Policy Letter; Retailer's Responsibility to Collect Tax, Your Letter, 11/14/90
Topic Code: N101Nonprofit Organization (ST) Document Reference:
Policy letter; Retailer's Responsibility to Collect Tax, Your Letter, 11/14/90
Your recent letter sent generally to the Department of Revenue and Finance has been given to me for reply. I am a technical tax specialist III in the Policy Section. My particular area of concentration is Iowa sales and use tax law. The specific facts of your situation are, as I understand them, as follows: You are an uncompensated consignor for Christian Cottage Imports. In that capacity, you receive various goods from that organization. The goods are produced by poor people living in other countries (for example the Dominican Republic, Haiti, Honduras and Kenya) and also by people living in at least one state of the U.S.A. (Mississippi). The goods produced are such things as crocheted items, puppets, Advent wreaths and other Christmas ornaments, embroidery and toys. Christian Cottage Imports determines the price at which these goods will be sold. You sell the goods to various third parties on behalf of Christian Cottage Imports. All proceeds from your sales are returned to Christian Cottage Imports on a quarterly basis. As far as I can determine from the brochure which you have included with your letter, Christian Cottage Imports return at least some portion of the money which you have collected to the people who produced the goods which you have sold on that organization's behalf. You ask if, under this arrangement, you are obligated to collect Iowa tax on the sales which you make on behalf of Christian Cottage Imports. My answer to this question would be yes. My explanation for that answer is as follows: Under Iowa Code § 422.43(1) tax is imposed upon the "gross receipts" from all sales of tangible personal property "sold at retail" in Iowa to consumers or users. Under § 422.48(1) of the law, "retailers" are obligated to collect this tax from consumers or users and, 422.52(1) they are obligated to forward the tax to the Department at periodic intervals. For the purposes of Iowa sales tax law, a "retailer" is defined by § 422.42(5) to be: 5. "Retailer" includes every person engaged in the business of selling tangible goods, wares, merchandise or taxable services at retail, or the furnishing of gas, electricity, water and communication service, and tickets or admissions to places of amusements and athletic events as provided in this division or operating amusement devices or other forms of commercial amusement from which revenues are derived; provided, however, that when in the opinion of the director, it is necessary for the efficient administration of this division to regard any salespersons, representatives, truckers, peddlers, or canvassers, as agents of the dealers, distributors, supervisors, employers, or persons under whom they operate or from whom they obtain tangible personal property sold by them irrespective of whether or not they are making sales on their own behalf or on behalf of such dealers, distributors, supervisors, employers, or persons, the director may so regard them, and may regard such dealers, distributors, supervisors, employers, or persons as retailers for the purposes of this division.
There is a great deal of legal verbiage contained in the definition of "retailer". If you study the definition, you will note that it is very broadly drawn to ensure, basically, that anyone who distributes goods for sale in Iowa is obligated to collect Iowa sales tax. Thus, even though you are an uncompensated consignor working on behalf of Christian Cottage Imports, you are a "retailer" selling goods in Iowa and collecting "gross receipts" from those sales and, as such, obligated to collect Iowa sales tax from the persons to whom those goods are sold. Under § 422.45(3) of the Code, there is an exemption from sales tax for sales of "charitable activities". Since the goods consigned to you on behalf of entrepreneurs who, obviously, must make a profit in order to survive, I cannot state that your consignment sales would be exempt from tax as sales of "charitable activities". Certainly, the activity in which you engage would appear to be a very worthy one. However, it is also, pretty clearly one which obligates you to collect sales tax on behalf of the state of Iowa. In conclusion and for your convenience I have included with this letter the usual packet sent to persons requesting a retail sales tax permit. It includes an application for the permit, a sales and use tax information booklet and a self-addressed envelope for return to the Department. After you apply for a sales tax permit, a pack of sales tax returns will be sent to you. Sincerely yours, Darwin D. Clupper Tax Specialist, Policy Section Technical Services Division