(1)
Definitions. For
purposes of this chapter, terms mean the same as defined in Iowa Code section
423.1 and as defined in this
rule.
"Building equipment" means any vehicle,
machine, tool, implement, or other device used by a contractor in erecting
structures for others, or reconstructing, altering, expanding, or remodeling
property of others, which does not become a physical component part of the
property upon which work is performed, and which is not necessarily consumed in
the performance of such work.
"Building materials" means materials used in
construction work and is not limited to materials used in a construction
contract. The term may also include any type of materials used for
reconstruction, alteration, expansion, or remodeling of the premises or
anything essential to the completion of a building or other structure for the
use intended. Building materials generally consist of items that are
incorporated into real property, lose their identity as tangible personal
property, and cannot be removed without altering the realty, or that are
consumed by the contractor during the performance of the construction
contract.
"Building supplies" means anything that is
furnished for and used directly in the carrying on of the work of an owner,
contractor, subcontractor, or builder and which is used or consumed in the
course of completing the project. Such items do not have to enter into and
become a physical part of the structure like building materials, but they do
become as much a part of the structure as the labor that is performed on
it.
"Construction contract" means an agreement
between a contractor and a sponsor under the terms of which the contractor
agrees to provide labor, materials, supplies, and equipment to build a
structure for the sponsor.
"Fabricated cost" means and includes the
cost of all materials as well as the cost of labor, power, transportation to
the plant, and other plant expenses but not installation on the job
site.
"Prefabricated structure" means any
structure assembled in a factory and capable of transport to the location where
it will be used in the performance of a construction contract by placement on a
foundation either by the buyer or a designated contractor.
"Repair" means the same as mend, restore,
maintain, replace and service. A repair contemplates an existing structure or
tangible personal property that has become imperfect and constitutes the
restoration to a good and sound condition.
"Structure" means that which is artificially
built up or composed of parts joined together in some definite manner and which
also has some obvious or apparent functional use or purpose. Nonexclusive
examples of structures include buildings; roads, whether paved or otherwise;
dikes; drainage ditches; and ponds.
(2)
Classification and
obligations. The
classification of persons and business determines
their obligations to pay or collect sales or use tax or claim an exemption on
the sales price from sales of
building materials, supplies, equipment, other
tangible personal property, and labor.
a.
Classification types. Persons and businesses can be classified
as an owner, contractor, contractor-retailer, retailer, or
repairperson.
b.
Classification. A specific classification must be chosen and
once chosen should not be changed unless it has become clear from an extended
course of dealing that the business has become something other than what it was
established to be.
c.
Assessment for new businesses. It can be difficult for a
person starting a business to determine whether that business will be engaged
in contracting, retailing, a combination of the two, or providing repair;
however, any reasonable assessment of a new business's status will be honored
by the department.
d.
Prohibited. Changing the status of a business from job to job
to avoid the obligation to pay or collect tax is not a lawful
activity.
e.
Example. A business is founded to engage in contracting and
purchases construction materials based on the fact that it is a contractor, but
the founder must sell construction materials at retail if the business is to
survive. If, after two years' operation, half the revenue is from construction
contracts and half from retail sales, then the business has become a
contractor-retailer and henceforth should purchase construction materials based
on that status.
This rule is intended to implement Iowa Code chapter
423.
