Senate Study Bill 3178 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON ECONOMIC GROWTH/REBUILD IOWA BILL BY CHAIRPERSON SODDERS) 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 5408SC (2) 84 mm/sc

S.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 5408SC (2) 84 mm/sc 1/ 5

S.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 c. (1) At any time on or after October 1, 2012, a retailer 8 shall be presumed to be maintaining a place of business in 9 this state, as defined in paragraph “a” , if a retailer has an 10 agreement with one or more residents of this state under which 11 the resident, for a commission or other consideration, directly 12 or indirectly refers potential customers, whether by a link on 13 an internet site, telemarketing, in-person presentation, or 14 otherwise, to the retailer, if the cumulative gross receipts 15 from sales by the retailer attributable to those agreements is 16 in excess of ten thousand dollars for the twelve-month period 17 ending on the last day of the most recent calendar quarter. 18 (2) The presumption established in this paragraph may be 19 rebutted by a showing of proof that the resident with whom 20 the retailer has an agreement did not engage in any activity 21 within this state that was significantly associated with the 22 retailer’s ability to establish or maintain the retailer’s 23 market in this state during the preceding twelve-month period 24 ending on the last day of the most recent calendar quarter. 25 Such proof may consist of sworn written statements from all 26 the residents with whom the retailer has an agreement stating 27 that the resident did not engage in any solicitation in this 28 state on behalf of the retailer during the period in question, 29 provided that such statement is provided and obtained in good 30 faith. 31 Sec. 2. NEW SECTION . 423.13A Administration —— 32 effectiveness of agreements with retailers. 33 1. Notwithstanding any provision of this chapter to the 34 contrary, any ruling, agreement, or contract, whether written 35 -2- LSB 5408SC (2) 84 mm/sc 2/ 5

S.F. _____ or oral, express or implied, entered into after the effective 1 date of this Act between a retailer and a state agency which 2 provides that a retailer is not required to collect sales and 3 use tax in this state despite the presence in this state of 4 a warehouse, distribution center, or fulfillment center that 5 is owned and operated by the retailer or an affiliate of the 6 retailer shall be null and void unless such ruling, agreement, 7 or contract is approved by a majority vote of both houses of 8 the general assembly. 9 2. For purposes of this section, “state agency” means 10 the executive branch, including any executive department, 11 commission, board, institution, division, bureau, office, 12 agency, or other entity of state government. “State agency” 13 does not mean the general assembly, or the judicial branch as 14 provided in section 602.1102. 15 Sec. 3. Section 423.36, Code 2011, is amended by adding the 16 following new subsection: 17 NEW SUBSECTION . 1A. a. Notwithstanding subsection 1, 18 if any person will make taxable sales of tangible personal 19 property or furnish services to any state agency, that person 20 and any affiliate shall, prior to the sale, apply for and 21 receive a permit to collect sales or use tax pursuant to this 22 section. A state agency shall not purchase tangible personal 23 property or services from any person unless that person and any 24 affiliate of that person has a valid, unexpired permit issued 25 pursuant to this section and is in compliance with all other 26 requirements in this chapter imposed upon retailers, including 27 but not limited to the requirement to collect and remit sales 28 and use tax and file sales tax returns. 29 b. For purposes of this subsection, “state agency” means 30 any executive, judicial, or legislative department, commission, 31 board, institution, division, bureau, office, agency, or other 32 entity of state government. 33 EXPLANATION 34 This bill relates to the collection of sales and use taxes 35 -3- LSB 5408SC (2) 84 mm/sc 3/ 5

S.F. _____ by retailers maintaining a place of business in this state, 1 agreements relating to the collection of sales and use taxes, 2 and sales of tangible personal property and services to state 3 agencies. 4 A retailer located in this state, or maintaining a place of 5 business in this state, must collect and remit sales and use 6 taxes to the department of revenue. Currently, as defined in 7 Code section 423.1, the term “retailer maintaining a place of 8 business in this state” includes certain places of business, 9 and representatives operating under the authority of the 10 retailer. 11 The bill provides that a retailer will be presumed to be 12 maintaining a place of business in this state if any person 13 that has substantial nexus in this state, other than a common 14 carrier, engages in any of six activities specified in the 15 bill. The presumption may be rebutted by a showing of proof 16 that the person’s activities are not significantly associated 17 with the retailer’s ability to establish or maintain a market 18 in this state for the retailer’s sales. 19 The bill also provides that, on or after October 1, 2012, a 20 retailer will be presumed to be maintaining a place of business 21 in this state if the retailer has an agreement with one or 22 more residents of this state whereby the residents receive 23 consideration for referring potential customers to the retailer 24 through the internet, telephone, or in person, and those 25 agreements yield in excess of $10,000 of gross receipts per 26 year. The presumption may be rebutted by a showing of proof 27 that the residents with whom the retailer has an agreement did 28 not engage in any activity within this state during the year 29 that was significantly associated with the retailer’s ability 30 to establish or maintain the retailer’s market in the state, 31 which proof may consist of sworn written statements stating 32 that the resident did not engage in any solicitation in this 33 state on behalf of the retailer during the year, so long as the 34 statement is provided and obtained in good faith. 35 -4- LSB 5408SC (2) 84 mm/sc 4/ 5

S.F. _____ The bill provides that any ruling, agreement, or contract 1 entered into after the effective date of the bill between a 2 retailer and a state agency which provides that a retailer is 3 not required to collect sales and use tax in this state despite 4 the presence in this state of a warehouse, distribution center, 5 or fulfillment center owned and operated by the retailer or 6 an affiliate shall be null and void unless it is specifically 7 approved by a majority vote of both houses of the general 8 assembly. For purposes of this provision of the bill, “state 9 agency” does not include the general assembly or the judicial 10 branch. 11 The bill provides that no person shall make taxable sales 12 or furnish taxable services to a state agency unless that 13 person and their affiliates obtain a sales tax permit. Also, 14 the state is prohibited from purchasing taxable property 15 or services from any person unless that person and their 16 affiliates have a valid, unexpired sales tax permit and are 17 in compliance with all other sales tax laws imposed upon 18 retailers. For purposes of this provision of the bill, “state 19 agency” includes the executive branch, the general assembly, 20 and the judicial branch. 21 -5- LSB 5408SC (2) 84 mm/sc 5/ 5