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SF 636 – Communications Network Equipment Sales Tax Exemption (LSB2095SV)
Staff Contact: Evan Johnson (515.281.6301) evan.johnson@legis.iowa.gov
Fiscal Note Version – New
Description
Senate File 636 expands the sales and use tax exemption in Iowa Code section 423.3(47A)(a)
by making all purchases of central office equipment or transmission equipment used by certain
entities in the furnishing of telecommunications services on a commercial basis exempt from
sales and use tax.
Background
Under current law, a sales tax exemption is available only for central office equipment or
transmission equipment primarily used by local exchange carriers and competitive local
exchange service providers; by franchised cable television operators, mutual companies,
municipal utilities, cooperatives, and certain communications services companies; by long
distance companies; or for a commercial mobile radio service in the furnishing of
telecommunications services on a commercial basis.
“Central office equipment” is defined as equipment utilized in the initiating, processing,
amplifying, switching, or monitoring of telecommunications services. Central office equipment
also includes ancillary equipment and apparatus that support, regulate, control, repair, test, or
enable such equipment to accomplish its function.
“Transmission equipment” is defined as equipment utilized in the process of sending information
from one location to another location. Transmission equipment also includes ancillary
equipment and apparatus that support, regulate, control, repair, test, or enable such equipment
to accomplish its function.
Assumptions
• The Bill is effective July 1, 2025 (FY 2026).
• It is assumed that there are 116 telecommunications providers affected by the Bill.
• Estimated taxable expenditures made exempt by the Bill are based on appeals information
filed with the Iowa Department of Revenue related to the sales tax exemption in Iowa Code
section 423.3(47A)(a) and scaled to include all telecommunications providers in the State.
• The amount of currently taxable sales for FY 2025 that would be made exempt under the Bill
is $16.4 million.
• The estimated value of purchases made exempt under the Bill is assumed to increase by
2.0% annually.
• Secure an Advanced Vision for Education (SAVE) refunds are 1.0% of taxable expenditures.
Local Option Sales Tax (LOST) distributions are estimated to be 0.97% of taxable
expenditures.
Fiscal Note
Fiscal Services Division 2
Fiscal Impact
Senate File 636 is estimated to reduce annual revenues to the General Fund, SAVE Fund, and
the LOST by the amounts in Figure 1.
Figure 1 — Fiscal Impact of SF 636
(in Millions)
Sources
Iowa Department of Revenue
Iowa Communications Alliance
/s/ Jennifer Acton
April 28, 2025
Doc ID 1526498
The fiscal note for this Bill was prepared pursuant to Joint Rule 17 and the Iowa Code. Data used in developing this
fiscal note is available from the Fiscal Services Division of the Legislative Services Agency upon request.
www.legis.iowa.gov General Fund SAVE LOST
FY 2026 -0.8$ -0.2$ -0.2$
FY 2027 -0.9 -0.2 -0.2
FY 2028 -0.9 -0.2 -0.2
FY 2029 -0.9 -0.2 -0.2
FY 2030 -0.9 -0.2 -0.2