Iowa Admin. Code r. 701—211.9(423) — Machine operators

211.9(1) In general. Persons engaged in the business of operating machines of all kinds that belong to other persons and charge a fee for operating are selling a service subject to sales tax. Operation of the machine must be the central function of the service being performed and not incidental to the performance of the service the operator was hired to perform. 211.9(2) Definitions. For purposes of this rule: “Machine” includes but is not limited to typewriters, computers, calculators, cash registers, and manufacturing machinery and equipment. “Machine” does not include telephones, automobiles, or airplanes. “Machine operator” is a person who manages, controls, and conducts a mechanical device or a combination of mechanical powers and devices used to perform a function and produce a certain result or effect. 211.9(3) Machine operators as employees. The services of a machine operator are not subject to sales tax if the operation of machinery is by an employee directly for an employer. Rule 701—211.3(423) contains information about services performed by an employee for an employer. Example 1: Employee A is hired to perform data entry on a computer for A’s employer. While Employee A is performing the service of a machine operator, because Employee A is performing the service directly for A’s employer, A’s service is not subject to sales tax. Example 2: Through a temporary employment agency, Worker B performs data entry on a computer for Company Z. Company Z pays a set per-hour fee for data entry services. Worker B is performing the service of a machine operator, not directly for Company Z but for the temporary employment agency. Company Z must pay sales or use tax on the fee imposed by the temporary employment agency. Rule 701—211.23(423) contains information about the service of private employment agencies. Example 3: Through a temporary employment agency, Worker C performs telemarketing services for Company X. Because Worker C is operating a telephone, which is not considered a machine for purposes of this rule, Company X would not pay sales or use tax on the fee imposed by the temporary employment agency. Example 4: Company Y hires Lawyer D through a temporary employment agency. Lawyer D spends most of the work time performing legal research and writing memoranda, both of which are done at a computer. Lawyer D is not a machine operator just because Lawyer D uses a computer. Lawyer D was hired by Company Y to perform legal services. Lawyer D’s use of the computer is incidental to the legal services Lawyer D was hired to perform. Example 5: Company X hires Employee A as a purchaser. In this role, Employee A procures materials for Company X, negotiates and manages purchasing agreements, and communicates with vendors. To perform these job duties, Employee A spends the majority of working hours on a computer. Employee A is Revenue[701]Ch 211, p.4 IAC 2/5/25 not a machine operator, because the central function of the job is as a purchaser and the computer use is incidental to the performance of job duties.