Senate File 550 - Introduced SENATE FILE 550 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO SSB 1125) A BILL FOR An Act relating to state and local revenue and finances by 1 modifying sales and use taxes, the charitable conservation 2 contribution tax credit available against individual and 3 corporate income taxes, the water service tax, property 4 taxes, transit funding, and local option taxes, crediting 5 moneys to the natural resources and outdoor recreation 6 trust fund, modifying allocations of road use tax fund 7 moneys, making appropriations, and including effective date, 8 retroactive applicability, and applicability provisions. 9 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 10 TLSB 1461SV (4) 90 md/jh

S.F. 550 DIVISION I 1 SALES AND USE TAX RATES AND DISTRIBUTION 2 Section 1. Section 423.2, subsection 1, unnumbered 3 paragraph 1, Code 2023, is amended to read as follows: 4 There is imposed a tax of six percent at the rate specified 5 in subsection 12 upon the sales price of all sales of tangible 6 personal property, sold at retail in the state to consumers or 7 users except as otherwise provided in this subchapter . 8 Sec. 2. Section 423.2, subsections 2 and 3, Code 2023, are 9 amended to read as follows: 10 2. A tax of six percent at the rate specified in subsection 11 12 is imposed upon the sales price of the sale or furnishing 12 of gas, electricity, water, heat, pay television service, and 13 communication service, including the sales price from such 14 sales by any municipal corporation or joint water utility 15 furnishing gas, electricity, water, heat, pay television 16 service, and communication service to the public in its 17 proprietary capacity, except as otherwise provided in this 18 subchapter , when sold at retail in the state to consumers or 19 users. 20 3. A tax of six percent at the rate specified in subsection 21 12 is imposed upon the sales price of all sales of tickets 22 or admissions to places of amusement, fairs, and athletic 23 events except those of elementary and secondary educational 24 institutions. A tax of six percent at the rate specified in 25 subsection 12 is imposed on the sales price of an entry fee or 26 like charge imposed solely for the privilege of participating 27 in an activity at a place of amusement, fair, or athletic event 28 unless the sales price of tickets or admissions charges for 29 observing the same activity are taxable under this subchapter . 30 A tax of six percent at the rate specified in subsection 12 31 is imposed upon that part of private club membership fees or 32 charges paid for the privilege of participating in any athletic 33 sports provided club members. 34 Sec. 3. Section 423.2, subsection 4, paragraph a, Code 2023, 35 -1- LSB 1461SV (4) 90 md/jh 1/ 91

S.F. 550 is amended to read as follows: 1 a. A tax of six percent at the rate specified in subsection 2 12 is imposed upon the sales price derived from the operation 3 of all forms of amusement devices and games of skill, games of 4 chance, raffles, and bingo games as defined in chapter 99B , and 5 card game tournaments conducted under section 99B.27 , that are 6 operated or conducted within the state, the tax to be collected 7 from the operator in the same manner as for the collection of 8 taxes upon the sales price of tickets or admission as provided 9 in this section . Nothing in this subsection shall legalize any 10 games of skill or chance or slot-operated devices which are now 11 prohibited by law. 12 Sec. 4. Section 423.2, subsection 5, Code 2023, is amended 13 to read as follows: 14 5. There is imposed a tax of six percent at the rate 15 specified in subsection 12 upon the sales price from the 16 furnishing of services as defined in section 423.1 . 17 Sec. 5. Section 423.2, subsection 7, paragraph a, 18 unnumbered paragraph 1, Code 2023, is amended to read as 19 follows: 20 A tax of six percent at the rate specified in subsection 12 21 is imposed upon the sales price from the sales, furnishing, or 22 service of solid waste collection and disposal service. 23 Sec. 6. Section 423.2, subsection 8, paragraph a, Code 2023, 24 is amended to read as follows: 25 a. A tax of six percent at the rate specified in subsection 26 12 is imposed on the sales price from sales of bundled 27 transactions. For the purposes of this subsection , a “bundled 28 transaction” is the retail sale of two or more distinct and 29 identifiable products, except real property and services to 30 real property, which are sold for one nonitemized price. A 31 “bundled transaction” does not include the sale of any products 32 in which the sales price varies, or is negotiable, based on 33 the selection by the purchaser of the products included in the 34 transaction. 35 -2- LSB 1461SV (4) 90 md/jh 2/ 91

