(1)
Basic concepts. Prefabricated structures include modular
homes, mobile homes, manufactured housing, sectionalized housing, precut
housing packages, and panelized construction.
(2)
Taxability.
a. Sales or use tax on the full purchase
price is due when prefabricated structures are sold to or used by owners,
contractors, subcontractors, or builders, or delivered under a contract for
sale or sold for use in Iowa.
b.
Sales of prefabricated structures that have not been erected on a foundation
are considered sales of tangible personal property and thus are taxable on the
purchase price charged to a consumer or user by the seller at the time of
retail sale.
(3)
Exceptions. The following are exceptions to the general
taxability rule described above, applicable to modular and mobile homes and
manufactured housing:
a.
Modular
homes. Modular homes, as defined in Iowa Code section
435.1, cannot be attached or
towed behind a motor vehicle, and which does not have permanently attached to
its body or frame any wheels or axles. Only 60 percent of the sales price from
the sale of a modular home is subject to Iowa tax. This 60 percent rule is
applicable only to structures that meet the definition of "modular home" and
not to other types of prefabricated structures that do not meet the definition
of the term "modular home" such as sectionalized housing or panelized
construction. Also, the 60 percent rule is not applicable to the sale of
materials used in the assembly of a modular home, only to the sale of the
finished product.
b.
Mobile
homes and manufactured housing.
(1)
Use tax. Mobile homes and manufactured housing, as defined in Iowa Code section
321.1, are subject to use tax at
the rate of 20 percent of the purchase price. All mobile homes sold in Iowa or
sold outside Iowa for use in this state are sold subject to Iowa use tax,
whether sold for placement within or outside a mobile home park. See Iowa Code
section 423.26A on the collection of use
tax and certificates of title for manufactured housing.
(2) Exemption. To be eligible for the use tax
exemption provided in Iowa Code section
423.6(9), the
purchaser of a mobile home or manufactured housing must provide sufficient
documentation to the county treasurer that verifies the Iowa use tax under Iowa
Code section 423.5 has been previously
imposed and paid.
(3) Trade-in
allowance. A trade-in allowance will result in a reduction in the price of
mobile homes and manufactured housing subject to tax if all the conditions
found in Iowa Code section
423.3(59) are
met.
1. The property traded for the mobile
home or manufactured housing is a type of property normally sold in the regular
course of business of the retailer selling the home or housing, and
2. The retailer intends ultimately to sell
the traded property at retail or to use the traded property in the manufacture
of a like item.
EXAMPLE 1: A manufactured housing dealer receives from the
factory a new manufactured home that has a sales price of $20,000. The dealer
sells it and takes the purchaser's old manufactured home worth $5,000 in trade.
The dealer keeps the traded-in manufactured home as an office. The Iowa use tax
is computed as follows:
|
Sales price
|
$20,000
|
|
Trade-in value
|
$5,000
|
|
Buyer's price (Sales price minus
trade-in)
|
$15,000
|
|
Amount subject to tax (Full sales price multiplied
by 20%)
|
$4,000
|
|
Use tax due (5%)
|
$200
|
Because the manufactured home will not be ultimately sold at
retail or used to manufacture a like item, the trade-in value does not result
in a reduction of the price subject to tax.
EXAMPLE 2: Same facts as Example 1; however, instead of
keeping the traded-in manufactured housing, the dealer intends to and lists the
trade-in for sale.
|
Sales price
|
$20,000
|
|
Trade-in value
|
$5,000
|
|
Buyer's price (Sales price minus
trade-in)
|
$15,000
|
|
Amount subject to tax (Full sales price multiplied
by 20%)
|
$3,000
|
|
Use tax due (5%)
|
$150
|
In this example, the trade-in value does result in a
reduction of the price subject to tax because the dealer intends to sell the
traded-in manufactured housing at retail.
(4)
Tax
consequences of sales of modular homes by various parties, some operating in a
dual capacity.
a. A retailer (dealer)
that is not additionally a contractor or manufacturer of modular homes
purchases those homes tax-free from a wholesaler or manufacturer for subsequent
resale to contractors or owners. Tax must be collected when the dealer sells
the modular home to an owner or contractor.
b. A contractor that is not a dealer must pay
tax when purchasing a modular home for use in a construction contract or for
some other purpose. A contractor's sale of a modular home to an owner or
another contractor is treated as explained in Examples 2 and 4 of subrule
219.4(5).
c. A dealer that is also
a contractor will purchase homes tax-free for inclusion in its inventory. Tax
is imposed when the dealer withdraws a home from inventory for sale or use in
the performance of a
construction contract as explained in rule
701-219.4 (423).
d. A manufacturer that acts as its own dealer
and sells its own modular homes at retail to contractors or owners will collect
tax on the sales price from its sales of those modular homes to its customers.
This situation is in contrast to that described in subrule 219.7(5) in which a
manufacturer uses its own modular homes in the performance of construction
contracts and the tax due is computed on a sum other than the sales price from
the sale of a home.
