Iowa Admin. Code r. 701—215.11(423) — Web search portal business and its exemption

A business that qualifies as a web search portal business that has a physical location in Iowa and that meets specific criteria may obtain an exemption from sales and use tax on specific purchases that are used in the operation and maintenance of the web search portal business. This exemption from sales and use tax also applies to the affiliates of a qualifying web search portal business. 215.11(1) Definitions. For the purpose of this exemption, “affiliate,” “control,” and “web search portal business” mean the same as defined in Iowa Code section 423.3(93)“e.” 215.11(2) Claiming the exemption. Iowa Code section 423.3(93)“b” provides the criteria to claim this exemption. If a business fails to meet the investment qualification found in Iowa Code section 423.3(93) “d,” the web search portal business loses the right to claim the exemption and the business is required to pay all sales or use taxes that would have been due on the purchase or rental of all purchases previously claimed exempt from sales and use tax, plus any and all applicable statutory penalty and interest due on the tax. 215.11(3) Exempt purchases. Sales and leases of the following are exempt from sales and use tax when sold or leased to a qualifying web search portal business: a. Computers and equipment that are necessary for the maintenance and operation of the web search portal business; b. All equipment used for the operation and maintenance of the cooling system for the computers and equipment used in the operation of the web search portal business; c. All equipment used for the operation and maintenance of the cooling towers for the cooling system referenced in paragraph 215.11(3)“b”; d. All equipment used for the operation and maintenance of the temperature control infrastructure for the computers and equipment used in the operation of the web search portal business; e. All equipment used for the operation and maintenance of the power infrastructure that is used for the transformation, distribution, or management of electricity used for the operation and maintenance of the web search portal business. This equipment includes but is not limited to exterior dedicated business- owned power substations and backup power generation systems, battery systems, and related infrastructure; f. All equipment used in the racking system, including cabling and trays; g. Fuel purchased by the web search portal business that is used in the back-up power generation system and in all items listed in paragraphs 215.11(3)“a” through “f.” This includes the fuel used in the backup generators that may be located outside the building and that are used if power is interrupted to ensure the web search portal business continues operation; and h. Electricity purchased for use in operating the web search portal business. 215.11(4) Limitation of exemption. The purchase or lease of the items listed in subrule 215.11(3) is only exempt if the items being purchased or leased are being used in the operation or maintenance of the web search portal business. Such purchases or leases will not be exempt from sales or use tax if the item is to be used in the business for another purpose. For example, the purchase of electricity for use in the office Revenue[701]Ch 215, p.6 IAC 2/5/25 portion of the web search portal facility would not be exempt. The purchase of building materials that become real property would not be exempt. For example, the purchase of a dishwasher that will be built into a kitchen area in the break room for employees would not be exempt from tax. The purchase of a dishwasher is the purchase of tangible personal property. However, upon installation, the dishwasher becomes part of the building and realty and is not exempt from Iowa sales or use tax.