Iowa Admin. Code r. 701-215.18

Current through Register Vol. 46, No. 25, May 29, 2024

Rule 701-215.18 - Exemption for the sale of computers and computer peripherals used in processing or storage of data or information by an insurance company, financial institution, or commercial enterprise

The sales price of computers and computer peripherals is exempt from sales and use tax when the computers and computer peripherals are used in processing or storage of data or information by an insurance company, financial institution, or commercial enterprise. The sales price of machinery, equipment, replacement parts, supplies, and materials used to construct or self-construct computers, computer peripherals, machinery, equipment, replacement parts, and supplies is not exempt under this rule.

(1)Required elements. To qualify for exemption under this rule, the purchaser must prove the property is:

a. Computers or computer peripherals (see Iowa Code section 423.1 );

b. Used in processing or storage of data or information (see subrule 230.18(2)); and

c. Used by:

(1) An insurance company (see subrule 230.18(3));

(2) A financial institution (see subrule 230.18(3)); or

(3) A commercial enterprise (see subrule 230.18(3)).

(2)Processing or storage of data or information. All computers store and process information. However, only if the "final output" for a user or consumer is stored or processed data will the computer be eligible for exemption from tax under this rule.

(3)Insurance company, financial institution, or commercial enterprise.

a.Insurance company. "Insurance company" means the same as defined in Iowa Code section 423.3(47)"d." Excluded from the definition of "insurance company" are benevolent associations governed by Iowa Code chapter 512A, fraternal benefit societies governed by Iowa Code chapter 512B, and health maintenance organizations governed by Iowa Code chapter 514B. This list of exclusions is not intended to be exclusive.

b.Financial institution. "Financial institution" means the same as defined in Iowa Code section 527.2.

c.Commercial enterprise. "Commercial enterprise" means the same as defined in Iowa Code section 423.3(47)"d."

d.Professions and occupations. The term "profession" means a vocation or employment requiring specialized knowledge and often long and intensive academic preparation. The term "occupation" means the principal business of an individual, such as the business of farming. A professional entity that carries on any profession or occupation, such as an accounting firm, is not a commercial enterprise.

(4)Exempt property. To qualify for exemption under this rule, tangible personal property must satisfy the definition of "computers" or "computer peripherals" contained in Iowa Code section 423.1. Other property, including machinery, equipment, replacement parts, supplies, and materials used to construct or self-construct computers, computer peripherals, machinery, equipment, replacement parts, and supplies, is not exempt under this rule, even if the property is used in processing or storage of data or information by an insurance company, financial institution, or commercial enterprise.

(5)Examples of computers used in processing or storage of data or information by an insurance company, financial institution, or commercial enterprise. A health insurance company has four computers. Computer A is used to monitor the temperature within the insurance company's building. Computer A transmits messages to the building's heating and cooling systems, which tell the systems when to raise or lower the level of heating or air conditioning. Computer B is used to store patient records and to recall those records on demand. Computer C is used to tabulate statistics regarding the amount of premiums paid in and the amount of benefits paid out for various classes of insured. Computer D is used to train the insurance company's employees to perform various additional tasks or to better perform work the employees can already do. Computer D uses various canned programs to accomplish this function. The final output of Computer A is neither stored nor processed information. Therefore, Computer A does not meet the definition of an exempt computer. The final output of Computer B is stored information. The final output of Computer C is processed information. The final output of Computer D is processed information consisting of the training exercises appearing on the computer monitor. The sales prices of Computers B, C, and D are exempt from sales and use tax as computers used in processing or storage of data or information by an insurance company.

This rule is intended to implement Iowa Code section 423.3(47)"a"(4).

Iowa Admin. Code r. 701-215.18

Renumbered from 701-230.18 by IAB September 7, 2022/Volume XLV, Number 5, effective 10/12/2022