IOWA CITY — Some lawmakers say they want to “level the playing field” for private booksellers in Iowa’s college communities after vendors last year aired concerns that public universities were capitalizing on sales tax exemptions to gain a competitive edge on not just textbooks but clothing and fan gear.
Legislation that Wednesday passed a subcommittee with unanimous, bipartisan support would exempt from sales tax — no matter who is selling — all “instructional materials required for a course of instruction at a postsecondary institution in this state.”
The bill notes that the sales tax exemption does not extend to non-academic gear commonly sold in public and private bookstores — like sweatshirts, jerseys and socks.
“It does level the playing field for books and equipment that are required by the universities or their instructors as part of a class,” said Rep. Dave Jacoby, D-Coralville, the sole Democrat on the House Ways and Means subcommittee that advanced the measure.
Last year, The Gazette reported the University of Iowa and Iowa State University had stopped collecting sales tax on all items at their campus bookstores — from textbooks to face tattoos — which drove down their prices and upset their private competitors.
The University of Northern Iowa, just entering the book business with its purchase of a private vendor, also planned not to collect sales tax there.
In the UI case, administrators decided to stop collecting sales tax at its Hawk Shop in January 2017 after UI Student Government passed a resolution calling for tax exemptions on “course materials purchased from University of Iowa-operated bookstores.”
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In considering the student resolution, the UI General Counsel’s Office analyzed the Iowa Code and concluded the institution could exempt from sales tax all purchases — even those that had nothing to do with academics. The UI’s Hawk Shop says proceeds from sales there go to support academic programs.
Supporters said those tax savings trimmed student costs amid rising tuition rates, fees and housing expenses. Critics argued the law doesn’t — or at least wasn’t meant to — cover non-educational sales and applying it that way gave the universities an unfair marketing edge.
One such critic, Virgil “Scooter” Hare with Iowa Book in downtown Iowa City, told The Gazette any tax exemption for textbooks should apply no matter where the materials are sold.
“Our owners have contacted people in Des Moines and representatives to see if they can alter the language so that any store selling textbook-related material could apply the exemption,” Hare said.
Lawmakers heeded those calls and last year introduced legislation nixing sales tax on textbooks regardless of the vendor. The bill passed 23-0 out of the House Ways and Means Committee before clearing the full House. But it stalled in the Senate, which never took it up.
Rep. Bobby Kaufmann, R-Wilton, is sponsoring this year’s iteration of the bill and said he’s hoping — with its broad support — it will move through the Legislature this year.
“I expect this will pass,” he said. “We are trying to put the pressure on to get this through both chambers and signed by the governor.”
The real benefactors of the legislation are students, Kaufmann said, who have seen the cost of higher education rising.
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“Our goal is that folks buying books at private stores are not at a disadvantage,” he said.
Jacoby said the UI has reported changing its practice by now charging tax on non-academic materials sold at its bookstores. But the Iowa Hawk Shop’s website still was advertising “Tax Free! On Everything” and a UI spokeswoman said Wednesday that “nothing has changed.”
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