Exempting from the state sales tax the purchase price of tangible personal property or specified digital products sold and services furnished to a nonprofit food bank

Description

House File 2103 exempts from the sales tax and use tax the purchase price from the sale or rental of tangible personal property or specified digital products, or services furnished, to a nonprofit food bank if the property or services are to be used by the nonprofit food bank for a charitable purpose.

Assumptions

• There are currently six major food banks that serve Iowa. Of those six, one is based in Omaha (Food Bank for the Heartland) and is assumed to not make significant purchases subject to Iowa sales/use tax. Another (Hawkeye Area Community Action Program) already qualifies for a sales/use tax exemption as a community action agency under Iowa Code section 423.3(79).
• The IRS 990 reports of the four remaining food banks were analyzed to identify a baseline amount of taxable purchases.
• An estimated 60 additional smaller food banks and food pantries will qualify under the Bill. These entities are estimated to represent 5.0% of total purchases of all qualifying entries.
• Growth trends in future fiscal years are based on Revenue Estimating Conference projections and 2.0% in subsequent years.

Fiscal Impact

House File 2103 will reduce General Fund, Secure an Advanced Vision for Education (SAVE) Fund, and local option sales tax (LOST) revenues by the following amounts.General Fund SAVE LOST FY 2021 143,000$ 29,000$ 29,000$ FY 2022 146,000$ 30,000$ 30,000$ FY 2023 149,000$ 31,000$ 31,000$ FY 2024 152,000$ 32,000$ 32,000$ FY 2025 155,000$ 33,000$ 33,000$

Sources

• Department of Revenue
• IRS 990 reports for Food Bank of Iowa, River Bend Foodbank, Northeast Iowa Food Bank, and
• Food Bank of Siouxland (2014-2017)
• Interviews with the Iowa Food Bank Association and Food Bank of Iowa
• LSA analysis and calculations