House Study Bill 669 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON SANDS) A BILL FOR An Act relating to retailers maintaining a place of business 1 in this state for purposes of the collection of sales and 2 use taxes, agreements relating to the collection of sales 3 and use taxes in the state, and sales of tangible personal 4 property and services to the state. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5408HC (1) 84 mm/sc

H.F. _____ Section 1. Section 423.1, subsection 48, Code Supplement 1 2011, is amended to read as follows: 2 48. a. “Retailer maintaining a place of business in this 3 state” or any like term includes any retailer having or 4 maintaining within this state, directly or by a subsidiary, 5 an office, distribution house, sales house, warehouse, or 6 other place of business, or any representative operating 7 within this state under the authority of the retailer or its 8 subsidiary, irrespective of whether that place of business or 9 representative is located here permanently or temporarily, or 10 whether the retailer or subsidiary is admitted to do business 11 within this state pursuant to chapter 490 . 12 b. (1) A retailer shall be presumed to be maintaining a 13 place of business in this state, as defined in paragraph “a” , if 14 any person that has substantial nexus in this state, other than 15 a person acting in its capacity as a common carrier, does any 16 of the following: 17 (a) Sells a similar line of products as the retailer and 18 does so under the same or similar business name. 19 (b) Maintains an office, distribution facility, warehouse, 20 storage place, or similar place of business in this state to 21 facilitate the delivery of property or services sold by the 22 retailer to the retailer’s customers. 23 (c) Uses trademarks, service marks, or trade names in this 24 state that are the same or substantially similar to those used 25 by the retailer. 26 (d) Delivers, installs, assembles, or performs maintenance 27 services for the retailer’s customers. 28 (e) Facilitates the retailer’s delivery of property to 29 customers in this state by allowing the retailer’s customers to 30 take delivery of property sold by the retailer at an office, 31 distribution facility, warehouse, storage place, or similar 32 place of business maintained by the person in this state. 33 (f) Conducts any other activities in this state that 34 are significantly associated with the retailer’s ability 35 -1- LSB 5408HC (1) 84 mm/sc 1/ 4

H.F. _____ to establish and maintain a market in this state for the 1 retailer’s sales. 2 (2) The presumption established in this paragraph may be 3 rebutted by a showing of proof that the person’s activities in 4 this state are not significantly associated with the retailer’s 5 ability to establish or maintain a market in this state for the 6 retailer’s sales. 7 Sec. 2. NEW SECTION . 423.13A Administration —— 8 effectiveness of agreements with retailers. 9 1. Notwithstanding any provision of this chapter to the 10 contrary, any ruling, agreement, or contract, whether written 11 or oral, express or implied, entered into after the effective 12 date of this Act between a retailer and a state agency which 13 provides that a retailer is not required to collect sales and 14 use tax in this state despite the presence in this state of 15 a warehouse, distribution center, or fulfillment center that 16 is owned and operated by the retailer or an affiliate of the 17 retailer shall be null and void unless such ruling, agreement, 18 or contract is approved by a majority vote of both houses of 19 the general assembly. 20 2. For purposes of this section, “state agency” means 21 the executive branch, including any executive department, 22 commission, board, institution, division, bureau, office, 23 agency, or other entity of state government. “State agency” 24 does not mean the general assembly, or the judicial branch as 25 provided in section 602.1102. 26 Sec. 3. Section 423.36, Code 2011, is amended by adding the 27 following new subsection: 28 NEW SUBSECTION . 1A. a. Notwithstanding subsection 1, 29 if any person will make taxable sales of tangible personal 30 property or furnish services to any state agency, that person 31 shall, prior to the sale, apply for and receive a permit 32 to collect sales or use tax pursuant to this section. A 33 state agency shall not purchase tangible personal property 34 or services from any person unless that person has a valid, 35 -2- LSB 5408HC (1) 84 mm/sc 2/ 4

H.F. _____ unexpired permit issued pursuant to this section and is in 1 compliance with all other requirements in this chapter imposed 2 upon retailers, including but not limited to the requirement to 3 collect and remit sales and use tax and file sales tax returns. 4 b. For purposes of this subsection, “state agency” means 5 any executive, judicial, or legislative department, commission, 6 board, institution, division, bureau, office, agency, or other 7 entity of state government. 8 EXPLANATION 9 This bill relates to the collection of sales and use taxes 10 by retailers maintaining a place of business in this state, 11 agreements relating to the collection of sales and use taxes, 12 and sales of tangible personal property and services to state 13 agencies. 14 A retailer located in this state, or maintaining a place of 15 business in this state, must collect and remit sales and use 16 taxes to the department of revenue. Currently, as defined in 17 Code section 423.1, the term “retailer maintaining a place of 18 business in this state” includes certain places of business, 19 and representatives operating under the authority of the 20 retailer. 21 The bill provides that a retailer will be presumed to be 22 maintaining a place of business in this state if any person 23 that has substantial nexus in this state, other than a common 24 carrier, engages in any of six activities specified in the 25 bill. The presumption may be rebutted by a showing of proof 26 that the person’s activities are not significantly associated 27 with the retailer’s ability to establish or maintain a market 28 in this state for the retailer’s sales. 29 The bill provides that any ruling, agreement, or contract 30 entered into after the effective date of the bill between a 31 retailer and a state agency which provides that a retailer is 32 not required to collect sales and use tax in this state despite 33 the presence in this state of a warehouse, distribution center, 34 or fulfillment center owned and operated by the retailer or 35 -3- LSB 5408HC (1) 84 mm/sc 3/ 4

H.F. _____ an affiliate shall be null and void unless it is specifically 1 approved by a majority vote of both houses of the general 2 assembly. For purposes of this provision of the bill, “state 3 agency” does not include the general assembly or the judicial 4 branch. 5 The bill provides that no person shall make taxable sales or 6 furnish taxable services to a state agency unless that person 7 obtains a sales tax permit. Also, the state is prohibited 8 from purchasing taxable property or services from any person 9 unless that person has a valid, unexpired sales tax permit and 10 is in compliance with all other sales tax laws imposed upon 11 retailers. For purposes of this provision of the bill, “state 12 agency” includes the executive branch, the general assembly, 13 and the judicial branch. 14 -4- LSB 5408HC (1) 84 mm/sc 4/ 4