Iowa—Sales and Use Tax: Utility Company’s Credits for Customer-Generated Electricity Exempt from Tax
IOWA: An electric utility company’s (taxpayer’s) credits to its customers for local electricity generation was exempt from Iowa sales and use tax. Generally, if a trade-in transaction meets the requirements of the relevant law, the amount of credit received from the trade-in is exempt from tax. In this matter, the taxpayer provided electricity to its customers, where its customers were responsible for paying electricity inflow charges, while the amount of net outflow was credited to them. Therefore, the taxpayer inquired regarding the taxability of the credits. In support of its tax liability calculation, the taxpayer presented three billing scenarios questioning whether the outflow and inflow charges should be treated separately or would the outflow be considered a trade-in. It was noted that the outflow was a trade-in. Further, the taxpayer’s trade-in transactions met the requirements of the tax exemption and, therefore, the amount of credit was tax-exempt. Lastly, the taxpayer was not required to issue a resale exemption certificate to each of its customers.
Declaratory Order 2020-300-2-0299, Iowa Department of Revenue, July 10, 2020, released December 2020
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