H.F. 2524 Section 1. Section 321.105A, subsection 2, paragraph a, 1 unnumbered paragraph 1, Code Supplement 2009, is amended to 2 read as follows: 3 For purposes of this subsection, “purchase price” applies to 4 the measure subject to the fee for new registration. “Purchase 5 price” shall be determined in the same manner as “sales price” 6 is determined for purposes of computing the tax imposed upon 7 the sales price of tangible personal property under chapter 8 423, pursuant to the definition of sales price in section 9 423.1 , subsection 47 , subject to the following exemptions: 10 Sec. 2. Section 423.1, Code 2009, is amended by adding the 11 following new subsection: 12 NEW SUBSECTION . 0A. “Affiliate” means any entity to which 13 any of the following applies: 14 a. Directly, indirectly, or constructively controls another 15 entity. 16 b. Is directly, indirectly, or constructively controlled by 17 another entity. 18 c. Is subject to the control of a common entity. A common 19 entity is one which owns directly or individually more than ten 20 percent of the voting securities of the entity. 21 Sec. 3. Section 423.1, subsections 27, 28, and 29, Code 22 2009, are amended to read as follows: 23 27. “Model 1 seller” is a seller registered under the 24 agreement that has selected a certified service provider as its 25 agent to perform all the seller’s sales and use tax functions, 26 other than the seller’s obligation to remit tax on its own 27 purchases. 28 28. “Model 2 seller” is a seller registered under the 29 agreement that has selected a certified automated system to 30 perform part of its sales and use tax functions, but retains 31 responsibility for remitting the tax. 32 29. “Model 3 seller” is a seller registered under the 33 agreement that has sales in at least five member states, 34 has total annual sales revenue of at least five hundred 35 -1- LSB 6159HV (1) 83 tw/sc 1/ 11

H.F. 2524 million dollars, has a proprietary system that calculates the 1 amount of tax due each jurisdiction, and has entered into a 2 performance agreement with the member states that establishes 3 a tax performance standard for the seller. As used in this 4 definition, a “seller” includes an affiliated group of sellers 5 using the same proprietary system. 6 Sec. 4. Section 423.1, Code 2009, is amended by adding the 7 following new subsection: 8 NEW SUBSECTION . 29A. “Model 4 seller” is a seller 9 registered under the agreement that is not a model 1, model 2, 10 or model 3 seller. 11 Sec. 5. Section 423.1, subsection 47, paragraph a, 12 subparagraph (6), Code 2009, is amended by striking the 13 subparagraph. 14 Sec. 6. Section 423.1, subsection 47, paragraph c, Code 15 2009, is amended to read as follows: 16 c. The sales price does not include and the sales tax shall 17 not apply to amounts received for charges included in paragraph 18 “a” , subparagraphs (3) through (7) (6) , if they are separately 19 contracted for, separately stated on the invoice, billing, 20 or similar document given to the purchaser, and the amounts 21 represent charges which are not the sales price of a taxable 22 sale or of the furnishing of a taxable service. 23 Sec. 7. Section 423.1, Code 2009, is amended by adding the 24 following new subsections: 25 NEW SUBSECTION . 52A. “State agency” means an authority, 26 board, commission, department, instrumentality, or other 27 administrative office or unit of this state, or any other state 28 entity reported in the Iowa comprehensive annual financial 29 report, including public institutions of higher education. 30 NEW SUBSECTION . 62. “Voting security” means a security to 31 which any of the following applies: 32 a. Confers upon the holder the right to vote for the 33 election of members of the board of directors or similar 34 governing body of the entity. 35 -2- LSB 6159HV (1) 83 tw/sc 2/ 11

H.F. 2524 b. Is convertible into, or entitles the holder to receive 1 upon its exercise, a security that confers such a right to 2 vote. 3 c. Is a general partnership interest. 4 Sec. 8. Section 423.2, subsection 1, paragraph a, Code 2009, 5 is amended to read as follows: 6 a. For the purposes of this subchapter, sales of the 7 following services are treated as if they were sales of 8 tangible personal property: 9 (1) Sales of engraving, photography, retouching, printing, 10 and binding services. 11 (2) Sales of vulcanizing, recapping, and retreading 12 services. 13 (3) Sales of prepaid telephone calling cards and 14 prepaid services that use an authorization numbers code . 15 (4) Sales of optional service or warranty contracts, except 16 residential service contracts regulated under chapter 523C, 17 which provide for the furnishing of labor and materials and 18 require the furnishing of any taxable service enumerated under 19 this section. The sales price is subject to tax even if some of 20 the services furnished are not enumerated under this section. 21 Additional sales, services, or use taxes shall not be levied 22 on services, parts, or labor provided under optional service 23 or warranty contracts which are subject to tax under this 24 subsection. 25 If the optional service or warranty contract is a computer 26 software maintenance or support service contract and there is 27 no separately stated fee for the taxable personal property 28 or for the nontaxable service, the tax imposed by this 29 subsection shall be imposed on fifty percent of the sales price 30 from the sale of such contract. If the contract provides for 31 technical support services only, no tax shall be imposed under 32 this subsection . The provisions of this subparagraph (4) also 33 apply to the use tax. 34 (5) Sales of optional service or warranty contracts for 35 -3- LSB 6159HV (1) 83 tw/sc 3/ 11

