S.F. _____ H.F. _____ Section 1. Section 423.1, Code 2011, is amended by adding 1 the following new subsections: 2 NEW SUBSECTION . 0A. “Advertising and promotional direct 3 mail” means direct mail sent in order to attract public 4 attention to a product, person, business, or organization or 5 in an attempt to sell, popularize, or secure financial support 6 for a product, person, business, or organization. For purposes 7 of this subsection, “product” may include tangible personal 8 property, a service, or an item transferred electronically. 9 NEW SUBSECTION . 33A. “Other direct mail” means all direct 10 mail that is not advertising and promotional direct mail even 11 if advertising and promotional direct mail is included in the 12 same mailing. For purposes of this subsection, other direct 13 mail includes but is not limited to: 14 a. Transactional direct mail that contains personal 15 information specific to the addressee including but not limited 16 to invoices, bills, statements of account, and payroll advices. 17 b. A legally required mailing including but not limited to 18 privacy notices, tax reports, and stockholder reports. 19 c. Other nonpromotional direct mail delivered to existing or 20 former shareholders, customers, employees, or agents including 21 but not limited to newsletters and pieces of informational 22 literature. 23 Sec. 2. Section 423.1, subsection 14, Code 2011, is amended 24 to read as follows: 25 14. a. “Direct mail” means printed material delivered or 26 distributed by United States mail or other delivery service to 27 a mass audience or to addressees on a mailing list provided by 28 the purchaser or at the direction of the purchaser when the 29 cost of the items is not billed directly to the recipients. 30 “Direct mail” includes tangible personal property supplied 31 directly or indirectly by the purchaser to the direct mail 32 seller for inclusion in the package containing the printed 33 material. 34 b. “Direct mail” does not include include: 35 -1- LSB 1231DP (10) 84 tw/sc 1/ 6

S.F. _____ H.F. _____ (1) multiple Multiple items of printed material delivered 1 to a single address. 2 (2) The development of billing information or the provision 3 of a data processing service that is more than incidental. 4 Sec. 3. Section 423.1, subsection 19, Code 2011, is amended 5 to read as follows: 6 19. “First use of a service” . A “first use of a service” 7 occurs, for the purposes of this chapter , when a service is 8 rendered, furnished, or performed in Iowa or if rendered, 9 furnished, or performed outside of Iowa, when the product or 10 result of the service is used in Iowa at the location at which 11 the service is received. For purposes of this subsection, the 12 location at which the service is received is the location at 13 which the purchaser or the purchaser’s donee can first make use 14 of the result of the service. For purposes of this subsection, 15 the location at which the seller performs the service is not 16 determinative of the location at which the service is received . 17 Sec. 4. Section 423.1, subsection 52, Code 2011, is amended 18 to read as follows: 19 52. “Services” means all acts or services rendered, 20 furnished, or performed, other than services used in processing 21 of tangible personal property for use in retail sales or 22 services, for an employer who pays the wages of an employee for 23 a valuable consideration by any person engaged in any business 24 or occupation specifically enumerated in section 423.2 . The 25 tax shall be due and collectible when first use of the service 26 is rendered, furnished, or performed for received by the 27 ultimate user of the service. 28 Sec. 5. Section 423.3, subsection 60, paragraph b, 29 unnumbered paragraph 1, Code 2011, is amended to read as 30 follows: 31 “Durable medical equipment” means equipment, including repair 32 and replacement parts , and all components or attachments , but 33 does not include mobility enhancing equipment, to which all of 34 the following apply: 35 -2- LSB 1231DP (10) 84 tw/sc 2/ 6

S.F. _____ H.F. _____ Sec. 6. Section 423.5, subsection 5, Code 2011, is amended 1 to read as follows: 2 5. The use in this state of services enumerated in section 3 423.2 . This tax is applicable where services are furnished in 4 this state or where the product or result of the service is 5 first used in this state. 6 Sec. 7. Section 423.15, unnumbered paragraph 1, Code 2011, 7 is amended to read as follows: 8 All sellers obligated to collect Iowa sales or use tax 9 shall use the standards set out in this section to determine 10 where sales of products occur, excluding sales enumerated in 11 section 423.16 . These provisions apply regardless of the 12 characterization of a product as tangible personal property, 13 a digital good, or a service, excluding telecommunications 14 services. All sales of products, except those sales enumerated 15 in section 423.16, shall be sourced according to this section 16 by sellers obligated to collect Iowa sales and use tax. The 17 sourcing rules described in this section apply to sales of 18 tangible personal property, digital goods, and all services 19 other than telecommunications services. This section only 20 applies to determine a seller’s obligation to pay or collect 21 and remit a sales or use tax with respect to the seller’s sale 22 of a product. This section does not affect the obligation of a 23 purchaser or lessee to remit tax on the use of the product to 24 the taxing jurisdictions in which the use occurs. A seller’s 25 obligation to collect Iowa sales tax or Iowa use tax only 26 occurs if the sale is sourced to this state. The application 27 of whether Whether Iowa sales tax applies to sales a sale 28 sourced to Iowa depends upon where shall be determined based 29 on the location at which the sale is consummated by delivery 30 or, in the case of a service, where the first use of the service 31 occurs . 32 Sec. 8. Section 423.19, Code 2011, is amended by striking 33 the section and inserting in lieu thereof the following: 34 423.19 Direct mail sourcing. 35 -3- LSB 1231DP (10) 84 tw/sc 3/ 6

