Policy Letter; Re: Bank Service Charges and Local Option Sales Tax, Your Letter, 3/23/95

Topic Code: B011Bank Service Charges (ST)          Document Reference:

Policy letter; Re: Bank Service Charges and Local Option Sales Tax, Your Letter, 3/23/95

Duane L. Lasack

Redacted Content

Citizens State Bank

P. O. Box 198

Wyoming, IA 52362-0198

Dear Redacted Content

Your letter to Mr. Hickman has been given to me for reply. Please allow me to introduce myself. My name is Darwin Clupper. I am a technical tax specialist with the Department's Policy Section. My particular area or concentration is Iowa sales and use tax law.

Under Iowa Code, ยง 422B.8, Iowa local option sales tax is imposed upon the gross receipts from all services subject to Iowa state sales tax. One of those taxable services is the " service charges of all financial institutions". If a taxable service is "rendered, furnished or performed" in an area of a county which imposes a local option tax, then the gross receipts from that service are subject to local option sales tax; if not, no tax is due.

I have answered questions similar go your in the past. I can state the usual rule I have learned from this experience, which is that the taxable services of a bank or other financial institution (e.g. stop payment orders on checks, debit card replacements, issuance of a certified check and research related to a checking account) are usually performed at the main bank of a multi-bank corporation and not at any branch bank. Thus, applying the usual rule, local option service tax would not be imposed on bank services performed in Wyoming. You mention that your bank's data processing is done in Wyoming, and this is a substantial indication that the usual rule would apply to your situation.

In closing, I must issue my usual warning. The opinions which I have expressed in this letter are informal only. Because of this, the Department could, in the future, take a position contrary to them.

Sincerely, Darwin D. Clupper Tax Specialist, Policy Section Compliance Division