The Iowa Sales Tax Quarterly Return will have a new look for permit holders who charge hotel/motel tax or automobile rental tax. The period end and due dates have not changed, but please review them carefully to make sure you are using the correct form. [Editor's Note: Sales and use tax returns and payments are now made through eFile & Pay, effective July 2005.]

• Sales/use tax forms will only be mailed twice each year, rather than four times a year as in the past.

Monthly filers: Each mailing will include forms for two calendar quarters and include two monthly deposits and one quarterly return for each quarter. The first and second months of each quarter require the monthly deposit form, which includes reporting and remitting the 5 percent sales tax, local option tax and school local option tax for each month. The third month of the quarter requires a quarterly sales tax return that includes detailed local option information, gross sales, goods consumed, exemptions, hotel/motel tax and automobile rental tax.

Quarterly filers: Each mailing will include a quarterly return.

• Schedule A combines the previously separate Hotel/Motel and Automobile Rental returns and applies to the entire quarter.

Line "a" of this schedule is gross receipts from rentals. Line "b" is the exemption amounts of sales made directly to and paid by the federal government, and contracts for the rental of any room to the same person for more than 31 consecutive days or an automobile to the same person for more than 60 consecutive days. Line "b" is subtracted from line "a." You must file even if you had no sales or rental tax activity during the quarter, entering zeros on appropriate lines.

• Note to EFT (Electronic Funds Transfer) monthly filers: You will receive two quarterly returns only, since you do not send in the paper deposit form.

Line reference correction

The Iowa sales tax quarterly return may contain line reference errors on the local option schedule. References to lines 7 and 8 should instead refer to lines 6b and 6c.

Do your business tax clients collect hotel-motel taxes? For a complete list of towns and counties affected, go here (Excel).

Effective April 1, 2002, the following towns have changed or implemented a hotel-motel tax:

• Dyersville will increase their hotel and motel tax rate to 7%.
• Avoca will implement a hotel and motel tax for 7%.
• Eldridge will implement a hotel and motel tax for 7%.
• Nevada will implement a hotel and motel tax for 6%.
• Sheldon will implement a hotel and motel tax for 5%.
• Stuart will implement a hotel and motel tax for 5%.

Please note: If a jurisdiction with the hotel/motel tax also imposes the regular local option tax and/or the school local option tax, only the hotel/motel tax applies to room rental.

New jurisdictions may be added January 1 and July 1 of each year. Our department is notified 90 days in advance, and we immediately begin updating our Web files. We try to have the files updated at least 30 days in advance of the implementation date.

The most comprehensive file we have on regular and school local option taxes is an Excel file.

You will notice arrows by the names of the columns. These allow you to sort out only the information you need. For instance, if you want to know which jurisdictions came on board January 1, 2002, for regular local option, you click arrow of the column named LOST Eff. Date. It will list all the effective dates in the whole file. Choose 01/01/02 and Excel will list only those jurisdictions. To go back to the whole list, click on the same arrow and choose (All).

For an update on sales tax law, visit the Iowa Tax Research Library (ITRL) and click on What's New. Updates in the Iowa Administrative Code and IDRF Policy letters are updated to the ITRL every Monday and we recommend visiting it regularly to stay up to date.

Security and detective services and Iowa Tax

Are security services or detective services taxable?

Yes, compensation from these services is subject to Iowa sales tax and to Federal and Iowa income taxes. This includes such work done by off-duty law enforcement officers. Security services include, but are not limited to, security guards, investigative services, and burglar or fire alarm systems. Detective service is the service of investigation for the purpose of obtaining information.

This information also applies to security and detective services provided by law enforcement officers on a part-time basis.

INCOME TAX

Individuals who receive income from the performance of security services or detective services are required to report that income on their Federal and Iowa income tax returns. This applies to income earned by an employee of the person/company for whom the service is provided and to income earned by a person who is providing the service as an independent contractor.

For more information on reporting security and detective services income on your income tax return, see the complete text of the Security and Detective Services publication.

SALES TAX

Security services and detective services are subject to Iowa sales tax. Therefore, an independent contractor performing security services or detective services is required to obtain an Iowa sales tax permit, charge the tax to their customer, and remit that tax to the state. An Iowa Business Tax Registration form should be completed to apply for a sales tax permit. This form is available on the department’s Web site; it may also be completed online.

Sales tax applies to the full amount charged to the customer for providing a security service or detective service. However, mileage and other travel expenses, as well as lodging and meal expenses, are not taxable if separately identified, separately billed and reasonable in amount.

Anyone who has performed security services or detective services as an independent contractor without collecting the appropriate sales tax should complete an Iowa Business Tax Registration form to obtain a sales tax permit. Quarterly sales tax returns for past years in which sales tax was not remitted must be completed, and the appropriate sales tax must be remitted. The sales tax is still due, even though it was not collected from customers.

Reference Rule 701-26.69, Iowa Administrative Code

More and more, businesses and individuals are paying bills automatically by having payments transferred directly from their bank accounts. You can remit Iowa sales and use taxes easily, too, through Electronic Funds Transfer (EFT).

Are paper returns eliminated? Not at this time. For example, monthly filers do not send in paper monthly deposit forms but still send in a paper quarterly return.

You can learn more about EFT in our Electronic Funds Transfer booklet.

Out-of-state businesses might not know their activities in Iowa may be subject to Iowa tax. Businesses located outside of Iowa frequently have representatives and/or employees in Iowa to maintain, establish, or further their market share within the state. These businesses need to contact our department to determine whether or not they should be paying Iowa tax. In the long run, they will save time and money by contacting us first.

These businesses can check out "nexus" qualifications on our Web site.

Do you know a business that might need this information? Please send it on; you’ll be doing them a favor.

Efficient processing of tax returns begins with the taxpayer. Returns that are completed correctly and completely are more easily processed. Returns that are not complete and correct require additional correspondence and resolution. Our improved computer system helps us correspond with permit holders more efficiently than in the past. We will contact you about errors whenever we can. We do, however, encourage you to take a second look at your return before sending it in.

Consolidated filers are mailed a schedule showing the permit numbers and locations of all their stores on a quarterly basis. Be sure to complete these schedules, showing the 5 percent tax collected on a quarterly basis. We need these schedules to be filed with the quarterly return.

Please remember to complete the back of the sales tax quarterly return, giving us the taxable amount of sales for local option and/or school local option in the correct county(s). These need to be quarterly figures, not monthly. If no sales were made in your location county, complete the back with a zero for that county. It is important to complete the local option portion of the return so that we can distribute the correct amount of local option tax to the correct counties.

Have you ever wondered what the "triangles" are on certain lines on the return? Lines with these symbols should always be filled in. They are called "key lines," and our data entry people are required to enter the amounts from these lines into the computer. When only the "Amount Paid" line is filled in, processing becomes time consuming and costly.

Don’t forget that the amounts on the quarterly return are for all three months of the quarter. Sometimes monthly filers enter only the amounts for the third month of the quarter.

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