Utility Status in Iowa
An Iowa homeowners’ association is a water utility and must collect a utility excise tax on water service, the state tax department said.
The decision may have implications for micro-grids.
Iowa collects a 6% excise tax on water utilities on revenue from providing water service to customers. The tax only applies when water is “sold for a separately itemized price” or “when the price of the water service is identifiable from an invoice, bill, catalog, price list, rate card, receipt, agreement, or other similar document.”
A homeowners’ association owns wells and pipes and supplies water to the 58 houses in a housing subdivision. Homeowners pay fixed annual dues that cover road maintenance, snow removal, lawn care, maintenance of common areas and water service. The charges are not itemized. However, the association prepares an annual report that shows how the dues money it collected was used during the year.
The association asked for a declaratory order that it is not a water utility required to collect the tax.
The Iowa Department of Revenue said in the declaratory order that the association is a water utility and must collect the tax because the share of the homeowner dues that pay for water service is reported in the annual report. It said the fact that the water service charges are an incidental part of the annual dues is irrelevant.
The order is In the Matter of Spring Valley Homeowners’ Association. The association received the order in July, but the order was not made public until late summer.