S.F. 550 Sec. 7. Section 423.2, subsection 9, Code 2023, is amended 1 to read as follows: 2 9. A tax of six percent at the rate specified in 3 subsection 12 is imposed upon the sales price from any mobile 4 telecommunications service, including all paging services, 5 that this state is allowed to tax pursuant to the provisions 6 of the federal Mobile Telecommunications Sourcing Act, Pub. 7 L. No. 106-252, 4 U.S.C. §116 et seq. For purposes of this 8 subsection , taxes on mobile telecommunications service, as 9 defined under the federal Mobile Telecommunications Sourcing 10 Act that are deemed to be provided by the customer’s home 11 service provider, shall be paid to the taxing jurisdiction 12 whose territorial limits encompass the customer’s place of 13 primary use, regardless of where the mobile telecommunications 14 service originates, terminates, or passes through and 15 shall in all other respects be taxed in conformity with 16 the federal Mobile Telecommunications Sourcing Act. All 17 other provisions of the federal Mobile Telecommunications 18 Sourcing Act are adopted by the state of Iowa and incorporated 19 into this subsection by reference. With respect to mobile 20 telecommunications service under the federal Mobile 21 Telecommunications Sourcing Act, the director shall, if 22 requested, enter into agreements consistent with the provisions 23 of the federal Act. 24 Sec. 8. Section 423.2, subsection 10, paragraph a, Code 25 2023, is amended to read as follows: 26 a. A tax of six percent at the rate specified in subsection 27 12 is imposed on the sales price of specified digital products 28 sold at retail in the state. The tax applies whether the 29 purchaser obtains permanent use or less than permanent use of 30 the specified digital product, whether the sale is conditioned 31 or not conditioned upon continued payment from the purchaser, 32 and whether the sale is on a subscription basis or is not on a 33 subscription basis. 34 Sec. 9. Section 423.2, subsection 12, Code 2023, is amended 35 -3- LSB 1461SV (4) 90 md/jh 3/ 91

S.F. 550 by striking the subsection and inserting in lieu thereof the 1 following: 2 12. a. For the period beginning January 1, 2025, through 3 December 31, 2050, the sales tax rate is seven percent. 4 b. Beginning January 1, 2051, the sales tax rate is six 5 percent. 6 Sec. 10. Section 423.2A, subsection 2, paragraphs a, b, and 7 c, Code 2023, are amended to read as follows: 8 a. (1) Transfer For the period beginning January 1, 9 2025, through December 31, 2027, transfer twenty-eight 10 one-hundred-fortieths of the revenues collected under deposited 11 into the general fund of the state under subsection 1 to the 12 appropriate county accounts under chapter 423B for the counties 13 from which the tax was collected . 14 (2) For the period beginning January 1, 2028, through 15 December 31, 2028, transfer twenty-seven one-hundred-fortieths 16 of the revenues deposited into the general fund of the state 17 under subsection 1 to the appropriate county accounts under 18 chapter 423B for the counties from which the tax was collected. 19 (3) For the period beginning January 1, 2029, through 20 December 31, 2029, transfer twenty-six one-hundred-fortieths of 21 the revenues deposited into the general fund of the state under 22 subsection 1 to the appropriate county accounts under chapter 23 423B for the counties from which the tax was collected. 24 (4) For the period beginning January 1, 2030, through 25 December 31, 2050, transfer twenty-five one-hundred-fortieths 26 of the revenues deposited into the general fund of the state 27 under subsection 1 to the appropriate county accounts under 28 chapter 423B for the counties from which the tax was collected. 29 (5) Beginning January 1, 2051, transfer five twenty-fourths 30 of the revenues deposited into the general fund of the state 31 under subsection 1 to the appropriate county accounts under 32 chapter 423B for the counties from which the tax was collected. 33 b. Transfer from the remaining revenues the amounts required 34 under Article VII, section 10, of the Constitution of the State 35 -4- LSB 1461SV (4) 90 md/jh 4/ 91

