Fiscal Note
Fiscal Services Division
HF 2635 – Communications Network Equipment Sales Tax Exemption (LSB5578HV)
Staff Contact: Evan Johnson (515.281.6301) evan.johnson@legis.iowa.gov
Fiscal Note Version – New
Description
House File 2635 expands the sales and use tax exemption found 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, certain communication 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, 2024 (FY 2025).
• 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 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 Impact
House File 2635 is estimated to reduce annual revenues to the General Fund, the SAVE Fund,
and the LOST by the amounts in Figure 1.
1
 Figure 1 — Fiscal Impact of HF 2635 (in Millions)
General Fund SAVE LOST
FY 2025 $ -0.8 $ -0.2 $ -0.2
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
Sources
Iowa Department of Revenue
Iowa Communications Alliance
/s/ Jennifer Acton
March 1, 2024
Doc ID 1447502
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
2


Statutes affected:
Introduced: 423.3