Are separately billed freight charges for a contractor's materials subject to Iowa sales tax?

Plain-English summary

Great Plains Structures did not owe Iowa sales tax on the freight charges described in its petition. The contractor designs and installs steel storage tanks. Materials travel from the manufacturer to the building site, usually by an independent carrier, and the freight charges are billed separately.

Iowa includes delivery charges in a taxable sale's sales price as a general rule. The order applied an exception for charges that are separately contracted for or separately stated on the buyer's invoice and do not represent the sales price of a taxable sale or service. The Department accepted that these freight charges met both conditions. It said future freight transactions remain untaxed only while they continue to meet those requirements.

What this means for you

Contractors and sellers

Keep the freight charge separate on the invoice and check whether it represents part of the price of a taxable sale or service. Separate billing alone did not decide this order.

Accountants and tax preparers

The order concerns the petitioner's delivery of construction materials. Apply its two conditions to the actual sale agreement and invoice before treating another delivery charge the same way.

Common questions

Q: Are all separately stated delivery charges exempt from Iowa sales tax? A: No. The order also requires that the charge not represent the sales price of a taxable sale or service.

Q: Does the conclusion cover future freight charges? A: The Department said future transactions remain untaxed as long as they continue to satisfy the stated requirements.

Q: Did the order decide the tax treatment of the storage tanks or installation work? A: No. Its stated issue and conclusion address freight charges related to delivery of materials.

Citations and references

• Iowa Code § 423.1(51)(a)(4) — delivery charges generally enter the sales price.
• Iowa Code § 423.1(51)(c) — conditions for excluding certain delivery charges.
• Iowa Administrative Code r. 701-204.8(1) — freight or transportation charges under a sale agreement.
• Iowa Code § 423.2(6) — services taxable when specifically enumerated.
• Iowa Code § 17A.9(7) — binding effect of a declaratory order.

Source

• Landing page: Iowa administrative orders
• Archive link: Iowa Department of Revenue media 4567
• Original PDF: Iowa document 10663926
• The official PDF contains an OCR text layer. The original text below preserves its extraction, including recognition errors. The visible PDF confirms the order's August 3, 2026 date and its printed case citations. The printed 36 N.W.3d 273 citation is preserved as published.

Original ruling text

BEFORE THE IOWA DEPARTMENT OF REVENUE
HOOVER STATE OFFICE BUILDING
DES MOINES, IOWA
IN THE MATTER OF
GREAT PLAINS STRUCTURES
3301 LABORE RO
VADNAIS HEIGHTS MN 55110-5149

DECLARATORY ORDER
DOCKET NO. 1371501

SALES/USE/EXCISE
Pursuant to a Petition for Declaratory Order ("Petition") filed with the Iowa Department of Revenue ("Department) by GREAT PLAINS STRUCTURES (hereinafter referred to as "Petitioner") on 6/18/2026, and in accordance with Iowa Code section 17A.9(2026) and Iowa Administrative Code rule 701-4.7(17A),' ' Oed aratory order-in general," the Director issues the following order. I.

FACTS
The findings of fact are based on the Petition submitted to the Department.

Petitioner is a contractor that designs and installs steel storage tanks. The materials used in construction and installation of the storage tanks are shipped from the manufacturer to the building site, typically through an independent carrier. Freight charges related to the delivery of these materials are billed separately. II.

ISSUE PRESENTED
Are freight charges that are billed separately to the purchaser subject to sales tax?

Ill.

STANDARD OF REVIEW

1 As of July 1. 2026. Iowa Administraiive Code rule 701-4. 7 on Declaratory Orders is rescinded. 2026 Iowa Acts. Senate File 2463, Section 4, Subsection 4. The Department of Revenue·s Administrative Code rules on Declaratory Orders are now found in Iowa Administrative Code chapter 701- 2503. As the Petition was filed prior to this date. citations are made to rule 4.7.

A.

Declaratory Orders under the Iowa Administrative Procedure Act

Iowa's Administrative Procedure Act ("IAPA") was enacted "to provide a minimum procedural code for the operation of all state agencies when they take action affecting the rights and duties of the public." Iowa Code§ 17A. 1(2). Under the IAPA, ' [a)ny person may petition an agency for a ded aratory order as to the applicability to specified circumstances of a statute, rule, or order within the primary jurisdiction of the agency." Id. at § 17A.9(1 )(a). The IAPA also describes agency rights and responsibilities with respect to declaratory order proceedings. Id. at§ 17A.9(8). Pursuant to Iowa Code section 17A.9(2), the Department adopted Iowa Administrative Code rule 701-4.7, Which outlines department-specific rules governing ded aratory orders. The purpose of a declaratory order is to provide a "generally available means for persons to obtain reliable information about agency administered law as it applies to their particular circumstances." Sierra Club Iowa Chapter v. Iowa Dep't of Transp., 832 N.W.2d 636, 647 (20 13) (citing Arthur Earl Bonfield, Amendments to Iowa Administrative Procedure Act, Report on Selected Provisions to Iowa State Bar Association and Iowa State Government, 1-8 ( 1998)). Ded aratory orders are not contested cases that "entitle[] parties affected by the agency action to an adversarial hearing" in order to "adjudicate disputed facts pertaining to particular individuals in specific circumstances." Greenwood Manor v. Iowa Dep't of Pub. Health, state Health Facilities Council, 641 N.W.2d 823, 834 (Iowa 2002); see also Iowa Code § 17A. 12. Instead, the IAPA · contemplates declaratory rulings by administrative agencies on purely hypothetical sets of facts." City of Des Moines v. Pub. Emp't Relations Bd., 275 N.W.2d 753, 758 (Iowa 1979).