S.F. 550 of Iowa to the natural resources and outdoor recreation trust 1 fund created in section 461.31 , if applicable . 2 c. Transfer one-sixth of from the remaining revenues an 3 amount equal to one-seventh of the revenues deposited into the 4 general fund of the state under subsection 1 to the secure an 5 advanced vision for education fund created in section 423F.2 . 6 This paragraph “c” is repealed January 1, 2051. 7 Sec. 11. Section 423.5, subsection 1, unnumbered paragraph 8 1, Code 2023, is amended to read as follows: 9 Except as provided in paragraph “b” , an excise tax at the 10 rate of six percent specified in subsection 4 of the purchase 11 price or installed purchase price is imposed on the following: 12 Sec. 12. Section 423.5, subsection 4, Code 2023, is amended 13 by striking the subsection and inserting in lieu thereof the 14 following: 15 4. a. For the period beginning January 1, 2025, through 16 December 31, 2050, the use tax rate is seven percent. 17 b. Beginning January 1, 2051, the use tax rate is six 18 percent. 19 Sec. 13. Section 423.43, subsection 1, paragraph b, Code 20 2023, is amended by striking the paragraph and inserting in 21 lieu thereof the following: 22 b. Subsequent to the deposit into the general fund of 23 the state the department shall do the following in the order 24 prescribed: 25 (1) (a) For the period beginning January 1, 2025, through 26 December 31, 2043, transfer one-seventh of such revenues to the 27 local use tax supplement fund, under section 423B.1A. 28 (b) For the period beginning January 1, 2044, through 29 December 31, 2050, transfer one-seventh of such revenues to the 30 appropriate county accounts under chapter 423B for the counties 31 from which the tax was paid. 32 (c) Beginning January 1, 2051, transfer one-sixth of such 33 revenues to the appropriate county accounts under chapter 423B 34 for the counties from which the tax was paid. 35 -5- LSB 1461SV (4) 90 md/jh 5/ 91

S.F. 550 (2) Transfer one-sixth of such remaining revenues to the 1 secure an advanced vision for education fund created in section 2 423F.2. This subparagraph is repealed January 1, 2051. 3 Sec. 14. EFFECTIVE DATE. This division of this Act takes 4 effect January 1, 2025. 5 DIVISION II 6 WATER SERVICE TAX 7 Sec. 15. Section 423G.3, Code 2023, is amended to read as 8 follows: 9 423G.3 Water service tax. 10 An excise tax at the a rate of six percent equal to the rate 11 being imposed under section 423.2, subsection 12, is imposed on 12 the sales price from the sale or furnishing by a water utility 13 of a water service in the state to consumers or users. 14 Sec. 16. Section 423G.6, subsection 2, Code 2023, is amended 15 by striking the subsection. 16 Sec. 17. REPEAL. Section 423G.7, Code 2023, is repealed. 17 Sec. 18. EFFECTIVE DATE. This division of this Act takes 18 effect January 1, 2025. 19 DIVISION III 20 LOCAL OPTION TAXES 21 Sec. 19. Section 15J.7, subsection 2, Code 2023, is amended 22 to read as follows: 23 2. In addition to the moneys received pursuant to section 24 15J.6 , a municipality may deposit in the reinvestment project 25 fund any other moneys lawfully at the municipality’s disposal, 26 including but not limited to local sales and services tax 27 receipts collected revenues received under chapter 423B if such 28 use is a purpose authorized for the municipality under chapter 29 423B . 30 Sec. 20. Section 28A.17, Code 2023, is amended to read as 31 follows: 32 28A.17 Local sales and services tax. 33 1. If an authority is established as provided in section 34 28A.6 and after approval of a referendum by a simple majority 35 -6- LSB 1461SV (4) 90 md/jh 6/ 91

