Main Street Objects to Student Tax Break; Bill Takes It Away

Apr 4, 2018

College students at Iowa’s Regents universities should plan to spend a little more for supplies under a bill that advanced in the Iowa House today.  

The bill would eliminate the sales tax exemption students currently enjoy at university-owned campus bookstores. 

We believe saving students money is a good thing. -Regents spokesman Keith Saunders

Private industry complains the tax break is unfair competition.  

The owner of Iowa Book, a private store near campus, wrote a letter to lawmakers urging them to change the law.  

“Our student customers tell us that their professors remind them that they can save 7 percent on their textbooks and anything they purchase at the University’s bookstore,” wrote Peter Vanderhoef.    “Needless to say, this has cut into our sales.”

The Iowa Retail Federation is lobbying for the bill.

A Regents spokesman says they’re complying with the way Iowa’s law is currently written.

“We believe saving students money is a good thing,” said Keith Saunders, “but if the law changes we will happily comply with that.”

Lawmakers say they will alter the bill so that textbooks at both public and private colleges would be exempt from sales tax, but everything else at the campus bookstore from sweatshirts and other swag, to laptop computers and notebooks would be taxed.  

This has cut into our business. -Iowa Book owner Peter Vanderhoef

“I can see that maybe the textbooks we probably shouldn't be collecting sales tax on not just from university bookstores but from all bookstores,” said Rep. Dawn Pettengill (R-Mount Auburn).  “But as far as the other items I don't think that's a fair situation  at all.”  

But Rep. Dave Jacoby (D-Coralville) said taxing other supplies would still be a hit on students at the same time that university budgets have been cut.

“Here we are a week to ten days that we slashed the budget at the end of the fiscal year millions of dollars, now we want to penalize our Regents schools,” Jacoby said.  “I think this bill is a poke in the eye.”

I think this bill is a poke in the eye. -Rep. Dave Jacoby

Jacoby said the universities implemented the tax break on the advice of the Iowa Department of Revenue.   He said the issue could be resolved administratively without passing legislation.

In debate on the recent bill cutting funding for the Regents, Rep. Pat Grassley (R-New Hartford) said the universities should have consulted with the legislature before implementing the tax  break.

“I see that as the perfect example of the legislature having expectations of the Regents, and them not cooperating,” Grassley said.