H.F. 2524 computer software maintenance or support services. 1 (a) If a service or warranty contract does not specify a fee 2 amount for nontaxable services or taxable personal property, 3 the tax imposed pursuant to this section shall be imposed upon 4 an amount equal to one-half of the sales price of the contract. 5 (b) If a service or warranty contract provides only for 6 technical support services, no tax shall be imposed pursuant to 7 this section. 8 (6) Subparagraphs (4) and (5) shall also apply to the use 9 tax imposed under section 423.5. 10 Sec. 9. Section 423.2, subsection 10, Code 2009, is amended 11 to read as follows: 12 10. a. Any person or that person’s affiliate, which is 13 a retailer in this state or a retailer maintaining a place 14 of business in this state under this chapter, that enters into 15 a contract with an agency of this state must register, collect, 16 and remit Iowa sales tax under this chapter on all sales of 17 tangible personal property and enumerated services. 18 b. Every bid submitted and each contract executed by a 19 state agency shall contain a certification by the bidder or 20 contractor stating that the bidder or contractor is registered 21 with the department and will collect and remit Iowa sales tax 22 due under this chapter. In the certification, the bidder or 23 contractor shall also acknowledge that the state agency may 24 declare the contract or bid void if the certification is false. 25 Fraudulent certification, by act or omission, may result in 26 the state agency or its representative filing for damages for 27 breach of contract. 28 For the purposes of this subsection , the following 29 definitions apply: 30 a. “Affiliate” means any entity to which any of the 31 following applies: 32 (1) Directly, indirectly, or constructively controls 33 another entity. 34 (2) Is directly, indirectly, or constructively controlled 35 -4- LSB 6159HV (1) 83 tw/sc 4/ 11

H.F. 2524 by another entity. 1 (3) Is subject to the control of a common entity. A common 2 entity is one which owns directly or individually more than ten 3 percent of the voting securities of the entity. 4 b. “State agency” means an authority, board, commission, 5 department, instrumentality, or other administrative office or 6 unit of this state, or any other state entity reported in the 7 Iowa comprehensive annual financial report, including public 8 institutions of higher education. 9 c. “Voting security” means a security to which any of the 10 following applies: 11 (1) Confers upon the holder the right to vote for the 12 election of members of the board of directors or similar 13 governing body of the entity. 14 (2) Is convertible into, or entitles the holder to receive 15 upon its exercise, a security that confers such a right to 16 vote. 17 (3) Is a general partnership interest. 18 Sec. 10. Section 423.5, subsection 8, Code 2009, is amended 19 to read as follows: 20 8. Any person or that person’s affiliate, which is a 21 retailer in this state or a retailer maintaining a place 22 of business in this state under this chapter, that enters 23 into a contract with an agency of this state must register, 24 collect, and remit Iowa use tax under this chapter on all sales 25 of tangible personal property and enumerated services. Every 26 bid submitted and each contract executed by a state agency 27 shall contain a certification by the bidder or contractor 28 stating that the bidder or contractor is registered with the 29 department and will collect and remit Iowa use tax due under 30 this chapter. In the certification, the bidder or contractor 31 shall also acknowledge that the state agency may declare the 32 contract or bid void if the certification is false. Fraudulent 33 certification, by act or omission, may result in the state 34 agency or its representative filing for damages for breach of 35 -5- LSB 6159HV (1) 83 tw/sc 5/ 11