S.F. 550 of votes cast in each metropolitan area in favor of the sales 1 and services tax, the governing board of a county in this state 2 within a metropolitan area which is part of the authority shall 3 impose, at the request of the authority, a local sales and 4 services tax at the rate of one-fourth of one percent on the 5 sales price taxed by this state under section 423.2 , within 6 the metropolitan area located in this state. The referendum 7 shall be called by resolution of the board and shall be held 8 as provided in section 28A.6 to the extent applicable. The 9 ballot proposition shall contain a statement as to the specific 10 purpose or purposes for which the revenues shall be expended 11 and the date of expiration of the tax. The local sales and 12 services tax shall be imposed on the same basis, with the same 13 exceptions, and following the same administrative procedures as 14 provided for a county under sections 423B.5 and 423B.6 , Code 15 2023 . The amount of the sale, for the purposes of determining 16 the amount of the local sales and services tax under this 17 section , does not include the amount of any local sales and 18 services tax imposed under sections 423B.5 and 423B.6 , Code 19 2023 . 20 2. The treasurer of state shall credit the local sales 21 and services tax receipts and interest and penalties to the 22 authority’s account. Moneys in this account shall be remitted 23 quarterly to the authority. The proceeds of the tax imposed 24 under this section shall be used only for the construction, 25 reconstruction, or repair of metropolitan facilities as 26 specified in the referendum. The local sales and services tax 27 imposed under this section may be suspended for not less than 28 a fiscal quarter or more than one year by action of the board. 29 The suspension may be renewed or continued by the board, but 30 the board shall act on the suspension at least annually. 31 The local sales and services tax may also be repealed by a 32 petition and favorable referendum following the procedures and 33 requirements of sections 28A.5 and 28A.6 as applicable. The 34 board shall give the department of revenue at least forty days’ 35 -7- LSB 1461SV (4) 90 md/jh 7/ 91

S.F. 550 notice of the repeal, suspension, or reinstatement of the tax 1 and the effective dates for imposition, suspension, or repeal 2 of the tax shall be as provided in section 423B.6 , Code 2023 . 3 3. A local sales and services tax authorized under this 4 section shall not be imposed or collected on or after January 5 1, 2025. 6 Sec. 21. Section 76.4, Code 2023, is amended to read as 7 follows: 8 76.4 Permissive application of funds. 9 Whenever the governing authority of such political 10 subdivision shall have on hand funds derived from any other 11 source than taxation which may be appropriated to the payment 12 either of interest or principal, or both principal and interest 13 of such bonds, such funds may be so appropriated and used 14 and the levy for the payment of the bonds correspondingly 15 reduced. This section shall not restrict the authority of a 16 political subdivision to apply sales and services tax receipts 17 collected received pursuant to chapter 423B for such purpose. 18 Notwithstanding section 423F.3 , a school district may apply tax 19 receipts received pursuant to chapter 423F for the purposes of 20 this section . 21 Sec. 22. Section 99B.1, subsection 23, Code 2023, is amended 22 to read as follows: 23 23. “Net receipts” means gross receipts less amounts awarded 24 as prizes and less state and local sales tax paid upon the 25 gross receipts. 26 Sec. 23. Section 99B.14, subsection 1, Code 2023, is amended 27 to read as follows: 28 1. A licensed qualified organization shall certify 29 that the receipts from all charitable gambling conducted 30 by the organization under this chapter , less reasonable 31 expenses, charges, fees, taxes, and deductions, either will 32 be distributed as prizes to participants or will be dedicated 33 and distributed for educational, civic, public, charitable, 34 patriotic, or religious uses. Reasonable expenses, charges, 35 -8- LSB 1461SV (4) 90 md/jh 8/ 91

S.F. 550 fees, taxes other than the state and local sales tax, and 1 deductions allowed by the department shall not exceed forty 2 percent of net receipts. 3 Sec. 24. Section 99G.4, subsection 2, Code 2023, is amended 4 to read as follows: 5 2. The income and property of the authority shall be exempt 6 from all state and local taxes, and the sale of lottery tickets 7 and shares issued and sold by the authority and its retail 8 licensees shall be exempt from all state and local sales taxes. 9 Sec. 25. Section 99G.30A, subsection 2, paragraph a, Code 10 2023, is amended to read as follows: 11 a. The director of revenue shall administer the monitor 12 vending machine excise tax as nearly as possible in conjunction 13 with the administration of state sales tax laws. The director 14 shall provide appropriate forms or provide appropriate entries 15 on the regular state tax forms for reporting local sales and 16 services tax liability. 17 Sec. 26. Section 279.63, subsection 2, paragraph a, Code 18 2023, is amended to read as follows: 19 a. All property tax levies , and income surtaxes , and local 20 option sales taxes in place in the school district, listed by 21 type of levy, rate, amount, duration, and notification of the 22 maximum rate and amount limitations permitted by statute. 23 Sec. 27. Section 321.40, subsection 5, Code 2023, is amended 24 by striking the subsection. 25 Sec. 28. Section 321.130, Code 2023, is amended to read as 26 follows: 27 321.130 Fees in lieu of taxes. 28 The registration fees imposed by this chapter upon private 29 passenger motor vehicles or semitrailers are in lieu of all 30 state and local taxes , except local vehicle taxes, to which 31 motor vehicles or semitrailers are subject. 32 Sec. 29. Section 418.13, subsection 2, Code 2023, is amended 33 to read as follows: 34 2. In addition to the moneys received pursuant to section 35 -9- LSB 1461SV (4) 90 md/jh 9/ 91

