Multilevel marketer companies may enter into a written
contract with the department to collect and remit state and local option sales
taxes on sales of tangible personal property and specified digital products to
independent distributors for resale and remit the taxes directly to the
department. To be eligible for the multilevel marketer program, the company
must meet certain eligibility requirements and agree to certain terms in the
multilevel marketer agreement as set forth in 701-subrules 208.1(3) and
208.1(4). All written contacts with the department should be sent to Nonfiler
Unit, Compliance Division, Iowa Department of Revenue, P.O. Box 10456, Des
Moines, Iowa 50306-0456.
(1)
Definitions. The following definitions of terms are applicable
to this chapter:
"Independent distributor" means a seller who
purchases products for resale to an Iowa consumer based on a price suggested by
a multilevel marketer.
"Multilevel marketer" means a wholesaler
that sells tangible personal property or specified digital products for resale
via a network of independent distributors who then sell the property to the
ultimate consumers located in Iowa at a retail price suggested by the
multilevel marketer.
"Sales tax" or "sales
taxes" for the purpose of this rule means Iowa state sales tax,
including local option sales and service taxes, and state use tax. To determine
whether local option sales and service taxes are due, see rules
701-270.2 (423B) and
701-270.3
(423B).
(2)
Collection of tax. Iowa state sales tax is to be collected on
the wholesale or retail selling price if delivery of the multilevel marketer's
tangible personal property or specified digital product occurs in Iowa or the
property is used in Iowa (more information is contained in subparagraph
208.1(4)
"a"(1)). In addition, local option sales tax is due on
the sale if delivery of the tangible personal property or specified digital
product to the consumer occurs within a local option tax jurisdiction. More
information and examples illustrating delivery and taxation can be found in
rules
701-270.2 (423B) and
701-270.3 (423B).
(3)
Eligibility
requirements. For a multilevel marketer to be eligible for a
multilevel marketer agreement, the following criteria must be met:
a. Tangible personal property or specified
digital products are sold by the multilevel marketer to an independent
distributor for resale to an Iowa end user or for a distributor's personal
use.
b. Unless authorized by the
department, the multilevel marketer must not have been previously required to
be registered to remit sales tax.
c. The multilevel marketer must have
contacted the department with a request to collect and remit sales taxes
directly to the department on sales made by an independent
distributor.
d. The multilevel
marketer must not be under audit or examination by the department on the
effective date of the agreement.
The department has full discretion to determine if a
multilevel marketer meets the eligibility requirements for a multilevel
marketer agreement. The department has full discretion to decide whether to
enter a multilevel marketer agreement. The department can request any and all
information and documentation necessary to determine whether eligibility
requirements are met. Failure to timely submit information and documents
requested by the department will result in the department's refusal to enter
into an agreement with the multilevel marketer.
(4)
Terms of the multilevel marketer
agreement. The multilevel marketer agreement will become effective on
the date an authorized representative of the multilevel marketer executes the
agreement. Unless terminated in accordance with subrule 208.1(5), the
multilevel marketer agreement remains in effect as long as the multilevel
marketer has an independent distributor making sales in Iowa. Terms of
agreements are based on results of negotiations between the multilevel marketer
and the department. However, the following general terms must be in each
multilevel marketer agreement:
a. The
multilevel marketer agrees to the following terms:
(1) The multilevel marketer agrees to collect
tax on the following three types of sales, excluding sales properly exempt from
tax and evidenced by a valid exemption certificate:
1. The multilevel marketer agrees to collect
sales tax from the independent distributors based on the suggested retail price
of its product;
2. If the
multilevel marketer allows independent distributors to purchase its product at
a wholesale price for the distributor's personal use, then the multilevel
marketer agrees to collect sales tax on sales that are based on the wholesale
price to the independent Iowa distributor, unless the department waives this
requirement; and
3. The multilevel
marketer agrees to collect sales tax on all retail sales by the multilevel
marketer to consumers that are subject to sales tax;
(2) The multilevel marketer will timely remit
sales tax on transactions described in subparagraph
208.1(4)"a"(1);
(3) The multilevel marketer will maintain
records to establish the accuracy of the sales and use tax returns within the
applicable statutes of limitation;
(4) The multilevel marketer agrees that the
sales tax shall be added to the retail price charged to the consumer, as
required by Iowa Code section
423.14(2)
"e";
(5) The
multilevel marketer agrees to be subject to audit and to pay any tax, penalty,
and interest that are ultimately found to be legally due and that were required
to be collected by the multilevel marketer under Iowa law, these rules, and the
multilevel marketer agreement;
(6)
The multilevel marketer agrees to abide by the rules in 701-Chapter 208;
and
(7) The multilevel marketer
agrees to register for an Iowa sales and use tax permit.
b. The department agrees to the following
terms:
(1) The department will not audit,
assess or demand payment of sales tax, penalty or interest from the multilevel
marketer for any tax periods ending before the effective date of the multilevel
marketer agreement, unless the multilevel marketer had a permit registration
with the department prior to the effective date of this multilevel marketing
agreement. If a multilevel marketer had a permit registration with the
department prior to the effective date of this multilevel marketing agreement,
the department may audit, assess, refund, or demand payment of tax, penalty,
and interest from the multilevel marketer for any of those previous tax periods
within the applicable statute of limitation.
