The Iowa legislature recently passed a new law which creates a Water Service Excise Tax (WET). Prior to this law, the sale of water was subject to the 6% state sales tax. The WET exempts water from state sales tax, but imposes a 6% excise tax.  This water service excise tax provides funding to the Iowa Finance Authority for the Wastewater and Drinking Water Financial Assistance Program and the Water Quality Financing Program, which will fund projects to improve surface water and groundwater quality. A portion of the tax is distributed to the Division of Soil Conservation and Water Quality in the Iowa Department of Agriculture and Land Stewardship for the Water Quality Urban Infrastructure Program.  This program funds demonstration projects that decrease erosion, storm water discharge, and other related projects. Beginning July 1, the City will separately collect and remit the 6% excise tax on water service sales. The Iowa Department of Revenue is responsible for administering the WET and is in the process of providing guidance to utilities. For most customers, there will be no financial impact because the state sales tax will be replaced by WET. Residents will see the new tax listed on the August water bill.

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