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As such, "[t]he procedure established by section 17A.9 allows persons to seek formal opinions on the effect of future transactions and arrange their affairs accordingly." Bennett v. Iowa Dep't of Nat. Res., 573 N.W.2d 25, 26 (Iowa 1997). Declaratory orders issued by an administrative agency do, however, have "the same status and binding eltect as any final order issued in a contested case proceeding ." Iowa Code§ 17A.9(7). The Department's rules governing ded aratory orders are consistent with this understanding of the role of ded aratory orders in administrative procedure. See Iowa Admin. Code r. 701-4.7. B.

Statutory Construction and Interpretation of Tax Statutes

"When engaging in statutory interpretation; the Department "first examine[s] the language of the statute and determine[s] whether it is ambiguous.· Kay-Decker v. Iowa State Bd. of Tax Review, 857 N.W.2d 216, 223 (Iowa 2014) (citing Rolfe State Bank v. Gunderson, 794 N.W.2d 56 1, 564 (Iowa 201 1)). " Generally, we presume words used in a statute have their ordinary and commonly understood meaning."' Id. (Quoting McGill v. Fish, 790 N.W.2d 113, 119 (Iowa 2010)). "[L]eglslative intent is expressed by what the legislature has said, not What it could or might have said. When a statute's language is clear, we look no further for meaning than its express terms. Intent may be expressed by the omission, as well as the inclusion ... of statutory terms ...." Hawkeye Land Co. v. Iowa Utils. Bd. , 847 N.W.2d 199, 210 (Iowa 201 4) (Quoting State v. Beach, 630 N.W.2d 598, 600 (Iowa 2001 )). The Iowa Supreme Court, in Chickasaw County Board of Review v. Property Assessment Appeal Board, determined that "we will construe tax statutes according to their ordinary meaning and apply the same principles of construction we apply to any other type of statute." 36 N.W.3d 273, 283 (2026).

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IV.

DISCUSSION

Sales tax applies to the sales price of taxable retail sales and services. Iowa Code section 423.1(51) defines sales price as "the total amount of consideration, including cash, credit, property, and services, for which personal property or services are sold, leased, or rented, valued in money, whether received in money or otherwise." This definition goes on to specify items that are included in the sales price, including delivery charges. Iowa Code § 423.1(51)(a)(4). However, delivery charges are not included in the sales price "if they are separately contracted for, separately stated on the invoice, billing, or similar document given to the purchaser, and the amounts represent charges which are not the sales price of a taxable sale or of the furnishing of a taxable service." Id. § 423.1(51 )(c). Iowa Administrative Code rule 701-204.8(1) further clarifies the taxability of delivery charges:
[w)hen tangible personal property or a taxable service is sold at retail in Iowa or purchased for use in Iowa and under the tenms of the sale agreement the seller is to deliver the property to the buyer or the purchaser is responsible for delivery and such delivery charges are stated and agreed to in the sale agreement or the charges are separate from the sale agreement, the sales price of the freight or transportation charges is not subject to tax. As long as the charges at issue in the Petition meet the requirements stated in Iowa Code section 423.1(51)(c) and Iowa Administrative Code rule 70 1- 204.8(1), they are not subject to sales tax. Iowa Code section 423.1(51)(c) provides that, in order for freight charges to be exempt from sales tax, they must both be separately contracted for or separately stated on the invoice, and they must not represent the sales price of a taxable sale or service. According to the facts provided by the Petitioner, freight charges related to the delivery of

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materials for their business are charged separately. In Iowa, services are not taxable unless they are specifically enumerated under Iowa Code section 423.2(6). Delivery charges in general are not an enumerated service, and therefore are not subject to sales tax. Since the freight charges are separately stated on the invoice and do not represent the sales price of a taxable sale or service, they are not subject to sales tax. V.

CONCLUSION
The freight charges at issue in this Petition do not represent the sales price of a

taxable sale or service. The Petitioner also asserts that the charges are separately stated on the invoice. Therefore, the freight charges are exd uded from the sales price under Iowa Code section 423.1(51)(c) and are not subject to tax. Future transactions of freight charges are not subject to tax as long as they continue to meet the requirements stated above. ORDER THEREFORE, based on the facts presented, foregoing reasoning, and applicable provisions of the law, the Director finds: Petitioner does not owe sales tax on freight charges that are separately stated on the invoice and do not represent the sales price of a taxable sale or service. Issued at Des Moines, Iowa this 3rd

day of August, 2026.
IOWA DEPARTMENT OF REVENUE

By

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Mary Mosiman
Mary Mos
man, Director