Declaratory rul ing; SERTLE, RICK (1998)(ST)
Topic Code: J002Janitorial services Document Refe rence: 98300116
BEFO RE THE IOWA DEPARTMENT OF REVENUE AND F INANCEHOOVER STATE OFFICE BUILD INGDES MO INES, IOWA _____________________________________________________________________________ ) IN THE MATTER OF: ) )THE PETITION OF RICK SERTLE ) . ) DECLARATORY RUL ING )DECLARATORY RUL ING ) REGARD ING THE APPLICABILITY OF )SALES TAX UNDER IOWA CODE )SECTIONS 422.43 AND 423.2 ) DOCKET NO. 98-30-6-0026 _____________________________________________________________________________Pursuant to a petition for Declaratory Rul ing submitted to the Iowa Department of Revenue and F inance (he re inafter refer red to as the "Department"), by Rick Sertle (he re inafter refer red to as the "Petitioner") on February 5, 1998 and in accordance with Iowa Code section 17A.9 and Department rule 701-x.1(17A) "Petition for Declaratory Rul ing", Iowa Adm inistrative Code, the Department he reby issues its Declaratory Rul ing.The follow ing is stated by the Petitioner:The Petitioner is do ing bus iness as Fi re and Safety Equipment III. The Petitioner's bus iness includes the sale of tangible personal property and the perform ing of services. The tangible personal property that is sold includes portable fi re ext inguishers, fi re supp ression systems, fi re ext inguisher cab inets, fi re blankets, fi re hose, fi re alarms and related safety equipment. The taxability of the sale of the tangible personal property is not the issue of this declaratory rul ing. Instead, the Petitioner seeks a rul ing regard ing the taxability of the services that the Petitioner performs. P reviously, the Petitioner received an informal letter from the Department's Technical Services Division regard ing the taxability of these services. However, the Petitioner seeks a formal rul ing regard ing whether these services a re subject to Iowa sales tax and whether these services a re to be classified as janitorial services. Specifically, the Petitioner has set forth a recap of the services that the Petitioner performs in an attachment to the Petition for Declaratory Rul ing. In this attachment, the services listed include service and inspection of the follow ing: hand held fi re ext inguishers, fi re supp ression systems, alarms, and the servic ing and clean ing of exhaust hoods, duct and fans. The function of a declaratory rul ing is to provide " reliable advice from an agency as to the applicability of unclear law" Bonfield, The Iowa Adm inistrative Procedu re Act: Background, Construction, Applicability, Public Access to Agency Law, The Rulemak ing Process, 60 Iowa Law Rev. 731, 805 (1975). Iowa Code section 17A.9 (1997) contemplates declaratory rul ings by adm inistrative agencies on a disclosed set of facts. City of Des Mo ines v. P.E.R.B., 275 N.W.2d 753, 758 (Iowa 1979). A declaratory rul ing enables the public to secu re def initive b ind ing advice as to the applicability of agency-enforced law to a particular set of facts. Bonfield, at 822-823.It is not the function of a declaratory rul ing to resolve issues involv ing factual analysis "too complicated to handle outside of an actual adjudication." Bonfield, at 807. A declaratory rul ing is not a "contested case" as def ined in Iowa Code section 17A.2(2) (1997); namely, it is not an evidentiary hear ing which is also an adm inistrative remedy set forth in Iowa Code chapter 17A (1997) and in the Department's rules, see 702 IAC 7.17. Consequently, for the purposes of this declaratory rul ing, the Di rector views the issue raised in the petition for declaratory rul ing as a question of law applicable to the factual situation disclosed by the Petitioner in the petition. This view is consistent with Department rule 701 IAC 7.25, concern ing the issuance of declaratory rul ings.Iowa Code sections 422.43 and 423.2 set forth that the sale of tangible personal property and enumerated services a re subject to Iowa sales or use tax. Only the services enumerated in Iowa Code section 422.43 a re subject to Iowa sales or use tax. The service of inspection is not a taxable enumerated service in Iowa. As a result, the gross receipts from inspect ing the hand- held fi re ext inguishers, fi re supp ression systems and alarms a re not subject to Iowa sales tax. Department rules have the force and effect of the law and a re p resumed valid. Hope