Taxability surrounding grain bins has been a hot topic this past year in Iowa. Part of reason is the ambiguity contained in the new law (423.3(16A), which became effective July 1, 2019. The new code language simply states, “The sales price from the sale of a grain bin, including material or replacement parts used to construct or repair a grain bin.” The language is so broad it has raised more questions than it answered, particularly questions concerning the taxability of grain bin attachment parts.
On July 15, 2020, Rule 701—226.20 was submitted to the Iowa Administrative Bulletin with an effective date scheduled for August 19, 2020. This is good news because Rule 701—226.20 provides clarity and much needed guidance on grain bin taxability.
Below are general guidelines. For additional details, reference Iowa Administrative Code Chapter 701-226: Agricultural Rules.
Rule 701—226.20 in brief:
226.20(1) Property considered to be a grain bin or material used to construct a grain bin. This section provides a non-exhaustive list of both exempt and taxable property. There have been numerous inquiries pertaining to the below points, which the new rule enumerates as exempt:
- Sweeps or augers permanently attached in a grain bin.
- Stirring equipment permanently attached in a grain bin.
- Concrete pad or foundation under a grain bin – this would normally be a taxable purchase by a contractor in a new construction contract.
Listed Taxable property of note:
- Scales or weighers.
- Conveyors, including chain conveyors, belt conveyors and drag conveyors.
226.20(2) Primarily used to hold loose grain for drying or storage. To be exempt, “primarily” is defined as 50% of the time holding loose grain for drying or storage.
226.20(3) Claiming the exemption. This section defines how to claim the exemption and provides examples of contractor’s responsibility in the transaction. Proactive Exemption Certificate management will be key to avoid hassles down the road.
While the rule is certainly a step in the right direction, there remain ambiguities. The question has already arisen on the taxability of equipment not specifically enumerated, however may be exempt per the rule. The state and local tax staff at BerganKDV will continue to monitor this rule for IDOR updates and policy clarifications.
Be sure to connect with your trusted advisor at BerganKDV for assistance in making the best decision for your situation. Start here.
