PRINCIPAL LIFE INSURANCE COMPANY (TRU) (2015)
Topic Code: C266 Computer (ST) Document Reference: 15300028
Principal Life Insurance Company
Attn: Richard H. Wireman, II
711 High Street
Des Moines, IA 50392-0350
RE: Principal Life Insurance Company (Principal) Consumer Use Tax Protest
Docket No. 2015-320-1-0146
Department Number 2015086700037
Dear Mr. Wireman:
The Review Unit of the Iowa Department of Revenue has considered your protest. After reviewing the facts and evidence presented and the laws which apply to your protest, the Review Unit grants your protest for the following reasons.
The protest was filed due to the Department’s partial denial of a refund claim which involved, among other issues, several multi-function devices which provide copy, print, scan, and fax services. Your position is that because the multi-function devices are connected to your company’s computers and used in the manner described that these devices qualify as exempt computer peripheral equipment under Iowa’s statutes and administrative code.
Iowa Code §423.3(47)“a” provides exemptions for the following, in relevant part:
The sales price from the sale or rental of computers, machinery, and equipment, including replacement parts, and materials used to construct or self-construct computers, machinery, and equipment if such items are any of the following:
(4) Computers used in processing or storage of data or information by an insurance company, financial institution, or commercial enterprise.
Rule IAC 701—18.58(1), which was written, in part, to implement that code section, defines computers as the following:
…stored program processing equipment and all devices fastened to it by means of signal cables or any communication medium that serves the function of a signal cable. Nonexclusive examples of devices fastened by a signal cable or other communication medium are terminals, printers, display units, card readers, tape readers, document sorters, optical readers, and card or tape punchers.
As presented in a policy letter dated December 28, 2009 (document reference no. 09300092 in the Iowa Tax Research Library http://itrl.idr.iowa.gov/), the Department has adopted a policy that “more than mere attachment to a computer is necessary to render a peripheral device a part of a computer, the sale of which is exempt from tax. The output of other than incidental amounts of information from any device must be derived from data stored or processed within a computer’s central processing unit if that device is to be considered part of the computer.” The Department’s position is that only the print and scan functions of the multi-function devices qualify as exempt usage; the copy and fax functions do not qualify.
You previously provided the Department with “click count” information summarizing the combined total number of pages used for each specific function for all of the multi-function devices included in the refund claim. You claim that this information verifies that the purchases of the multi-function devices qualify for exemption because the majority of the overall usage is for exempt printing and scanning.
The Department’s position is that each individual multi-function unit must qualify for exemption on its own merit. Because the information provided summarized the combined usage of all devices instead of each individual unit, the Department denied that portion of the refund claim.
However, since the filing date of the protest, you have provided the auditor with the “click count” information for each individual multi-function device included in the refund claim. This documentation verifies that each unit individually qualifies for exemption because the majority of the usage for each of the devices is for exempt printing and scanning.
Attached to the protest as Exhibit B was a summary schedule in which you determined that 96.67% of the usage of the devices was for exempt purposes. This percentage was utilized by Principal to determine the amount of tax under protest ($145,134.80). However, because each device qualified for exemption, the purchase prices of these units are fully exempt from Iowa sales tax. Therefore, the Department will refund 100% of the sales tax paid on the purchases of these devices.
An issue related to this protest involves a separate refund claim filed with the Department which includes the same purchases of multi-function devices as those included in this protest. Because the protest has now been granted, the Department asks that you contact Revenue Auditor, Don Coy II, at 515-281-8003 to withdraw the second, separate refund claim involving the purchases of these multi-function devices.
In summary, your protest has been granted. A tax refund of $150,139.44, plus interest will be processed and issued within 30 days. Because your protest has been granted in full, the Director will be notified that this matter has been resolved and the Review Unit will request that the protest be closed. An official closing order will be sent to you in the near future.
If you have any questions regarding this matter, please do not hesitate to contact me.
Steve Campbell, Technical Tax Specialist
Policy and Communications Division
Audit Services Section