owns directly or individually more than ten percent of the voting securities of the entity.
   b.  “State agency” means an authority, board, commission, department, instrumentality, or other administrative office or unit of this state, or any other state entity reported in the Iowa comprehensive annual financial report, including public institutions of higher education.
   c.  “Voting security” means a security to which any of the following applies:
   (1)  Confers upon the holder the right to vote for the election of members of the board of directors or similar governing body of the entity.
   (2)  Is convertible into, or entitles the holder to receive upon its exercise, a security that confers such a right to vote.
   (3)  Is a general partnership interest.
    Sec. 6.  Section 423.5, subsection 8, Code 2009, is amended to read as follows:
   8.  Any person or that person’s affiliate, which is a retailer in this state or a retailer maintaining a place of business in this state under this chapter, that enters into a contract with an agency of this state must register, collect, and remit Iowa use tax under this chapter on all sales of tangible personal property and enumerated services. Every bid submitted and each contract executed by a state agency shall contain a certification by the bidder or contractor stating that the bidder or contractor is registered with the department and will collect and remit Iowa use tax due under this chapter. In the certification, the bidder or contractor shall also acknowledge that the state agency may declare the contract or bid void if the certification is false. Fraudulent certification, by act or omission, may result in the state agency or its representative filing for damages for breach of contract.

   For the purposes of this subsection, “affiliate”, “state agency”, and “voting security” mean the same as defined in section 423.2, subsection 10.
    Sec. 7.  Section 321.105A, subsection 2, paragraph a, unnumbered paragraph 1, Code Supplement 2009, is amended to read as follows:
   For purposes of this subsection, “purchase price” applies to the measure subject to the fee for new registration. “Purchase price” shall be determined in the same manner as “sales price” is determined for purposes of computing the tax imposed upon the sales price of tangible personal property under chapter 423, pursuant to the definition of “sales price” in section 423.1, subsection 47, subject to the following exemptions:
EXPLANATION
   This bill relates to the collection of sales and use taxes by retailers maintaining a place of business in this state.
   A retailer located in this state, or maintaining a place of business in this state, must collect and remit sales taxes to the department of revenue. Currently, as defined in Code section 423.1, the term “retailer maintaining a place of business in the state” includes certain places of business, subsidiary arrangements, and representatives operating on a retailer’s behalf. The bill adds the term “solicitor” to that definition. A solicitor is defined as a person, including an independent contractor, who directly or indirectly solicits business for a retailer, refers potential customers to a retailer, or otherwise regularly engages in activity which is significantly associated with the retailer’s ability to establish or maintain a market in the state or which effects a substantial amount of sales by the retailer in the state.
   The bill provides that a person is presumed to be a solicitor if that person enters into an agreement with a retailer whereby a commission or other consideration is paid by the retailer to the person for directly or indirectly referring potential customers to the retailer by digital or electronic means and has gross receipts for the year in excess of $10,000. Digital or electronic means includes links on internet sites or similar mechanisms on other devices with the capability of directing customers to the retailer for purposes of making sales. The presumption is rebuttable by proof that a person with whom the retailer has an agreement did not engage in referrals in the state or that the activities of the person were de minimis.
   By operation of law, the changes to the definition of “retailer maintaining a place of business in the state” also apply to the use tax imposed in Code section 423.5.
   The bill makes conforming amendments to the definitions in Code section 423.1.