(2) Unless required for transactions outside
the multilevel marketer agreement, the department will not require the
multilevel marketer to retroactively register for an Iowa sales and use tax
permit or file Iowa sales and use tax returns for periods ending on or before
the effective date of this agreement.
(3) The department agrees to allow a
deduction from taxable sales reported by the multilevel marketer for
merchandise returned by an independent distributor for which tax has already
been paid to the department and for which the multilevel marketer, via the
distributor, has allowed a credit or refund of the tax to the
consumer.
c. Other
general agreement terms:
(1) The multilevel
marketer agreement is binding upon all parties, including their successors and
assignees; and
(2) The terms,
provisions, interpretations and enforcement of the multilevel marketer
agreement are to be governed by the laws of the state of Iowa.
d. Refunds. Refunds for any
overpayment of taxes paid by a consumer as a result of a multilevel marketer
agreement should be claimed on the proper Iowa refund claim form as designated
by the director. Under this agreement, if the retail sale is made by an Iowa
retailer to an out-of-state consumer, the multilevel marketer agrees to forego
any claim for refund of tax that was paid on such sale.
(5)
Termination of a multilevel
marketer agreement. If any of the following events occur, an executed
multilevel marketer agreement may be declared null and void:
a. Termination of a multilevel marketer
agreement at the department's discretion.
(1)
The multilevel marketer has misrepresented any material fact regarding its
activities, operations, tax liabilities, or eligibility under the
agreement.
(2) It is determined by
the department that the multilevel marketer had been notified that it was to be
or was under audit by the department prior to the time the multilevel marketer
executed the multilevel marketer agreement.
b. Termination of a multilevel marketer
agreement by mutual agreement of the parties.
(1) Change occurs in law that impacts the tax
liability subject to the multilevel marketer agreement.
(2) Collection and remittance of sales tax as
required under the agreement are more feasible by other means.
Written notice of termination will be promptly given by the
department in the event of termination under paragraph
208.1(5)"a." To accommodate the time necessary to effectuate
changes by the multilevel marketer and the department, the effective date of
the termination of the multilevel marketer agreement shall be 60 days from the
date of the notice of the written termination, unless a request for additional
time is made by the multilevel marketer and the request is granted by the
department.
(6)
Liability of independent
distributors. After execution of a multilevel marketer agreement, an
independent distributor must collect, report, and remit to the department,
unless remitted to the multilevel marketer, any and all sales taxes that the
independent distributor is required to collect, report, and remit that exceed
the amount of tax that the independent distributor has previously remitted to
the multilevel marketer company. If such excess tax is remitted to the
multilevel marketer, the multilevel marketer shall report and remit the tax to
the department.
EXAMPLE 1: An independent distributor purchased products from
the multilevel marketer at the wholesale price because the distributor thought
that the product would be for the personal use of the distributor. The
distributor paid Iowa tax based on the wholesale price to the multilevel
marketer and the multilevel marketer remitted the tax to the state of Iowa.
Subsequently, the distributor resold the product to an Iowa customer at a
retail price, which is greater than the wholesale price. The distributor is
required to charge Iowa tax on the retail price. The distributor is also
required to report and remit directly to the department or the multilevel
marketer the difference between the tax previously paid on the wholesale price
and the tax collected on the retail price from the Iowa customer.
EXAMPLE 2: An independent distributor purchased products from
a multilevel marketer for resale at the retail price suggested by the
multilevel marketer. Tax was collected by the multilevel marketer from the
independent distributor on the suggested retail price of the products and
remitted to the department by the multilevel marketer. The independent
distributor subsequently sold the product to an Iowa customer for a price
greater than the suggested retail price. The independent distributor is
required to charge Iowa tax on the full sale price. The independent distributor
is also required to report and remit directly to the department or to the
multilevel marketer the difference between the tax previously paid on the
suggested retail price and the tax collected on the price charged the Iowa
customer.
If an independent distributor makes sales that are exempt
from sales taxes, then the independent distributor must obtain a valid
exemption certificate from the purchaser to evidence the transaction and
provide a copy of the completed exemption certificate to the multilevel
marketer that has the multilevel marketer agreement with the
department.
(7)
Legislative changes. All multilevel marketer agreements are
subject to all applicable legislative enactments that are made subsequent to
the agreement and that impact the agreement.