H.F. 2524 contract. 1 For the purposes of this subsection , “affiliate” , “state 2 agency” , and “voting security” mean the same as defined in 3 section 423.2, subsection 10 . 4 Sec. 11. Section 423.46, Code 2009, is amended to read as 5 follows: 6 423.46 Rate and base changes —— liability for failure to 7 collect . 8 1. The department shall make a reasonable effort to provide 9 sellers with as much advance notice as practicable of a rate 10 change and to notify sellers of legislative changes in the tax 11 base and amendments to sales and use tax rules. Failure of a 12 seller to receive notice or failure of this state to provide 13 notice or limit the effective date of a rate change shall not 14 relieve the seller of its obligation to collect sales or use 15 taxes for this state Except as provided in subsection 2, a 16 seller shall not be relieved of the obligation to collect sales 17 or use taxes for this state by either a failure to receive such 18 notice or by a failure of the state to provide notice . 19 2. A seller will be relieved of liability for failing to 20 collect sales or use taxes for this state at the new rate under 21 all of the following conditions and to the following extent: 22 a. The department fails to provide for at least thirty 23 days between the enactment of the statute providing for a rate 24 change and the effective date of such rate change. 25 b. The seller continues to collect sales or use taxes at the 26 rate in effect immediately prior to the rate change. 27 c. The erroneous collection described in paragraph “b” does 28 not continue for more than thirty days after the effective date 29 of the rate change. 30 3. The relief from the obligation to collect sales or use 31 taxes described in subsection 2 shall not apply if a seller 32 knowingly or fraudulently fails to collect tax at the new rate 33 or if a seller has solicited purchasers on the basis of the 34 rate in effect immediately prior to the rate change. 35 -6- LSB 6159HV (1) 83 tw/sc 6/ 11

H.F. 2524 Sec. 12. Section 423.48, subsection 2, Code 2009, is amended 1 by adding the following new paragraph: 2 NEW PARAGRAPH . h. Upon the registration of a seller, 3 the department shall provide to the seller information 4 regarding the options available for the filing of returns and 5 remittances. Such information shall include information on 6 the requirements of filing simplified electronic returns and 7 remittances. 8 Sec. 13. Section 423.48, subsection 3, Code 2009, is amended 9 by adding the following new paragraph: 10 NEW PARAGRAPH . d. A model 2, model 3, or model 4 seller 11 making no sales sourced in the state in the preceding twelve 12 months may elect to be registered in the state as a seller that 13 anticipates making no sales sourced in the state. Making such 14 an election shall not relieve the seller of the obligation to 15 collect and remit sales or use taxes on sales sourced in the 16 state. 17 Sec. 14. Section 423.48, Code 2009, is amended by adding the 18 following new subsection: 19 NEW SUBSECTION . 4. The provisions of this section shall not 20 be construed to relieve a seller of the obligation to register 21 in the state if required to do so, and to collect and remit 22 sales or use taxes for at least thirty-six months and to meet 23 any other requirements necessary for amnesty in Iowa under the 24 terms of an agreement as provided in section 423.54. 25 Sec. 15. Section 423.49, Code 2009, is amended by striking 26 the section and inserting in lieu thereof the following: 27 423.49 Return requirements —— electronic filing. 28 1. Except as provided in subsection 7, all sellers 29 registered under the agreement shall file a single return per 30 month for the state and all taxing jurisdictions within this 31 state. 32 2. The director shall by rule determine the date on which 33 returns shall be filed. The date shall not be earlier than the 34 twentieth day of the following month. 35 -7- LSB 6159HV (1) 83 tw/sc 7/ 11

H.F. 2524 3. The department shall provide to all registered and 1 unregistered sellers, except sellers of products qualifying for 2 exclusion from the provisions of section 308 of the agreement, 3 a simplified return that can be filed electronically. 4 a. The simplified return shall be provided in a form 5 approved by the governing board and shall not contain a field 6 unless that field has been approved by the governing board. 7 b. The simplified return shall contain two parts. The 8 first part shall contain information relating to remittances 9 and allocations. The second part shall contain information 10 relating to exempt sales. 11 c. The department shall notify the governing board if 12 the submission of the second part of the return is no longer 13 necessary. 14 d. The department shall not require a model 4 seller to 15 submit the second part of the simplified return but may provide 16 for another means of collecting the information contained in 17 the second part of the return as described in subsection 4, 18 paragraph “e” . 19 4. a. A certified service provider shall file a simplified 20 return electronically on behalf of a model 1 seller and shall 21 file audit reports for the seller as provided for in article V 22 of the rules and procedures of the agreement. 23 b. A certified service provider shall file the first part of 24 the simplified return, as described in subsection 3, once per 25 month, as required pursuant to subsection 1. 26 c. A model 1 seller may file both the first and second parts 27 of the simplified return. Model 1 sellers filing both parts 28 shall also file audit reports as described in paragraph “a” . 29 d. A model 4 seller may elect to file a simplified return. 30 Model 4 sellers electing to do so shall file the first part of 31 the return each month. 32 e. A model 4 seller required to register in the state may 33 submit the information collected in the second part of the 34 return in one of the following ways: 35 -8- LSB 6159HV (1) 83 tw/sc 8/ 11

