Gov. Branstad Signs Legislation Clarifying Nexus for Iowa

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By Mark Wolski  

 

ST. PAUL, Minn.--Iowa Gov. Terry Branstad (R) signed legislation June 11 that clarifies nexus for retailers in the state.

H.F. 625 requires retailers with offices or distribution facilities in the state that facilitate the delivery of property or services to collect sales and use taxes, as well as those that conduct activities that are significantly associated with retailers' ability to establish and maintain a market in the state for sales.

Jim McNulty, spokesman for the Iowa Department of Revenue, told BNA June 12 that the bill codifies current department practice. Victoria Daniels, also with the department, said the bill's language could strengthen the state's definition of the elements necessary for internet retailers to collect sales tax.

The department has not estimated the tax revenues that could result from the updated nexus language, McNulty said.

Under H.F. 625, retailers would have nexus if they maintain an office, distribution facility, merchandise storage place, or a similar place of business that facilitates the delivery of property or services. Retailers would also be considered to have nexus if they take actions associated with their ability to establish or maintain a market in the state.

The legislation provides that any agreements between retailers and state agencies that exempt them from collecting sales taxes would be considered null and void unless they are approved by the Iowa General Assembly.

School Tuition Organization Tax Credit

McNulty said H.F. 625 includes language that expands the state's school tuition organization tax credit. The credit is currently limited to $8.75 million per year; the legislation provides for a $12 million tax credit, effective for tax year 2014.

He said the bill also expands the definition of those who can claim the tax credit.

According to McNulty, the STO tax credit was established several years ago. It allows individuals who contribute to STOs to claim a credit equal to 65 percent of the amount contributed, and the credits are awarded on a first-come, first-served basis.

There are 12 STOs in Iowa, each representing non-public elementary and secondary schools, McNulty said, and contributions allow the STOs to offer scholarships to students seeking to attend non-public schools in the state.

Currently, only individuals and C corporations can claim STO tax credits, McNulty said. Under H.F. 625, S corporations, partnerships, limited liability companies, and estates and trusts will also be able to claim credits, and shareholders in the different entities will be able to claim credits on a pro-rata basis, he said.

H.F. 625 will take effect July 1.

 


Text of the legislation is at https://www.legis.iowa.gov/index.aspx.