ARC 9035C - Iowa Administrative Rules

Adopted and Filed

Automobile rental excise tax, ch 251

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ARC 9035C

REVENUE DEPARTMENT[701]

Adopted and Filed

Rulemaking related to automobile rental excise tax

The Revenue Department hereby rescinds Chapter 251, “Automobile Rental Excise Tax,” Iowa Administrative Code, and adopts a new chapter with the same title.

Legal Authority for Rulemaking

This rulemaking is adopted under the authority provided in Iowa Code sections 421.14, 422.68, 423.42 and 423C.4.

State or Federal Law Implemented

This rulemaking implements, in whole or in part, Iowa Code chapter 423C.

Purpose and Summary

The purpose of this rulemaking is to rescind and adopt new Chapter 251. This chapter provides guidance on the excise tax imposed on the rentals of automobiles and the Department’s administration of the tax. The Department revised the chapter to remove portions of the rules that the Department determined are unnecessary, obsolete, or duplicative of statutory language as required by Executive Order 10. Further, the Department removed existing rule 701—251.4(423C) and added the language of that rule to existing rule 701—251.2(423C), where it would be better suited.

Public Comment and Changes to Rulemaking

Notice of Intended Action for this rulemaking was published in the Iowa Administrative Bulletin on January 22, 2025, as ARC 8728C. A public hearing was held on the following date(s):

●February 11, 2025

●February 12, 2025

No one attended the public hearings. No public comments were received. No changes from the Notice have been made.

Adoption of Rulemaking

This rulemaking was adopted by the Department on February 27, 2025.

Fiscal Impact

This rulemaking has no fiscal impact to the State of Iowa.

Jobs Impact

After analysis and review of this rulemaking, no impact on jobs has been found.

Waivers

Any person who believes that the application of the discretionary provisions of this rulemaking would result in hardship or injustice to that person may petition the Department for a waiver of the discretionary provisions, if any, pursuant to rule 701—7.28(17A).

Review by Administrative Rules Review Committee

The Administrative Rules Review Committee, a bipartisan legislative committee which oversees rulemaking by executive branch agencies, may, on its own motion or on written request by any individual or group, review this rulemaking at its regular monthly meeting or at a special meeting. The Committee’s meetings are open to the public, and interested persons may be heard as provided in Iowa Code section 17A.8(6).

Effective Date

This rulemaking will become effective on April 23, 2025.

The following rulemaking action is adopted:

ITEM 1.Rescind 701—Chapter 251 and adopt the following new chapter in lieu thereof:

CHAPTER 251

AUTOMOBILE RENTAL EXCISE TAX

701—251.1(423C) Definitions and characterizations. For the purposes of this chapter, terms have the same meaning as defined in Iowa Code section 423C.2. In addition, the following definitions and characterizations of words apply.

“Automobile” means the same as defined in Iowa Code section 423C.2(2) and does not include delivery trucks designed primarily to carry cargo rather than passengers.

“Lessor” is a person engaged in the business of renting automobiles to users. Included within the meaning of the term “lessor” are motor vehicle dealers licensed under Iowa Code chapter 322 to sell new and used automobiles who also rent automobiles to users. A person need not be engaged in a profit-making enterprise to be in the business of renting automobiles.

701—251.2(423C) Tax imposed upon rental of automobiles.

251.2(1) Generally. A tax at the rate of 5 percent is imposed on the rental price of any automobile if the rental transaction is taxed under Iowa sales or Iowa use tax law. The tax imposed is in addition to the Iowa state sales or use tax. However, if the rental transaction is not subject to the state sales or use tax, then no automobile rental excise tax is due.

a.Sales tax. Sales tax is due on the rental price of the “rental” of an automobile if possession or the right to possession of the automobile is transferred, under a rental contract, in Iowa.

b.Use tax. Use tax is due on the rental price if an automobile is rented outside Iowa, used in Iowa under the rental contract, and payment of the rental price is made in Iowa at the termination of the rental agreement.

251.2(2) Administration. The director of revenue is required to administer the excise tax on automobile rental as nearly as possible in conjunction with the administration of the state sales tax.

a.Monthly reporting. On a monthly basis, the correct amount of automobile tax collected and due must be reported and remitted to the department electronically via GovConnectIowa.

b.Permit. No permit, other than an Iowa sales and use tax permit, is required to collect the tax imposed under Iowa Code chapter 423C. However, the director may require persons responsible for collecting the automobile rental excise tax to register with the department.

c.Other aspects to administration. 701—Chapters 10, 11, 201, 202, and 203 provide more information on other details of administering this tax.

701—251.3(423C) Lessor’s obligation to collect tax. The lessor shall collect automobile rental excise tax from the user or from any other person paying the rental price for an automobile. The lessor shall collect the tax by adding the tax to the rental price of the automobile. When collected, the tax shall be stated on any billing or invoice as a distinct item separate and apart from the rental price of the automobile and separate and apart from any state or local option sales or service tax or any state use tax.

These rules are intended to implement Iowa Code chapter 423C.

[Filed 2/27/25, effective 4/23/25]

[Published 3/19/25]

EDITOR’S NOTE: For replacement pages for IAC, see IAC Supplement 3/19/25.