S.F. 550 418.10 or 418.12 , a governmental entity may deposit in the 1 flood project fund any other moneys lawfully received by the 2 governmental entity, including but not limited to local sales 3 and services tax receipts collected amounts received under 4 chapter 423B . 5 Sec. 30. Section 421.26, Code 2023, is amended to read as 6 follows: 7 421.26 Personal liability for tax due. 8 If a licensee or other person under section 452A.65 , a 9 retailer or purchaser under chapter 423A , 423B , 423C , 423D , or 10 423E , or section 423.14 , 423.14A , 423.29 , 423.31 , or 423.33 , 11 or a user under section 423.34 , or a permit holder or licensee 12 under section 453A.13 , 453A.16 , or 453A.44 fails to pay a tax 13 under those sections when due, an officer of a corporation 14 or association, notwithstanding section 489.304 , a member or 15 manager of a limited liability company, or a partner of a 16 partnership, having control or supervision of or the authority 17 for remitting the tax payments and having a substantial legal 18 or equitable interest in the ownership of the corporation, 19 association, limited liability company, or partnership, who has 20 intentionally failed to pay the tax is personally liable for 21 the payment of the tax, interest, and penalty due and unpaid. 22 However, this section shall not apply to taxes on accounts 23 receivable. The dissolution of a corporation, association, 24 limited liability company, or partnership shall not discharge a 25 person’s liability for failure to remit the tax due. 26 Sec. 31. Section 421.28, Code 2023, is amended to read as 27 follows: 28 421.28 Exceptions to successor liability. 29 The immediate successor to a licensee’s or retailer’s 30 business or stock of goods under chapter 423A or 423B , or 31 section 423.33 or 452A.65 , is not personally liable for 32 the amount of delinquent tax, interest, or penalty due and 33 unpaid if the immediate successor shows that the purchase of 34 the business or stock of goods was made in good faith that 35 -10- LSB 1461SV (4) 90 md/jh 10/ 91

S.F. 550 no delinquent tax, interest, or penalty was due and unpaid. 1 For purposes of this section the immediate successor shows 2 good faith by evidence that the department had provided 3 the immediate successor with a certified statement that 4 no delinquent tax, interest, or penalty is unpaid, or that 5 the immediate successor had taken in good faith a certified 6 statement from the licensee, retailer, or seller that no 7 delinquent tax, interest, or penalty is unpaid. When requested 8 to do so by a person with whom the licensee or retailer is 9 negotiating the sale of the business or stock of goods, the 10 director of revenue shall, upon being satisfied that such 11 a situation exists, inform that person as to the amount of 12 unpaid delinquent tax, interest, or penalty due by the licensee 13 or the retailer. The giving of the information under this 14 circumstance is not a violation of section 422.20 , 422.72 , or 15 452A.63 . 16 Sec. 32. Section 421.60, subsection 2, paragraph m, 17 subparagraphs (1) and (2), Code 2023, are amended to read as 18 follows: 19 (1) The director may abate unpaid state sales and use 20 taxes and local sales and services taxes owed by a retailer 21 in the event that the retailer failed to collect tax from the 22 purchaser as a result of erroneous written advice issued by 23 the department that was specially directed to the retailer 24 by the department and the retailer is unable to collect the 25 tax, interest, or penalties from the purchaser. Before the 26 tax, interest, and penalties shall be abated on the basis of 27 erroneous written advice, the retailer must present a copy of 28 the retailer’s request for written advice to the department and 29 a copy of the department’s reply. The department shall not 30 maintain a position against the retailer that is inconsistent 31 with the erroneous written advice, except on the basis of 32 subsequent written advice sent by the department to that 33 retailer, or a change in state or federal law, a reported 34 court case to the contrary, a contrary rule adopted by the 35 -11- LSB 1461SV (4) 90 md/jh 11/ 91

