Senate File 507 - Introduced SENATE FILE 507 BY DEARDEN A BILL FOR An Act relating to the natural resources and outdoor recreation 1 trust fund by increasing the sales and use tax rates and 2 including effective date provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 2505XS (9) 84 da/rj

S.F. 507 Section 1. Section 423.2, subsection 1, unnumbered 1 paragraph 1, Code 2011, is amended to read as follows: 2 There is imposed a tax of six and three-eighths percent upon 3 the sales price of all sales of tangible personal property, 4 consisting of goods, wares, or merchandise, sold at retail in 5 the state to consumers or users except as otherwise provided 6 in this subchapter . 7 Sec. 2. Section 423.2, subsection 2, Code 2011, is amended 8 to read as follows: 9 2. A tax of six and three-eighths percent is imposed upon 10 the sales price of the sale or furnishing of gas, electricity, 11 water, heat, pay television service, and communication service, 12 including the sales price from such sales by any municipal 13 corporation or joint water utility furnishing gas, electricity, 14 water, heat, pay television service, and communication service 15 to the public in its proprietary capacity, except as otherwise 16 provided in this subchapter , when sold at retail in the state 17 to consumers or users. 18 Sec. 3. Section 423.2, subsection 3, Code 2011, is amended 19 to read as follows: 20 3. A tax of six and three-eighths percent is imposed upon 21 the sales price of all sales of tickets or admissions to places 22 of amusement, fairs, and athletic events except those of 23 elementary and secondary educational institutions. A tax of 24 six and three-eighths percent is imposed on the sales price of 25 an entry fee or like charge imposed solely for the privilege of 26 participating in an activity at a place of amusement, fair, or 27 athletic event unless the sales price of tickets or admissions 28 charges for observing the same activity are taxable under this 29 subchapter . A tax of six and three-eighths percent is imposed 30 upon that part of private club membership fees or charges paid 31 for the privilege of participating in any athletic sports 32 provided club members. 33 Sec. 4. Section 423.2, subsection 4, paragraph a, Code 2011, 34 is amended to read as follows: 35 -1- LSB 2505XS (9) 84 da/rj 1/ 6

S.F. 507 a. A tax of six and three-eighths percent is imposed upon 1 the sales price derived from the operation of all forms of 2 amusement devices and games of skill, games of chance, raffles, 3 and bingo games as defined in chapter 99B , and card game 4 tournaments conducted under section 99B.7B , that are operated 5 or conducted within the state, the tax to be collected from 6 the operator in the same manner as for the collection of taxes 7 upon the sales price of tickets or admission as provided in 8 this section . Nothing in this subsection shall legalize any 9 games of skill or chance or slot-operated devices which are now 10 prohibited by law. 11 Sec. 5. Section 423.2, subsection 5, Code 2011, is amended 12 to read as follows: 13 5. There is imposed a tax of six and three-eighths percent 14 upon the sales price from the furnishing of services as defined 15 in section 423.1 . 16 Sec. 6. Section 423.2, subsection 7, paragraph a, 17 unnumbered paragraph 1, Code 2011, is amended to read as 18 follows: 19 A tax of six and three-eighths percent is imposed upon the 20 sales price from the sales, furnishing, or service of solid 21 waste collection and disposal service. 22 Sec. 7. Section 423.2, subsection 8, paragraph a, Code 2011, 23 is amended to read as follows: 24 a. A tax of six and three-eighths percent is imposed on 25 the sales price from sales of bundled transactions. For the 26 purposes of this subsection , a “bundled transaction” is the 27 retail sale of two or more distinct and identifiable products, 28 except real property and services to real property, which 29 are sold for one nonitemized price. A “bundled transaction” 30 does not include the sale of any products in which the sales 31 price varies, or is negotiable, based on the selection by the 32 purchaser of the products included in the transaction. 33 Sec. 8. Section 423.2, subsection 9, Code 2011, is amended 34 to read as follows: 35 -2- LSB 2505XS (9) 84 da/rj 2/ 6

S.F. 507 9. A tax of six and three-eighths percent is imposed upon 1 the sales price from any mobile telecommunications service 2 which this state is allowed to tax by the provisions of 3 the federal Mobile Telecommunications Sourcing Act, Pub. L. 4 No. 106-252, 4 U.S.C. § 116 et seq. For purposes of this 5 subsection , taxes on mobile telecommunications service, as 6 defined under the federal Mobile Telecommunications Sourcing 7 Act that are deemed to be provided by the customer’s home 8 service provider, shall be paid to the taxing jurisdiction 9 whose territorial limits encompass the customer’s place of 10 primary use, regardless of where the mobile telecommunications 11 service originates, terminates, or passes through and 12 shall in all other respects be taxed in conformity with 13 the federal Mobile Telecommunications Sourcing Act. All 14 other provisions of the federal Mobile Telecommunications 15 Sourcing Act are adopted by the state of Iowa and incorporated 16 into this subsection by reference. With respect to mobile 17 telecommunications service under the federal Mobile 18 Telecommunications Sourcing Act, the director shall, if 19 requested, enter into agreements consistent with the provisions 20 of the federal Act. 21 Sec. 9. Section 423.2, subsection 11, Code 2011, is amended 22 by adding the following new paragraph: 23 NEW PARAGRAPH . c. Subsequent to the deposit into the 24 general fund of the state, the department shall transfer 25 revenues equal to an amount generated by a tax of three-eighths 26 of one percent imposed on the sale of tangible personal 27 property and enumerated services as provided in this section to 28 the natural resources and outdoor recreation trust fund created 29 in section 461.31. 30 Sec. 10. Section 423.2, subsection 13, Code 2011, is amended 31 to read as follows: 32 13. The sales tax rate of six and three-eighths percent is 33 reduced to five and three-eighths percent on January 1, 2030. 34 Sec. 11. Section 423.5, unnumbered paragraph 1, Code 2011, 35 -3- LSB 2505XS (9) 84 da/rj 3/ 6

