Iowa Admin. Code r. 701-215.22

Current through Regsiter Vol. 46, No. 26, June 12, 2024

Rule 701-215.22 - Exemption for the sale of services for designing or installing new industrial machinery or equipment

The sales price from the services of designing or installing new industrial machinery or equipment is exempt from sales and use tax. The enumerated services of electrical or electronic installation are included in this exemption.

(1) Required elements. To qualify for the exemption, the purchaser must prove the service is:

(2) Design or installation services include electrical and electronic installation. "Design or installation" services do not include any repair service.

a. A design or installation service (see subrule 230.22(2));

b. Of new (see subrule 230.22(3)); and

c. Industrial machinery or equipment (see subrule 230.22(4)).

(3) "New" means never having been used or consumed by anyone. The exemption does not apply to design or installation services on reconstructed, rebuilt, repaired, or previously owned machinery or equipment.

(4) Industrial machinery or equipment.

a.Generally. "Industrial machinery or equipment" means machinery or equipment, as defined in subrule 230.14(2). The sale of industrial machinery or equipment must also qualify for exemption under any of the following:

(1) Property used directly and primarily in processing by a manufacturer (see rule 701-230.15(423)).

(2) Property used directly and primarily by a manufacturer to maintain the integrity of the manufacturer's product or to maintain unique environmental conditions for computers, computer peripherals, machinery, or equipment (see rule 701-230.16(423)).

(3) Property used directly and primarily in research and development of new products or processes of processing (see rule 701-230.17(423)).

(4) Property used directly and primarily in recycling or reprocessing of waste products (see rule 701-230.19(423)).

(5) Pollution-control equipment used by a manufacturer (see rule 701-230.20(423)).

b.Exclusions. The following property is not industrial machinery or equipment regardless of how the purchaser uses it:

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

(2) Replacement parts (see Iowa Code section 423.3(47)"d").

(3) Supplies (see Iowa Code section 423.3(47)"d").

(4) Materials used to construct or self-construct computers, computer peripherals, machinery, equipment, replacement parts, or supplies (see paragraph 230.14(2)"f").

(5) Billing. The sales price for designing or installing new industrial machinery or equipment must be separately identified, charged separately, and reasonable in amount for the exemption to apply. The exemption applies to new industrial machinery or equipment regardless of how it is purchased, including leased or rented machinery or equipment.

EXAMPLE: Dealer sells and installs two new machines for Manufacturer. Manufacturer uses one machine on its production floor, where the machine is directly and primarily used in processing. Manufacturer uses the other machine in its machine shop, where the machine is not directly and primarily used in processing. Dealer gives an invoice to Manufacturer that separately itemizes the sales prices for each machine and each installation. The machine used on the production floor is new industrial machinery or equipment, and the sales prices of the machine and its installation are exempt from sales and use tax. The machine used in the machine shop is not new industrial machinery or equipment, and the sales prices of the machine and its installation are taxable.

This rule is intended to implement Iowa Code section 423.3(48).

Iowa Admin. Code r. 701-215.22

Renumbered from 701-230.22 by IAB September 7, 2022/Volume XLV, Number 5, effective 10/12/2022