Festivus 2019: State Tax Edition

And just like that, another Festivus (A Festivus for the Rest of Us!) is upon us! We are celebrating Festivus by revisiting this year’s Airing of Grievances and Feats of Strength.    

Airing of Grievances

• In the latest head scratcher, through a pair of Declaratory Orders—issued within eight months of each other—the Iowa Department of Revenue determined that Pilates classes are not subject to sales tax because they are “instruction in recreational activities” but spinning classes are taxable “commercial recreation.” Iowa Department of Revenue: Spinning Classes Subject to Sales Tax, but Not Pilates.
• After years of confusion about whether grain bins are subject to sales tax, this past legislative session the Iowa legislature clarified that grain bins are exempt from sales tax. In doing so, the Iowa legislature—likely unknowingly—increased the complexity of sales tax compliance for construction contractors. Effective July 1, 2019, Grain Bins are Exempt From Sales Tax; Complexity, Unanswered Questions Remain.
• The reach of Iowa’s marketplace facilitator law is expansive. The new law applies to online platforms, but also brick and mortar businesses that act as agents on behalf of the actual sellers.  Additionally, those businesses that advertise goods and services for sale on behalf of marketplace sellers and collect a fee for such advertisement satisfy both prongs of the definition of “marketplace facilitator.” This means that television and radio stations may be responsible for collecting sales tax when the businesses that run the advertisements (marketplace sellers) make sales of goods or services. The television or radio station may be responsible for collecting sales tax on the marketplace seller’s sale regardless of whether the station’s fees are based on a specific retail sale and whether the station knows of the details of the retail sale (such as the sales price or location of sale). Iowa’s Marketplace Facilitators: Auctioneers and Consignment Shops and Radio Stations, Oh My!

Feats of Strength

• The District Court for Linn County determined that an Iowa nonprofit corporation, which is wholly owned by charitable institutions, is exempt from property tax under Iowa Code § 427.1(8). District Court Blesses “Flow Through” Charitable Status in Property Tax Exemption; Grants Exemption.  

Happy Festivus! I’ve made a donation to The Human Fund in your name.