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The Iowa Department of Revenue would like to inform you that recent changes in Iowa law may affect your business or members of your organization. Earlier this year, Iowa legislators passed a new law, SF 512, effective July 1, 2018, which creates a Water Service Excise Tax. This new law means changes for entities piping water to consumers for compensation.
Here are the basics:
- Currently, the sale of water piped to consumers for compensation is subject to state sales tax of 6%, and may be subject to local option sales tax.
- This state sales tax will be replaced with the new Water Service Excise Tax of 6% and will require a new permit number.
- There will be no local option sales tax collected on Water Service Excise Tax.
- If your sales of piped water service are combined with other taxable sales, you will need to separately remit the portion of taxes collected for the sale of piped water service. This will include separately listing the sales of piped water service on receipts and bills.
- There will be some entities who sell water service and other taxable products or services that will still collect and remit state sales tax. Those entities will be filing a sales tax return under their existing sales tax permit for non-water service sales and will also be filing a separate return under the new Water Service Excise Tax.
- For example, if an entity that provides both sewage and water services is currently collecting and remitting sales tax on sewer charges to nonresidential commercial customers, they will continue to collect this portion as sales tax plus any applicable local option sales tax, and will now also collect the water service excise tax on the water service sales only.
Registration for a new permit will begin June 1, through the Iowa Department of Revenue website. You will receive additional information on how to register for a new permit in June.
This notice requires no immediate action on your part. More information is available on the Department’s website at https://tax.iowa.gov/WET
The statutory mission of the Iowa Department of Revenue is to serve
Iowans and support state government by collecting all taxes required by
law, but no more.
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