S.F. 550 department, a change in material facts or circumstances 1 relating to the retailer, or the retailer’s misrepresentation 2 or incomplete or inadequate representation of material facts 3 and circumstances in requesting the written advice. 4 (2) (a) The director shall abate the unpaid state sales 5 and use taxes and any local sales and services taxes owed by a 6 retailer where the retailer failed to collect the tax from the 7 purchaser on the charges paid for access to on-line computer 8 services as a result of erroneous written advice issued by the 9 department regarding the taxability of charges paid for access 10 to on-line computer services. To qualify for the abatement 11 under this subparagraph, the erroneous written advice shall 12 have been issued by the department prior to July 1, 1999, and 13 shall have been specially directed to the retailer by the 14 department. 15 (b) If an abatement of unpaid state sales and use taxes and 16 any local sales and services taxes is granted to the retailer 17 by the director pursuant to this subparagraph, the department 18 is precluded from collecting from the purchaser any unpaid 19 state sales and use taxes and any local sales and services 20 taxes which were abated. 21 Sec. 33. Section 422.72, subsection 6, paragraph a, Code 22 2023, is amended to read as follows: 23 a. The department may enter into a written informational 24 exchange agreement for tax administration purposes with a city 25 or county which is entitled to receive funds due to a local 26 hotel and motel tax or a local sales and services tax . The 27 written informational exchange agreement shall designate no 28 more than two paid city or county employees that have access to 29 actual return information relating to that city’s or county’s 30 receipts from a local hotel and motel tax or a local sales and 31 services tax . 32 Sec. 34. Section 423.4, subsection 2, paragraph d, Code 33 2023, is amended by striking the paragraph. 34 Sec. 35. Section 423.4, subsection 5, paragraph f, Code 35 -12- LSB 1461SV (4) 90 md/jh 12/ 91

S.F. 550 2023, is amended to read as follows: 1 f. Notwithstanding the state sales tax imposed in section 2 423.2 , a rebate issued pursuant to this subsection shall not 3 exceed an amount equal to five percent of the sales price 4 of the tangible personal property or services furnished to 5 purchasers at the automobile racetrack facility. Any local 6 option taxes paid and collected shall not be subject to rebate 7 under this subsection . 8 Sec. 36. Section 423.4, subsection 7, paragraph f, Code 9 2023, is amended to read as follows: 10 f. The refund in this subsection applies only to state 11 sales and use tax paid and does not apply to local option 12 sales and services taxes imposed pursuant to chapter 423B . 13 Notwithstanding the state sales tax imposed in section 423.2 , 14 a refund issued pursuant to this section shall not exceed 15 an amount equal to five percent of the sales price of the 16 fuel used to create heat, power, and steam for processing 17 or generating electrical current or from the sale price 18 of electricity consumed by computers, machinery, or other 19 equipment for operation of the data center business facility. 20 Sec. 37. Section 423.4, subsection 8, paragraph g, Code 21 2023, is amended to read as follows: 22 g. The refund in this subsection applies only to state 23 sales and use tax paid and does not apply to local option 24 sales and services taxes imposed pursuant to chapter 423B . 25 Notwithstanding the state sales tax imposed in section 423.2 , 26 a refund issued pursuant to this section shall not exceed an 27 amount equal to five percent of the sales price of the items 28 listed in paragraph “a” , subparagraphs (1), (2), and (3). 29 Sec. 38. Section 423.14A, subsection 2, Code 2023, is 30 amended to read as follows: 31 2. In addition to and not in lieu of any application of 32 this chapter to sellers who are retailers and sellers who are 33 retailers maintaining a place of business in this state, any 34 person described in subsection 3 , or the person’s agents, 35 -13- LSB 1461SV (4) 90 md/jh 13/ 91

