House Study Bill 673 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON VANDER LINDEN) A BILL FOR An Act amending the sales tax imposed on certain machinery, 1 equipment, attachments, and replacement parts used in 2 construction. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 6178YC (2) 87 mm/jh

H.F. _____ Section 1. Section 423.3, subsection 2, Code 2018, is 1 amended to read as follows: 2 2. The sales price of sales for resale of tangible personal 3 property or taxable services, or for resale of tangible 4 personal property in connection with the furnishing of taxable 5 services , except for sales, the following: 6 a. Sales, other than leases or rentals, which are sales 7 to nonqualified dealers of machinery, equipment, attachments, 8 and replacement parts specifically enumerated in subsection 37 9 and used in the manner described in subsection 37 or the . For 10 purposes of this paragraph, “nonqualified dealer” means any 11 dealer who is not a party to a dealership agreement, as those 12 terms are defined in section 322F.1. 13 b. The purchase of tangible personal property, the leasing 14 or rental of which is exempted from tax by subsection 49 . 15 EXPLANATION 16 The inclusion of this explanation does not constitute agreement with 17 the explanation’s substance by the members of the general assembly. 18 This bill relates to the sales tax imposed on certain 19 construction equipment. 20 CURRENT LAW. Under current law in Code section 423.3(37), 21 the lease or rental of machinery, equipment, attachments, and 22 replacement parts directly and primarily used in specified 23 construction services by an owner, contractor, subcontractor, 24 or builder is exempt from the sales tax (construction 25 equipment exemption). Also under current law, in Code section 26 423.3(2), the purchase of tangible personal property for 27 subsequent resale, lease, or rental is exempt from the sales 28 tax (sale-for-resale exemption). However, the purchase of 29 construction equipment for a subsequent lease or rental that 30 will qualify for the construction equipment exemption does not 31 qualify for the sale-for-resale exemption. 32 BILL CHANGES. The bill amends the sale-for-resale exemption 33 to provide that the purchase of construction equipment 34 for a subsequent lease or rental that will qualify for the 35 -1- LSB 6178YC (2) 87 mm/jh 1/ 2

H.F. _____ construction equipment exemption will only fail to qualify for 1 the sale-for-resale exemption if the sale is to a nonqualified 2 dealer. The bill defines “nonqualified dealer” to mean any 3 dealer who is not a party to a dealership agreement, as those 4 terms are defined in Code section 322F.1. The definitions 5 of “dealer” and “dealership agreement” in that Code section 6 respectively include persons engaged in the retail sale of 7 equipment and agreements between a dealer and supplier which 8 grant the dealer the right to sell, distribute, or service the 9 supplier’s equipment. 10 By operation of Code section 423.6, an item exempt from the 11 imposition of the sales tax is also exempt from the use tax 12 imposed in Code section 423.5. 13 -2- LSB 6178YC (2) 87 mm/jh 2/ 2