Sent via email

 

March 18, 2016

 

 

 

Re:      Mobile Office Space

 

Dear :

 

 

The Department received your question regarding whether or not the rental of a trailer used as an office at a job site is subject to tax.  In addition, you asked about charges related to installation of mobile home or manufactured housing used as an office at a job site, and if charges made for the tie-down of mobile homes are taxable as mandatory charges, which are a part of the taxable rental receipts.  The vehicles at issue may not be registered under Iowa Code chapter 321F as the business is a South Dakota business and the vehicles are plated or titled in South Dakota.  The trailers weigh anywhere from 3,500 pounds up to 15,000 pounds.  The rental periods are typically six (6) months to a year but many are three (3) months or longer.  You are not certain if the trailers are registered vehicles but they do have South Dakota license plates.

 

Iowa Department of Revenue’s Response:

 

Iowa Code section 423.2 imposes sales tax on the sales price of tangible personal property sold at retail in Iowa, including the rental or lease of tangible personal property.  See Iowa Code § 423.1(51).  Iowa Code section 423.5 imposes a six percent use tax on the purchase price of the use of manufactured housing in the state if sold in the form of tangible personal property or on the installed purchase price if the manufactured housing is sold in the form of realty.  Iowa Code § 423.5(1)(b). 

 

An excise tax of five percent is imposed on the use of manufactured housing and leased vehicles, if the lease transaction does not requiring titling or registration of the vehicle.  Iowa Code § 423.5(1)(c). 

 

Tax exemption statutes are strictly construed with all doubt resolved in favor of taxation and the party seeking an exemption has the burden to prove entitlement to it.  Iowa Code section 423.3(37) exempts from sales tax:

 

The sales price of services on or connected with new construction, reconstruction, alteration, expansion, remodeling, or the services of a general building contractor, architect, or engineer. The exemption in this subsection also applies to the sales price on the lease or rental of all machinery, equipment, and replacement parts directly and primarily used by owners, contractors, subcontractors, and builders for new construction, reconstruction, alteration, expansion, or remodeling of real property or structures and of all machinery, equipment, and replacement parts which improve the performance, safety, operation, or efficiency of the machinery, equipment, and replacement parts so used.

 

In Policy letter; contractor - retailer; Dec23, 1998, the Department determined the taxability of modular space units that resembled mobile homes except they cannot be used as living quarters and determined that the selling and leasing of the modular space units were the sale of tangible personal property and taxable.  In Policy Letter; Construction Equipment Rental; October 15, 2014, the Department determined that the rental of a construction trailer rented as temporary offices were not directly used in new construction, and therefore not exempt.  In Memorandum December 3, 1973,  the rental of an on-site construction office was a taxable rental as it was not directly used in connection with construction.

 

As indicated in the statute and the previously mentioned policy letters , the exemption applies to machinery, equipment, and replacement parts directly and primarily used for new construction.  The trailers you are renting to use as offices are not used directly in new construction.  Therefore, the sales price for the rental of the trailers would not be exempt under Iowa Code section 423.3(37).  I have included a recent policy letter that addresses this issue.

 

Assuming that the installation and/or tie-down is part of the rental price of a trailer to be used as an office at a job site and not separately contracted for and separately stated on the invoice, the tax would be imposed on the whole rental price, including the installation and/or tie-down.  See Iowa Code § 423.1(51). 

 

I hope this information has been helpful to you. Please remember that this letter is an informal opinion based only on the facts you provided, and on the current law. In the future the Department could take a position contrary to that stated in this letter. Any written advice or opinion rendered to members of the public by Department personnel that is not pursuant to a Petition for Declaratory Order under 701 IAC 7.24 is not binding upon the Department. If you have any additional questions regarding this matter please do not hesitate to contact me.

 

Sincerely,

 

 

Theresa A. Dvorak

Policy Section

Taxpayer Services and Policy Division

Iowa Department of Revenue

(515) 281-3194

theresa.dvorak@iowa.gov