Evangelical Lutheran Church v. Iowa Department of Revenue and F inance, 463 N.W.2d 76 (Iowa 1990); Richards v. Iowa Department of Revenue, 360 N.W.2d 830 (Iowa 1985). One of the enumerated services set forth in Iowa Code section 422.43(11) is that of mach ine repair. Department rule 701 IAC 26.29, that implements Iowa Code section 422.43(11), governs mach ine repair of all k inds. This rule states the follow ing: Persons engaged in the bus iness of repair ing mach ines of all k inds a re render ing, furnish ing or perform ing a service, the gross receipts from which a re subject to tax. "Mach ine" shall include all devices hav ing mov ing parts and operated by hand, powe red by a motor, eng ine, or other form of energy. It is a mechanical device or comb ination of mechanical powers and devices used to perform some function and produce a certa in effect or result. A musical instrument does not constitute a mach ine and the refo re, musical instrument repairs a re not subject to tax. Due to insufficient facts in this Petition for Declaratory Rul ing regard ing the operation and mechanics of the fi re ext inguishers, fi re supp ression systems, alarm systems and exhaust fans, the Department is unable to make a determ ination regard ing whether these items constitute a "mach ine" as def ined in Department rule 701 IAC 26.29. However, the Department notes that it may be possible that some or all of these items may be classified as a mach ine. As a result, the Department states that if one or some of these items can be classified as a mach ine as def ined in the above-cited rule and that servic ing performed includes repair, then such services would be subject to Iowa sales or use tax. Iowa Code section 422.43(11) imposes Iowa sales tax on janitorial services. Department rule 701 IAC 26.60 implements this Iowa Code provision and sets forth a def inition of "janitorial services". The relevant portion of this rule def ines this term in the follow ing manner: "Janitorial services" means the type of clean ing services performed by a janitor in the regular course of duty, whether such services a re performed individually, under separate contract, or a re included with in a general contract to perform a comb ination of such services. The term includes, but is not limited to, contracts to perform interior w indow wash ing, floor clean ing, vacuum ing and wax ing, the clean ing of interior walls and woodwork, and clean ing of restrooms and furnaces. Also included with in the mean ing of the term is the movement of furnitu re and other items of personal property with in a build ing.
The service of clean ing exhaust hoods, ducts, and fans involves the removal of g rease build-up on exhaust systems for commercial restaurants to reduce the risk of fi re and inc rease the effectiveness of the fi re ext inguish ing system to put out a fi re once ignited. Such a service is not the type of clean ing services performed by a janitor as def ined in the above-cited rule. As a result, the gross receipts from clean ing of exhaust hoods, ducts and fans a re not subject to Iowa sales or use tax. In addition, the services and inspection of hand held fi re ext inguishers, fi re supp ression systems and alarms a re also not classified as janitorial services as set forth in Iowa Code section 422.43 and Department rule 701 IAC 26.60.THE REFO RE, based on the facts p resented by the Petitioner, the fo rego ing reason ing and applicable provisions of law, it is the Di rector's rul ing that the Petition for Declaratory Rul ing does not conta in sufficient information to determ ine if Iowa sales tax should be collected on the servic ing of the fi re ext inguishers, fi re supp ression systems, alarm systems and exhaust fans pursuant to Department rule 701 IAC 26.29. The Di rector further rules that the services of inspection and the clean ing of exhaust hoods, ducts and fans a re not taxable enumerated services and the refo re, a re not subject to Iowa sales tax. In addition, the Di rector rules that servic ing and inspect ing hand held fi re ext inguishers, fi re supp ression systems and alarms a re not classified as janitorial services as set forth in Iowa code section 422.43 and Department rule 701 IAC 26.60. Done at Des Mo ines, Iowa, this 4th day of March, 1998. IOWA DEPARTMENT OF REVENUE AND F INANCE ___________________________________________ G. D. Bair, Di rector