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SF 636

A bill for an act relating to the sales tax exemption for the purchase of central office equipment or transmission equipment used by certain entities primarily in the furnishing of telecommunications services on a commercial basis.

2025-2026 Regular Session

Expands Iowa sales tax exemption to cover central office and transmission equipment used to furnish telecom services, broadening who qualifies and reducing state revenue.

Subcommittee: Bousselot, Bisignano, and Dawson.
#communicationsservices #prices #sales #salestaxes #taxexemptions #telecommunications
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Bill Summary · SF 636

Summary of Senate File 636 (SF 636)

Purpose and intent

SF 636 expands Iowa’s sales tax exemption for purchases of central office equipment and transmission equipment. The bill removes the prior “primarily used” limitation and extends the exemption to all such equipment used by certain entities in furnishing telecommunications services on a commercial basis. The change aims to reduce the tax burden on telecom infrastructure investments by a broader set of providers.

Key provisions

  • Covers purchases of:
    • Central office equipment (equipment used in initiating, processing, amplifying, switching, or monitoring telecommunications services) and
    • Transmission equipment (equipment used to send information between locations),
    • Including ancillary equipment and apparatus that support, regulate, control, repair, test, or enable the above functions.
  • Eligible entities (broadened beyond prior scope) include:
    • Local exchange carriers and competitive local exchange service providers;
    • Franchised cable television operators, mutual companies, municipal utilities, cooperatives, and certain companies furnishing communications services not subject to rate regulation under ch. 476;
    • Long distance companies;
    • Commercial mobile radio service providers (as defined in 47 C.F.R. §20.3).
  • Effective date: July 1, 2025 (FY 2026).
  • Tax treatment: Exemption from sales tax also implies exemption from the corresponding use tax.

Affected parties

  • Primarily Iowa-based telecommunications providers and related entities that purchase central office or transmission equipment to furnish telecom services commercially.
  • The fiscal note estimates about 116 providers would be affected.

Fiscal impact (from the Fiscal Note)

  • Revenue impact: Reduction in annual general fund, SAVE, and LOST revenues.
    • General Fund: about $0.8–0.9 million per year (FY 2026–FY 2030).
    • SAVE (Education savings program): about $0.2 million per year.
    • Local Option Sales Tax (LOST): about $0.2 million per year.
  • Assumptions:
    • Effective July 1, 2025 (FY 2026).
    • Current taxable expenditures exempted in FY2025 are estimated at $16.4 million, with a 2.0% annual growth in exempt purchases.
    • SAVE refunds represent 1.0% of taxable expenditures; LOST distributions represent 0.97% of taxable expenditures.
  • The fiscal note reflects anticipated ongoing reductions in tax revenues corresponding to the broader exemption.

Timeline and legislative status

  • Introduced: April 22, 2025.
  • Attached to HF 960.
  • Committee action: April 22, 2025, committee report approved.
  • Legislative actions:
    • April 22, 2025: Introduced and placed on Ways and Means calendar.
    • April 22, 2025: Committee reported favorably and attached to HF 960.
    • April 28, 2025: Fiscal note issued.
    • June 16, 2025: Referred to Ways and Means.

Notable notes

  • The exemption aligns with Code sections 423.3(47A) and related use-tax provisions (exempt items remain exempt from use tax per 423.6 and 423.5).
  • By broadening eligibility beyond “primarily used” to “used in furnishing telecommunications services on a commercial basis,” the bill expands the scope of exempt purchases for a wider set of telecom infrastructure investments.

Compiled from official sources — confirm details with the bill’s official record.

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