The Iowa state legislature has moved to update the state’s sales tax rules for communications infrastructure by passing House File 960 (HF 960). The bill broadens the existing sales tax exemption,1 so it more accurately reflects the role of modern broadband networks in today’s economy. In doing so, HF 960 acknowledges that communications services are now delivered through newer technologies and updates the tax treatment to better match that reality. The bill becomes effective July 1, 2026.
Iowa Sales Tax Exemption Before HF 960
Before HF 960, Iowa law exempted from sales tax central office equipment primarily used to provide telecommunications services on a commercial basis. The exemption generally applied to traditional communications providers, including:
- Local exchange carriers
- Competitive local exchange carriers
- Cable television operators
- Wireless providers
- Municipal utilities and cooperatives
- Long-distance carriers
The qualifying equipment included:
- Central office equipment used to switch, route, process, and monitor communications.
- Transmission equipment used to carry information between locations, such as fiber, cable, and related electronics.
However, the exemption was limited to equipment used in furnishing “telecommunications services” a term more closely associated with legacy voice and data services. As communications technology has evolved, the line between telecommunications services and internet access services has become less distinct. Modern fiber cable, and wireless networks commonly deliver voice, video, and data over the same infrastructure, yet Iowa’s sales tax rules did not fully reflect that convergence.
While equipment used to provide telecommunications services could qualify for the exemption, equipment used to provide internet access services was not explicitly covered, even though internet access itself generally was not subject to sales tax. As a result, providers could face sales tax on infrastructure used to deliver broadband and other internet services despite operating integrated communications networks.
How HF 960 Expands Iowa’s Sales Tax Exemption
HF 960 expands Iowa’s sales tax exemption by applying it to central office and transmission equipment used to furnish telecommunications services, internet access services, or any combination of the two on a commercial basis. By expressly adding internet access services, the law brings broadband infrastructure, including fiber, cable internet, fixed wireless systems, and other integrated communications networks, within the scope of the exemption and better aligns Iowa tax policy with how modern providers deliver service. The change also recognizes that communications networks now commonly support voice, video, and internet access of shared infrastructure, reducing the need to isolate equipment used solely for traditional telecommunications services.
At the same time, HF 960 does not change the underlying equipment requirements, meaning property still must qualify as central office or transmission equipment under the existing statutory framework.
The expanded exemption is expected to benefit a wide range of providers, including telecommunications carriers, broadband and cable operators, wireless providers, municipal and cooperative utilities, and other businesses operating communications infrastructure in Iowa.
Tax and Policy Implications of Iowa HF 960
HF 960 has both practical tax and broader policy implications for communications providers operating in Iowa. By expanding the sales tax exemption to equipment used in furnishing internet access services, the law potentially lowers the cost of broadband deployment, including rural expansion, fiber-to-the-home projects, and network modernization efforts, which may be especially significant in underserved areas where infrastructure costs are high.
The change also improves tax neutrality by addressing the prior mismatch by which internet access services were generally not taxed, but equipment used to provide that service could still be subject to sales tax.
At the same time, taxpayers should remain prepared to substantiate the primarily used requirement, proper classification of equipment, and any allocation issues in mixed-use or multi-service environments. More broadly, HF 960 reflects a shift from a telecom-focused tax framework to one that recognizes broadband and integrated communications networks as essential infrastructure deserving of more consistent tax treatment.
How Forvis Mazars Can Help
For businesses operating in the communications space, HF 960 is both a compliance development and a potential planning opportunity. Professionals at Forvis Mazars can help businesses assess whether equipment and infrastructure may qualify for the expanded exemption, evaluate potential refund claims, and review documentation and tax positions to support compliance going forward. Please contact us to learn more.
- 1Iowa Code Section 423.3(47A)