S.F. _____ H.F. _____ 1. Notwithstanding section 423.15, the following provisions 1 apply to sales of advertising and promotional direct mail: 2 a. A purchaser of advertising and promotional direct mail 3 may provide the seller with one of the following: 4 (1) A direct pay permit. 5 (2) An agreement certificate of exemption claiming to be 6 direct mail, or a similar written statement, if the statement 7 is approved, authorized, or accepted by the department. 8 (3) Information showing the jurisdiction to which the 9 advertising and promotional direct mail is to be delivered to 10 the recipient. 11 b. (1) If the purchaser provides the seller a permit, a 12 certificate of exemption, or an approved written statement 13 pursuant to paragraph “a” , subparagraph (1) or (2), then, 14 in the absence of bad faith, the seller is relieved of the 15 obligation to collect, pay, or remit tax on a transaction 16 involving advertising and promotional direct mail to which the 17 permit, certificate, or approved written statement applies. In 18 such a transaction, the purchaser shall source the sale to the 19 jurisdiction in which the advertising and promotional direct 20 mail is to be delivered to the recipient and shall report and 21 pay any tax due accordingly. 22 (2) If the purchaser provides the seller information 23 showing the jurisdiction to which the advertising and 24 promotional direct mail is to be delivered pursuant to 25 paragraph “a” , subparagraph (3), the seller shall source 26 the sale to the jurisdiction in which the advertising and 27 promotional direct mail is to be delivered and shall collect 28 and remit the tax due accordingly. If the seller has sourced 29 the sale according to the delivery information provided by the 30 purchaser, then, in the absence of bad faith, the seller is 31 relieved of any further obligation to collect tax on the sale 32 of the advertising and promotional direct mail. 33 c. (1) If the purchaser fails to provide the seller with 34 one of the items listed in paragraph “a” , the sale shall be 35 -4- LSB 1231DP (10) 84 tw/sc 4/ 6

S.F. _____ H.F. _____ sourced pursuant to the sourcing directive described in section 1 423.15, subsection 1, paragraph “e” . 2 (2) If a sale is sourced to this state pursuant to 3 subparagraph (1), the full amount of the tax imposed by 4 subchapter II or III, as applicable, is due from the purchaser, 5 notwithstanding section 423.22. 6 2. Notwithstanding section 423.15, sales of other direct 7 mail are subject to all of the following: 8 a. Except as otherwise provided in this subsection, the sale 9 of other direct mail shall be sourced pursuant to the sourcing 10 directive described in section 423.15, subsection 1, paragraph 11 “c” . 12 b. A purchaser of other direct mail may provide the seller 13 with either of the following: 14 (1) A direct pay permit. 15 (2) An agreement certificate of exemption claiming to be 16 direct mail, or a similar written statement, if the statement 17 is approved, authorized, or accepted by the department. 18 c. (1) If the purchaser provides the seller a permit, a 19 certificate of exemption, or an approved written statement 20 pursuant to paragraph “b” , then, in the absence of bad faith, 21 the seller is relieved of the obligation to collect, pay, or 22 remit tax on a transaction involving other direct mail to which 23 the permit, certificate, or approved written statement applies. 24 (2) Notwithstanding paragraph “a” , the sale of other direct 25 mail under the circumstances described in subparagraph (1) 26 shall be sourced to the jurisdiction in which the other direct 27 mail is to be delivered to the recipient, and the purchaser 28 shall report and pay any tax due accordingly. 29 Sec. 9. Section 423.50, subsection 4, Code 2011, is amended 30 to read as follows: 31 4. If a due date falls on a Saturday, a Sunday, legal 32 holiday, or a legal banking holiday in this state, the taxes 33 are payment, including any related payment voucher information, 34 is due on the next succeeding business day. 35 -5- LSB 1231DP (10) 84 tw/sc 5/ 6

S.F. _____ H.F. _____ Sec. 10. Section 423.50, Code 2011, is amended by adding the 1 following new subsection: 2 NEW SUBSECTION . 5A. If the federal reserve bank is closed 3 on the due date preventing a person from being able to make an 4 automated payment, the payment shall be accepted as timely if 5 made on the next day the federal reserve bank is open. 6 EXPLANATION 7 This bill relates to the administration of the sales and use 8 taxes under the streamlined sales tax agreement. 9 Iowa is a member of the streamlined sales and use tax 10 agreement which is an effort to administer state sales and 11 use taxes in all participating states according to the same 12 simplified system. Under the agreement, Iowa must periodically 13 make changes in the administration of the sales and use taxes 14 in order to remain in compliance. The bill makes changes 15 to a number of provisions in the uniform sales and use tax 16 administration Act in Code chapter 423, subchapter IV, to more 17 closely conform to the terms of the agreement. 18 The bill amends language relating to the sourcing of taxable 19 services. Currently, the first use of a service occurs when it 20 is rendered, furnished, performed, or used in Iowa. The bill 21 provides that the location at which the service is received 22 is the location of the first use of the service and makes 23 coordinating changes related to the sourcing of services. 24 The bill amends the definition of durable medical equipment 25 to include components and attachments of the equipment. 26 The bill strikes and replaces Code section 423.19 relating 27 to the sourcing of direct mail and makes conforming changes 28 for purposes of the taxation of shipping and handling charges. 29 Currently, Iowa does not tax shipping and handling charges on 30 direct mail, but compliance with the agreement nonetheless 31 requires that these provisions be enacted in Iowa law. 32 The bill amends Code section 423.50 to include new language 33 relating to the due dates and timeliness of sales and use tax 34 payments. 35 -6- LSB 1231DP (10) 84 tw/sc 6/ 6