S.F. 550 shall be considered a retailer in this state and a retailer 1 maintaining a place of business in this state for purposes of 2 this chapter on or after January 1, 2019, and shall be subject 3 to all requirements of this chapter imposed on retailers and 4 retailers maintaining a place of business in this state, 5 including but not limited to the requirement to collect and 6 remit sales and use taxes pursuant to sections 423.14 and 7 423.29 , and local option taxes under chapter 423B . 8 Sec. 39. Section 423.33, subsection 1, paragraph c, Code 9 2023, is amended to read as follows: 10 c. If the retailer fails to collect sales tax at the time 11 of the transaction, the retailer shall thereafter remit the 12 applicable sales tax, or the purchaser thereafter shall remit 13 the applicable use tax. If the purchaser remits all applicable 14 use tax, the retailer remains liable for any local sales and 15 services tax under chapter 423B that the retailer failed to 16 collect. 17 Sec. 40. Section 423.34A, unnumbered paragraph 1, Code 18 2023, is amended to read as follows: 19 A purchaser is relieved of liability for payment of state 20 sales or use tax, for payment of any local option sales tax, 21 for payment of interest, or for payment of any penalty for 22 nonpayment of tax which nonpayment is not fraudulent, willful, 23 or intentional, under the following circumstances: 24 Sec. 41. Section 423.36, subsection 9, paragraph a, Code 25 2023, is amended to read as follows: 26 a. Except as provided in paragraph “b” , purchasers, users, 27 and consumers of tangible personal property, specified digital 28 products, or enumerated services taxed pursuant to subchapter 29 II or III of this chapter or chapter 423B may be authorized, 30 pursuant to rules adopted by the director, to remit tax owed 31 directly to the department instead of the tax being collected 32 and paid by the seller. To qualify for a direct pay tax permit, 33 the purchaser, user, or consumer must accrue a tax liability 34 of more than four thousand dollars in tax under subchapters 35 -14- LSB 1461SV (4) 90 md/jh 14/ 91

S.F. 550 II and III in a semimonthly period and make deposits and file 1 returns pursuant to section 423.31 . This authority shall not 2 be granted or exercised except upon application to the director 3 and then only after issuance by the director of a direct pay 4 tax permit. 5 Sec. 42. Section 423B.1, Code 2023, is amended by striking 6 the section and inserting in lieu thereof the following: 7 423B.1 Use of revenues deposited in the local sales and use 8 tax fund —— revenue purpose statement. 9 1. a. Revenues credited to and deposited in each county’s 10 account within the local sales and use tax fund shall be 11 expended by each recipient county and city as required by the 12 revenue purpose statement, subject to the requirements of 13 section 423B.7, subsection 7, and approved under this section 14 for the city or for the county for the unincorporated areas of 15 the county, or as required by subsection 3. 16 b. A revenue purpose statement for the use of local option 17 sales and services tax revenue under this chapter approved at 18 election prior to January 1, 2025, and in effect on or set 19 to take effect on or after January 1, 2025, and the use of 20 revenues received under this chapter for purposes authorized 21 under section 423B.10 for ordinances in effect and approved 22 before January 1, 2025, shall continue in effect for revenues 23 received under this chapter until the expiration of the revenue 24 purpose statement or ordinance, if applicable, or until the 25 county board of supervisors or city council, as applicable, 26 adopts a new revenue purpose statement under subsection 2 or 27 repeals or amends the ordinance for the use of revenues under 28 section 423B.10. 29 2. The board of supervisors of each county and the city 30 council of each city may adopt by resolution a revenue purpose 31 statement for the expenditure of funds received under this 32 chapter. 33 3. Each city and county without a valid revenue purpose 34 statement shall expend the revenues received for the following 35 -15- LSB 1461SV (4) 90 md/jh 15/ 91

S.F. 550 purposes in the order prescribed in this subsection, except 1 that the payment of bonds for which the revenues have been 2 pledged shall be paid first: 3 a. Reduction of the county’s basic levies under section 4 331.423 or reduction of the city general fund levy under 5 section 384.1, as applicable. 6 b. Reduction of any debt service levy of the county or city, 7 as applicable. 8 c. Reduction of the city’s additional taxes levied under 9 section 384.12 or the county’s supplemental levies under 10 section 331.424, as applicable. 11 d. Reduction of any other property tax levy of the county 12 or city, as applicable. 13 Sec. 43. NEW SECTION . 423B.1A Local use tax supplement 14 fund. 15 1. A local use tax supplement fund is created in the state 16 treasury under the control of the department of revenue. The 17 fund shall consist of all moneys transferred under section 18 423.43, subsection 1, paragraph “b” , subparagraph (1), 19 subparagraph division (a), and moneys appropriated to the fund. 20 2. Moneys in the local use tax supplement fund are annually 21 appropriated to the department of revenue and shall be used for 22 supplement payments to cities and counties under this section. 23 3. For each year during the period beginning January 1, 24 2025, through December 31, 2043, each city or county for the 25 unincorporated portion of the county, shall receive a local 26 use tax supplement payment equal to the difference, but not 27 less than zero between the amount of revenue received by the 28 city or county under section 423B.7, Code 2023, for the period 29 beginning January 1, 2024, and ending December 31, 2024, minus 30 the amount that would have been received by that city or county 31 for that period if all cities and the county were eligible for 32 distributions of such revenues under section 423B.7, Code 2023. 33 If moneys in the fund are insufficient to pay all supplement 34 amounts for the year, the director of revenue shall prorate the 35 -16- LSB 1461SV (4) 90 md/jh 16/ 91

