What’s in a name? Iowa’s “Computer” Sales Tax Exemption

Cody Edwards, Dickinson Law Firm, Iowa Table SALT, Iowa Taxation Law, Des Moines Iowa

Posted on 12/04/2017 at 12:00 AM by Cody Edwards

“What’s in a name? That which we call a rose by any other word would smell as sweet.” Juliet was so profound. Her logic applies to many areas of life, including Iowa’s computer sales tax exemption where something may be an exempt computer even if it is called by another name. 

Iowa has over 100 sales tax exemptions. Buried within the list of exemptions is a broad, often overlooked exemption for “computers” used by certain businesses. And, even if a business does take advantage of the computer exemption, the exemption applies to much more than laptop and desktop computers.   

Iowa Code section 423.3(47) exempts from sales tax computers used by insurance companies, financial institutions and commercial enterprises. Computers used by “professions” or “occupations,” such as law and accounting firms and doctors are not exempt from tax. To be a computer, the item must process or store information or data or be attached, via cable or otherwise, to a computer that stores or processes data (referred to as a “computer peripheral”).  Exempt computers include the obvious laptop and desktop computers. Computer peripherals include “terminals, printers, display units, card readers, tape readers, document sorters, optical readers, and card or tape punchers.” However, a computer can be something that is not typically thought of as a computer.

In 2010, an administrative law judge examined the breadth of the computer exemption when considering whether slot machines qualified as “computers.” The ALJ noted that the computer exemption is not limited to those items that meet the dictionary definition of a computer.  Rather, the Iowa legislature defined computer in such a way that Iowa’s computer exemption can encompass items are not typically thought of as a computer. Accordingly, the ALJ determined that slot machines do indeed fall within the definition of computer (although ultimately not exempt because the point-of-sale exception to the computer exemption). Significantly, the ALJ also noted that an item qualifies for a computer even if its primary use is not storing or processing data or information.

Thus, based on the statutory definition of computer and the 2010 administrative decision, Iowa’s computer exemption is much broader than it appears and may encompass tablets, machinery and equipment containing microchips, cell phones, land line telephones, postage meters, money counting machines, ATMs, laboratory testing equipment, and security cameras, to name a few.  

Businesses should be cognizant of the capability of the items they purchase—if an item can process or store information or data, it likely qualifies for the computer exemption.  If an item is attached to a computer, it may also qualify for the computer exemption.  

To adapt from Shakespeare’s Romeo and Juliet, a “computer” by any other name should be exempt.  

Dickinson’s attorneys have experience analyzing whether items qualify for the computer exemption. Contact Cody Edwards with questions regarding Iowa computer exemption.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed. 

- Cody Edwards


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