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

About Davis Davis & Harmon LLC – Sales Tax Experts: Headquartered in Dallas, Texas, Davis Davis & Harmon LLC – Sales Tax Experts specializes in sales/use tax refund recovery and audit defense. Our team of consultants is comprised of former Big 4 sales tax consultants and state sales tax auditors. Each of our consultants has 15 to 20 years of experience, providing our clients with access to a highly specialized team of sales/use tax professionals. At Davis Davis & Harmon, LLC we are committed to maintaining the highest standards in our talent pool. We work hard to meet our clients’ needs by ensuring that you view our firm as an extension of your company and a member of your team.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.