S.F. 550 payment of the supplement payments and shall notify the cities 1 and counties of the pro rata percentage. 2 4. The supplement payment calculated under subsection 3 3 shall be paid to each city or county for the unincorporated 4 area of the county and shall be combined with and be used in the 5 same manner and be subject to the same requirements as moneys 6 received by the city or county under section 423B.7 for that 7 year. 8 5. Notwithstanding section 12C.7, subsection 2, interest or 9 earnings on moneys deposited in the local use tax supplement 10 fund shall be credited to the local use tax supplement fund. 11 Notwithstanding section 8.33, moneys credited to the local use 12 tax supplement fund shall not revert at the close of a fiscal 13 year. 14 6. This section is repealed January 1, 2044. Moneys in the 15 fund upon the repeal of this section shall be transferred to 16 the appropriate county accounts under section 423B.7 for the 17 counties from which the tax was paid. 18 Sec. 44. Section 423B.7, subsection 1, Code 2023, is amended 19 to read as follows: 20 1. a. Except as provided in paragraphs paragraph “b” and 21 “c” , the director shall credit the local sales and services tax 22 receipts and interest and penalties from a county-imposed tax 23 as specified in section 423.2A, subsection 2, paragraph “a” , 24 including any interest and penalties, to the county’s account 25 in the local sales and services use tax fund for the county in 26 from which the tax was collected. The director shall credit 27 the use tax receipts as specified in section 423.43, subsection 28 1, paragraph “b” , subparagraph (1), subparagraph divisions (b) 29 and (c), including any interest and penalties, to the county’s 30 account in the local sales and use tax fund for the county 31 from which the use tax was paid. If the director is unable to 32 determine from which county any of the receipts were collected 33 or paid, as applicable , those receipts shall be allocated among 34 the possible counties based on allocation rules adopted by the 35 -17- LSB 1461SV (4) 90 md/jh 17/ 91

S.F. 550 director. 1 b. The director shall credit the designated amount of the 2 increase in local sales and services tax receipts, as computed 3 in section 423B.10 , collected in an urban renewal area of an 4 eligible city that has adopted an ordinance pursuant to section 5 423B.10, subsection 2 , into a special city account in the local 6 sales and services use tax fund. 7 c. The director shall credit the local sales and services 8 tax receipts and interest and penalties from a city-imposed tax 9 under section 423B.1, subsection 2 , to the city’s account in 10 the local sales and services tax fund. 11 Sec. 45. Section 423B.7, subsections 2, 3, and 4, Code 2023, 12 are amended to read as follows: 13 2. The director of revenue by the last day of each 14 month shall transfer to each city or county where the local 15 option tax is imposed the amount of tax moneys remitted to 16 the department attributable to each city or county from the 17 preceding month. 18 3. Seventy-five percent of each county’s account shall be 19 remitted on the basis of the county’s population residing in 20 the unincorporated area where the tax was imposed and those the 21 incorporated areas where the tax was imposed as follows: 22 a. To the board of supervisors a pro rata share based upon 23 the percentage of the above population of the county residing 24 in the unincorporated area of the county where the tax was 25 imposed according to the most recent certified federal census. 26 b. To each city in the county where the tax was imposed 27 a pro rata share based upon the percentage of the city’s 28 population residing in the county to the above population of 29 the county according to the most recent certified federal 30 census. 31 c. If a subsequent certified census exists which modifies 32 that most recent certified federal census for a participating 33 jurisdiction under paragraphs “a” and “b” , the computations 34 under paragraphs “a” and “b” shall utilize the subsequent 35 -18- LSB 1461SV (4) 90 md/jh 18/ 91