Iowa Admin. Code r. 701—211.2(423) — Services purchased for resale

Services purchased for resale are not subject to sales tax. A service is purchased for resale when it is subcontracted by the person contracted to perform the service. Tax imposed on services is collectible at the time the service is complete even if the services are not purchased by the ultimate beneficiary. Example 1: D owns an auto repair shop, and F brings an automobile in to have the air conditioner fixed. D is unable to fix the unit, so the car is sent to G, who is an air conditioning specialist. The sale of G’s service to D is a sale for resale by D to F, so there is no tax imposed. The sale from D to F is subject to sales tax. Example 2: R operates a retail farm implement dealership. R accepts a motorboat as part consideration for a piece of farm equipment. R then contracts with D to repair the motor on the boat. R does not normally sell motorboats in the regular course of R’s business. Therefore, the repair service performed by D for R is subject to sales tax.