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What if IA company receives contract with company Y located in NE to install piping for chemical storage facility. How do we manage tax-free inventory?

Full Question: Company X operates in Iowa. Company X receives a contract with company Y located in Nebraska to install piping for a chemical storage facility. Company X files forms (24, 24A, 24B and 24C) elects Option1 - Retailer - Tax-Free Inventory. What tax if any is owed to Iowa? Is it that if Nebraska has a lower tax rate than Iowa the difference is paid to Iowa and do you collect the 7% from the customer on particular line items?

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Answer:

Diane Yetter photoIn Iowa, no tax is due when materials are withdrawn from inventory for use in construction outside Iowa or when building materials are consumed by a manufacturer or its subcontractor in the performance of construction outside the state. As far as Nebraska, option 1 contractors must collect and remit state and local sales tax from customers on the total amount charged for building materials and fixtures annexed to real estate, unless the project owner is an exempt entity. Contractor labor charges that are itemized on the invoice are not taxable.

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