Iowa Admin. Code r. 701-219.9
Machinery and equipment sales contracts with installation are transactions which are considered a sale of tangible personal property to a final consumer Therefore, the individual who sells the equipment with installation must purchase the machinery and equipment tax-free as a purchase for resale. This rule should not be confused with subrule 219.3(3) regarding building equipment. The contract should itemize the sales tax separately. If a contractor wishes to avoid an itemization of sales and use tax on machinery and equipment which remains tangible personal property, the contractor can do so by figuring the tax as a general overhead expense and including a statement in the contract and related invoices that "sales tax is included in the contract price."
If the sales transaction is one completed out of state and shipped in interstate commerce to a consumer or a user in Iowa, and not otherwise exempt from tax, the final purchaser is required to pay Iowa use tax on the purchase price of the machinery and equipment.
In a "mixed contract" (a construction contract mingled with a machinery and equipment sales contract), the elements of the contract should be separated for sales tax purposes. See rule 219.10(423).
Certain services which are enumerated in 2005 Iowa Code section 4232. are subject to tax when performed under a contract for the installation of machinery and equipment which is not done in connection with new construction, reconstruction, alteration, expansion or remodeling of a building or structure. Reference rule 701-1514. (422,423) relating to installation charges. Examples of the enumerated services are: electrical installation; plumbing; welding; and pipe fitting. Other labor charges for job site installation which do not involve a taxable enumerated service are not subject to tax if the charges are separately contracted or, if no written contract exists, are separately itemized on the billing from the seller to the purchaser
Example. company B contracts with company A to furnish and install a portable conveyor unit, in company A's new building. company B can purchase the portable conveyor unit, tax-free because the portable conveyor unit maintains its identity as tangible personal property after installation and does not become a component part of the real property. company B would then charge tax to company A on the sale of the portable conveyor unit,. Installation charges would be part of the total sales price subject to tax unless they are separately contracted or, if no written contract exists, separately itemized on the billing from company B to company A.
Iowa Admin. Code r. 701-219.9