S.F. 507 is amended to read as follows: 1 Except as provided in subsection 3 , an excise tax at the 2 rate of six and three-eighths percent of the purchase price or 3 installed purchase price is imposed on the following: 4 Sec. 12. Section 423.5, subsection 9, Code 2011, is amended 5 to read as follows: 6 9. The use tax rate of six percent is reduced to five and 7 three-eighths percent on January 1, 2030. 8 Sec. 13. Section 423.43, subsection 1, Code 2011, is amended 9 by adding the following new paragraph: 10 NEW PARAGRAPH . c. Subsequent to the deposit into the 11 general fund of the state, the department shall transfer 12 revenues equal to an amount generated by a tax of three-eighths 13 of one percent imposed on the use of property and enumerated 14 services as provided in section 423.5 to the natural resources 15 and outdoor recreation trust fund created in section 461.31. 16 Sec. 14. PURPOSE. The purpose of this Act is to provide 17 for the implementation of Article VII, section 10, of the 18 Constitution of the State of Iowa by fully funding the natural 19 resources and outdoor recreation trust fund as created in 20 section 461.31, pursuant to Article VII, section 10, of the 21 Constitution of the State of Iowa. 22 Sec. 15. EMERGENCY RULES. The department of revenue shall 23 adopt emergency rules under section 17A.4, subsection 3, and 24 section 17A.5, subsection 2, paragraph “b”, to implement 25 the provisions of this Act. The rules shall be effective 26 immediately upon filing with the administrative rules 27 coordinator unless a later date is specified in the rules, but 28 not later than July 1, 2011. Any rules adopted in accordance 29 with this section shall also be published as a notice of 30 intended action as provided in section 17A.4. 31 Sec. 16. EFFECTIVE DATE. The following provision or 32 provisions of this Act take effect: 33 1. Except as provided in subsection 2, this Act takes effect 34 on July 1, 2011. 35 -4- LSB 2505XS (9) 84 da/rj 4/ 6

S.F. 507 2. The section of this Act requiring the department of 1 revenue to adopt emergency rules, being deemed of immediate 2 importance, takes effect upon enactment. 3 EXPLANATION 4 This bill relates to the sales tax imposed on the sale of 5 tangible personal property and the furnishing of enumerated 6 services and to an amendment to the Constitution of the State 7 of Iowa ratified on November 2, 2010, dedicating a portion of 8 state revenue for purposes of benefiting natural resources, 9 outdoor recreation, and soil conservation (Article VII, section 10 10). 11 The constitutional amendment creates a natural resources 12 and outdoor recreation trust fund within the state treasury. 13 The fund and allocations from the fund are codified in Code 14 chapter 461. Moneys in the fund cannot be used for any purpose 15 other than protecting and enhancing water quality and natural 16 areas in this state including parks, trails, and fish and 17 wildlife habitat, and conserving agricultural soils in this 18 state. No revenue is credited to the fund until the sales tax 19 rate is increased. Whenever the rate is increased, the amount 20 generated by the increase is credited to the fund, but the 21 amount credited cannot exceed the amount that a rate of 3/8 of 22 1 percent would generate. 23 Currently, the tax on sales and services in Iowa is imposed 24 at the rate of 6 percent. This bill provides for an increase in 25 the rate to 6 and 3/8 percent. 26 The bill provides for the same increase to the use tax 27 in order to comply with the streamlined sales and use tax 28 agreement of which Iowa is a party. The revenues generated 29 are deposited into the general fund of the state before being 30 transferred to the natural resources and outdoor recreation 31 trust fund. The increase does not affect those use taxes 32 deposited into other statutory funds, including the road use 33 tax fund. 34 The bill requires that revenues generated by the sales tax 35 -5- LSB 2505XS (9) 84 da/rj 5/ 6

S.F. 507 increase also be deposited in the general fund of the state 1 before being transferred to the natural resources and outdoor 2 recreation trust fund. 3 The bill takes effect on July 1, 2011, except for a provision 4 requiring the department of revenue to adopt emergency rules 5 which takes effect upon enactment. 6 -6- LSB 2505XS (9) 84 da/rj 6/ 6