H.F. 2524 (1) By filing monthly both the first and second parts 1 electronically on a simplified return as described in 2 subsection 3. 3 (2) By filing the second part together with the required 4 December filing of the first part. A seller filing the second 5 part of a return pursuant to this subparagraph shall include 6 information for all months of that calendar year and shall 7 report the information in an annual rather than a monthly 8 fashion. 9 (3) The department shall notify the governing board prior to 10 requiring the submission of the second part of the simplified 11 return pursuant to this paragraph “e” . 12 5. The department shall adopt rules for the filing of 13 returns by a model 4 seller electing not to file a simplified 14 return pursuant to this section. 15 6. A seller which has previously elected to file a 16 simplified return shall provide at least three months’ notice 17 of an intent to discontinue the filing of such returns. 18 7. a. A seller making the election under section 423.48, 19 subsection 3, paragraph “d” , is exempt from the requirements of 20 this section and shall not be required to file a return. 21 b. The exemption allowed under paragraph “a” is only 22 applicable as long as a seller makes no taxable sales in this 23 state. If a seller makes a taxable sale in this state, the 24 seller shall file a return the month after such a sale is made. 25 8. A seller may file a return for more than one legal entity 26 at the same time only if such entities are affiliated. 27 9. The department shall adopt a standardized process for the 28 transmission and receipt of returns and related information. 29 The adoption of a procedure pursuant to this subsection is 30 subject to the approval of the governing board. 31 10. a. The department shall notify a seller registered 32 under the agreement that has no obligation to register in 33 this state of a failure to file a return required under this 34 section and allow the seller at least thirty days after such 35 -9- LSB 6159HV (1) 83 tw/sc 9/ 11

H.F. 2524 notification to file the return. 1 b. A liability amount may be established for an assessment 2 of taxes based solely on a seller’s failure to timely file 3 a return if such seller has a history of nonfiling or late 4 filing. 5 Sec. 16. Section 423.50, Code 2009, is amended by adding the 6 following new subsection: 7 NEW SUBSECTION . 5. The department shall adopt a 8 standardized process for the remittance of tax payments. The 9 procedure shall have the capability of processing multiple 10 payments and simplified returns by affiliated entities, 11 certified service providers, or tax preparers. The process 12 adopted pursuant to this subsection is subject to the approval 13 of the governing board. 14 Sec. 17. EFFECTIVE UPON ENACTMENT. This Act, being deemed 15 of immediate importance, takes effect upon enactment. 16 EXPLANATION 17 This bill relates to the administration of the sales and use 18 taxes under the streamlined sales tax agreement. 19 Iowa is a member of the streamlined sales and use tax 20 agreement which is an effort to administer state sales and 21 use taxes in all participating states according to the same 22 simplified system. Under the agreement, Iowa must periodically 23 make changes in the administration of the sales and use taxes 24 in order to remain in compliance. The bill makes changes 25 to a number of provisions in the uniform sales and use tax 26 administration Act in Code chapter 423, subchapter IV, to more 27 closely conform to the terms of the agreement. 28 The bill specifies references to the registration of model 29 sellers under the agreement and moves certain definitions from 30 one section of the Code to another. 31 The bill removes certain “bundling” language from the 32 definition of sales price in Code section 423.1. 33 The bill amends Code section 423.2 by changing references 34 to “prepaid calling cards” to “prepaid calling services” and 35 -10- LSB 6159HV (1) 83 tw/sc 10/ 11

H.F. 2524 clarifies certain language relating to service and warranty 1 contracts. 2 The bill requires the department of revenue to make 3 reasonable efforts to notify sellers after sales tax rate 4 changes and provides a safe harbor under certain circumstances 5 to sellers who do not receive such notice. 6 The bill clarifies that the changes made in the bill do not 7 affect a seller’s obligation to register in the state or to 8 meet certain requirements for amnesty under the agreement. 9 The bill allows certain sellers to register in the state as 10 sellers who do not anticipate making any sales here. 11 The bill provides for the electronic filing of simplified 12 returns and remittances, in accordance with the terms of the 13 agreement. 14 The bill eliminates the requirement in Code section 423.49 15 that a remote seller file a return in the following month if it 16 accumulates more than $1,000 of state and local sales taxes in 17 the preceding month. 18 The bill directs the department to adopt a standardized 19 process for the remittance of sales tax payments. 20 The bill takes effect upon enactment. 21 -11- LSB 6159HV (1) 83 tw/sc 11/ 11