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Department clarifies exemptions, certificates and recordkeeping: keep expired certificates at least three years
Summary
Iowa Department of Revenue staff reviewed common tax exemptions, how to claim exemptions with certificates, recordkeeping rules (purchaser must provide certificate within 90 days; sellers must retain it), and recommended retaining expired exemption certificates for at least the statute of limitations (three years).
Department policy staff walked through exemptions and the role of exemption certificates and recordkeeping for sellers.
Nick Belkkey and Matt Bishop listed common exemptions — services connected with new construction, items purchased for resale, food ingredients for human consumption, prescription drugs and medical devices, certain delivery charges and designated exempt entities — and cited Iowa Code sections referenced in the webinar for further detail.
Belkkey explained how exemption certificates operate: the purchaser completes the certificate and must provide it to the seller within 90 days of the sale; the seller must keep a complete certificate in their records to substantiate the exemption in the event of an audit. Certificates can cover a single transaction or remain valid until revoked or until 12 months pass with no purchases between the same seller and purchaser.
On record retention, panelists recommended keeping expired exemption certificates at least for the statute of limitations (three years) and longer in limited circumstances. They cautioned that purchases by nonprofits are not automatically exempt; only entities designated by statute or meeting specified requirements qualify for exempt purchases.
Why it matters: lacking a complete exemption certificate can expose a seller to audit adjustments and liabilities. The department directed businesses to the cited Iowa Code sections and administrative rules and to use the department website for certificate templates and additional guidance.
