Exempting from the sales and use tax the sales price of tangible personal property or specified digital products sold and services furnished to a county or district fair, and making a county or district fair a designated exempt entity

Description

House File 681 exempts from the State sales and use tax the price of tangible personal property, specified digital products, or services sold to a county or district fair. The Bill makes county and district fairs designated exempt entities.

Background

A fair, as defined under Iowa Code chapter 174, means an organization that is incorporated under the laws of this State, including as a county or district fair or as an agricultural society, for the purpose of conducting a fair event, if all of the following apply:

• The organization owns or leases at least 10 acres of fairgrounds.
• The organization owns buildings or other improvements situated on the fairgrounds that have been specially constructed for the purposes of conducting a fair event.
• The market value of the fairgrounds and buildings and other improvements located on the fairgrounds is at least $25,000.

There are 106 county and district fairs in Iowa.

Assumptions

• The average cost to operate a fair in Iowa is approximately $540,000 annually. One-quarter of this cost, or $135,000, is for items subject to sales/use tax upon purchase. Across all 106 fairs, total annual costs subject to sales/use tax are estimated to be approximately $14.3 million.
• Construction costs are not included in operating costs.
• According to the Association of Iowa Fairs 2023 Exhibitor Summary and Statistics Report, there were approximately $8.6 million in capital improvements across Iowa county fairs in 2023. It is assumed that 50.0% of capital improvement costs are labor costs, which are not subject to sales/use tax.
• Total taxable expenditures by county fairs that will be exempt under the Bill are estimated to be approximately $18.6 million in FY 2023.
• Growth trends in future fiscal years are based on Consumer Price Index estimated increases of 2.0% from FY 2025 to FY 2029.
• Secure an Advanced Vision for Education (SAVE) refunds are 1.0% of taxable expenditures. Local options sales tax (LOST) distributions are estimated to be 0.97% of taxable expenditures.

Fiscal Impact

House File 681 is estimated to reduce revenues to the General Fund, SAVE Fund, and LOST by the amounts in Figure 1.

Figure 1 — Fiscal Impact of HF 681 (in Millions)

Sources

• Iowa Department of Revenue
• Association of Iowa Fairs 2023 Exhibitor Summary and Statistics Report
• Legislative Services Agency analysis and calculations