What is stated in this subrule concerning sales of modular
homes is generally applicable to the use tax on mobile homes and manufactured
housing. However, one distinct difference is that mobile homes and manufactured
housing are seldom, if ever, purchased by a dealer for any subsequent use in
the performance of construction contracts. A dealer will often purchase a
mobile home or manufactured housing for subsequent resale to a customer as
tangible personal property and then will place or install the mobile home or
manufactured housing on a site prepared by the customer. This is not the
performance of a construction contract, and the dealer is a retailer who
installs tangible personal property and is not a construction
contractor.
(5)
Manufacturers who perform construction contracts. When
companies whose principal business is the manufacture of prefabricated
structures use those structures in the performance of construction contracts,
this use is treated as a retail sale of the structures on the manufacturer's
part. Rule
701-219.6 (423) provides a
description of the sales tax treatment of this sort of transaction. The 60
percent rule, as described in subrule 219.7(3), is not applicable when
calculating the amount of tax owed by a manufacturer.
(6)
Examples. The following
examples are intended to illustrate who must collect or remit sales or use tax
when a manufacturer sells a modular home to a contractor or owner or acts as a
contractor in erecting the home. The incidence of tax depends on several
factors, such as the nature of the manufacturer's business, the point of
delivery, the contractual agreement, and whether or not a sale for resale has
occurred.
EXAMPLE 1: The manufacturer is located outside Iowa. The
manufacturer contracts with an Iowa customer to build a home in the
manufacturer's factory. The manufacturer also contracts to completely erect the
home, install the furnace, and do electrical and other necessary work to make
the home ready for occupancy. The main source of the manufacturer's income
relates to on-site construction. The manufacturer has paid a sales tax equal to
Iowa tax in its state of residency. The manufacturer would be considered to be
performing a construction contract in Iowa and would owe use tax in Iowa;
however, a sales tax credit would be allowed for tax paid to the other
state.
EXAMPLE 2: The manufacturer is located outside Iowa. An Iowa
unrelated builder/dealer contracts with the customer for the home and then
contracts with the manufacturer for construction, delivery, and installation on
the customer's foundation. The manufacturer delivers the home into Iowa on the
manufacturer's own truck. The customer, by contractual agreement, is obligated
to pay for the home on delivery of the property, so the sale takes place in
Iowa. In this situation, the manufacturer is involved in the sale of tangible
personal property rather than the sale of real estate and must collect Iowa
sales tax on 60 percent of the sales price to the Iowa builder/dealer.
EXAMPLE 3: The manufacturer is located outside Iowa. The
manufacturer contracts to sell a home to a customer (owner) in Iowa. The
manufacturer hires a common carrier to deliver the home to the Iowa customer.
The manufacturer has no activity in Iowa that would create a "nexus" requiring
the manufacturer to collect Iowa tax. In this situation, the Iowa customer is
required to remit use tax on 60 percent of the purchase price of the
home.
EXAMPLE 4: The manufacturer may be located in Iowa or outside
Iowa. The manufacturer sells a home to a dealer in Iowa that will resell the
home to the final customer. The manufacturer may deliver the home, or delivery
may be made by a common carrier. The manufacturer has no contractual obligation
for erection. In this situation, the manufacturer is making a sale for resale
and is not required to collect tax. The manufacturer must have a valid resale
certificate on file from the dealer. The dealer, if in Iowa, would be required
to collect tax when the home is sold.
EXAMPLE 5: The manufacturer is located in Iowa. The
manufacturer contracts to furnish, deliver, and perform the setup on a home in
a state other than Iowa. The manufacturer withdraws the home from inventory and
transports the home to the other state for setup. In this situation, the Iowa
manufacturer does not owe any Iowa tax because Iowa Code section
423.2(1)
"b" exempts building materials and supplies that manufacturers
withdraw from inventory for construction outside Iowa.
EXAMPLE 6: The manufacturer is located in Iowa. The
manufacturer sells a home to an Iowa customer and agrees, under separate
contract, to transport the home to the job site and perform the setup. The
manufacturer should collect tax on 60 percent of the sales price of the home.
The customer also wants a garage. The manufacturer agrees to sell the lumber,
nails, and shingles to the customer who would build the garage. This sale would
be considered a sale at retail, and the manufacturer should collect tax on the
entire sales price of these materials. The same would be true if the
manufacturer sold appliances separate from the sale of the home; sales tax
would be due on the entire sales price of the appliances.
EXAMPLE 7: The manufacturer may be located inside or outside
Iowa. The manufacturer sells a modular home to a dealer that is a general
contractor. The dealer subcontracts the work of placing the home on a
foundation to various third parties, which transport the home to its site,
excavate for and pour the concrete slab, and perform plumbing, electrical
hookup, and all other services that are part of the construction contract for
placing the modular home at its location. Since the sale of the modular home is
to a dealer that is a contractor, the manufacturer will collect and the dealer
will pay tax on 60 percent of the modular home's invoice price.
This rule is intended to implement Iowa Code sections
423.2(1)
"b," 423.3(64), 423.5(1)"b," 423.6(9), and
423.6(10).
