Details regarding sales tax worth noting resulting from Iowa’s recent derecho
September 30, 2020
On August 10, 2020, several cities in Iowa experienced its first ever derecho: a devastating storm with up to 100+ mph winds and thunderstorms that terrified the physical and technological landscape, resulting in a range of damage to many buildings and structures within these communities.
Recent derecho included in Iowa code
Iowa code exempts sales tax on repair services related to “flood, fire, or other uncontrolled disaster or casualty” outlined in Iowa Admin Code 701-219.(13)(2). Thankfully, the derecho fits within this description.
Normally in a real estate repair transaction, the contractor/party performing repairs would charge the end customer sales tax on both materials and labor, however, under the above exemption, the repair labor portion is now pardoned.
Materials used in repair are still taxable to the end customer, but the mechanics of where sales tax applies in the transaction can be complicated and depends on whether or not the party making the repair holds a sales tax permit and how they invoice their customer.
If you have a client who will be paying for repairs due to the derecho, or if you represent a contractor making these repairs, reach out and we can discuss specifically how this will affect them.