H.B. 27

1

SALES AND USE TAX MODIFICATIONS
2 2007 GENERAL SESSION
3 STATE OF UTAH
4 Chief Sponsor: Ben C. Ferry
5 Senate Sponsor: Howard A. Stephenson
6
7 LONG TITLE
8 General Description:
9 This bill amends the Sales and Use Tax Act.
10 Highlighted Provisions:
11 This bill:
12 . modifies definitions;
13 . addresses the tax rates at which a seller that does not have sufficient contacts with
14 the state to be required to collect and remit sales and use taxes may voluntarily
15 collect and remit sales and use taxes on:
16 . food and food ingredients; or
17 . a bundled transaction attributable to food and food ingredients and tangible
18 personal property other than food and food ingredients;
19 . addresses the effective dates of sales and use tax repeals, changes, or increases for
20 certain taxes and transactions;
21 . addresses the distribution of the local taxes that are voluntarily collected and
22 remitted by a seller that does not have sufficient contacts with the state to be
23 required to collect and remit sales and use taxes;
24 . addresses the revenues to be deposited into the:
25 . Centennial Highway Fund Restricted Account; and
26 . Transportation Investment Fund of 2005;
27 . addresses the calculation of the credit for certain repossessions of a motor vehicle;

28 . addresses the calculation of the amount a seller that collects and remits sales and
29 use taxes on a monthly basis may retain;
30 . provides that the portion of the tax under the Tourism, Recreation, Cultural, and
31 Convention Facilities Tax part, that is imposed on sales by restaurants, is imposed
32 on sales of prepared food and food and food ingredients;
33 . modifies an appropriation to the State Tax Commission to provide that, in addition
34 to other purposes allowed in the appropriation language, monies may be expended
35 to reimburse certain sellers for expenditures to pay for in-house programming to
36 account for sales under the reduced sales and use tax rate imposed on food and food
37 ingredients; and
38 . makes technical changes.
39 Monies Appropriated in this Bill:
40 None
41 Other Special Clauses:
42 This bill provides an effective date and provides for retrospective operation.
43 Utah Code Sections Affected:
44 AMENDS:
45 10-1-405, as last amended by Chapter 253, Laws of Utah 2006
46 11-41-102, as last amended by Chapter 282, Laws of Utah 2006
47 59-12-102, as last amended by Chapter 1, Laws of Utah 2006, Fourth Special Session
48 59-12-103, as last amended by Chapter 9, Laws of Utah 2006, Third Special Session
49 59-12-104.3, as last amended by Chapter 253, Laws of Utah 2006
50 59-12-108, as last amended by Chapters 253 and 282, Laws of Utah 2006
51 59-12-603, as last amended by Chapters 134 and 253, Laws of Utah 2006
52 Uncodified Material Affected:
53 AMENDS UNCODIFIED MATERIAL:
54 Uncodified Section 3, Chapter 9, Laws of Utah 2006, Third Special Session
55
56 Be it enacted by the Legislature of the state of Utah:
57 Section 1. Section 10-1-405 is amended to read:
58 10-1-405. Collection of taxes by commission -- Uniform interlocal agreement --

59 Rulemaking authority -- Charge for services.
60 (1) Subject to the other provisions of this section, the commission shall collect,
61 enforce, and administer any municipal telecommunications license tax imposed under this part
62 pursuant to:
63 (a) the same procedures used in the administration, collection, and enforcement of the
64 state sales and use tax under:
65 (i) Title 59, Chapter 1, General Taxation Policies; and
66 (ii) Title 59, Chapter 12, Part 1, Tax Collection:
67 (A) except for:
68 (I) Subsection 59-12-103 (2)[(e)](h);
69 (II) Section 59-12-104 ;
70 (III) Section 59-12-104.1 ;
71 (IV) Section 59-12-104.2 ; and
72 (V) Section 59-12-107.1 ; and
73 (B) except that for purposes of Section 59-12-110 , the term "taxpayer" may include a
74 customer from whom a municipal telecommunications license tax is recovered in accordance
75 with Subsection 10-1-403 (2); and
76 (b) a uniform interlocal agreement:
77 (i) between:
78 (A) the municipality that imposes the municipal telecommunications license tax; and
79 (B) the commission;
80 (ii) that is executed under Title 11, Chapter 13, Interlocal Cooperation Act;
81 (iii) that complies with Subsection (2)(a); and
82 (iv) that is developed by rule in accordance with Subsection (2)(b).
83 (2) (a) The uniform interlocal agreement described in Subsection (1) shall provide that
84 the commission shall:
85 (i) transmit monies collected under this part:
86 (A) monthly; and
87 (B) by electronic funds transfer by the commission to the municipality;
88 (ii) conduct audits of the municipal telecommunications license tax;
89 (iii) charge the municipality for the commission's services under this section in an

90 amount:
91 (A) sufficient to reimburse the commission for the cost to the commission in rendering
92 the services; and
93 (B) that may not exceed an amount equal to 1.5% of the municipal telecommunications
94 license tax imposed by the ordinance of the municipality; and
95 (iv) collect, enforce, and administer the municipal telecommunications license tax
96 authorized under this part pursuant to the same procedures used in the administration,
97 collection, and enforcement of the state sales and use tax as provided in Subsection (1)(a).
98 (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
99 commission shall develop a uniform interlocal agreement that meets the requirements of this
100 section.
101 (3) The administrative fee charged under Subsection (2)(a) shall be:
102 (a) deposited in the Sales and Use Tax Administrative Fees Account; and
103 (b) used for administration of municipal telecommunications license taxes under this
104 part.
105 Section 2. Section 11-41-102 is amended to read:
106 11-41-102. Definitions.
107 As used in this chapter:
108 (1) "Agreement" means an oral or written agreement between a:
109 (a) (i) county; or
110 (ii) municipality; and
111 (b) person.
112 (2) "Municipality" means a:
113 (a) city; or
114 (b) town.
115 (3) "Payment" includes:
116 (a) a payment;
117 (b) a rebate;
118 (c) a refund; or
119 (d) an amount similar to Subsections (3)(a) through (c).
120 (4) "Regional retail business" means a:

121 (a) retail business that occupies a floor area of more than 80,000 square feet;
122 (b) dealer as defined in Section 41-1a-102 ;
123 (c) retail shopping facility that has at least two anchor tenants if the total number of
124 anchor tenants in the shopping facility occupy a total floor area of more than 150,000 square
125 feet; or
126 (d) grocery store that occupies a floor area of more than 30,000 square feet.
127 (5) (a) "Sales and use tax" means a tax:
128 (i) imposed on transactions within a:
129 (A) county; or
130 (B) municipality; and
131 (ii) except as provided in Subsection (5)(b), authorized under Title 59, Chapter 12,
132 Sales and Use Tax Act.
133 (b) Notwithstanding Subsection (5)(a)(ii), "sales and use tax" does not include a tax
134 authorized under:
135 (i) Subsection 59-12-103 (2)(a)(i);
136 (ii) Subsection 59-12-103 (2)(b)(i)[(A)];
137 (iii) Subsection 59-12-103 (2)[(b)(iii)(A)](c)(i);
138 (iv) Subsection 59-12-103 (2)(d)(i);
139 (v) Subsection 59-12-103 (2)(e)(ii)(A);
140 (vi) Subsection 59-12-103 (2)(e)(iii)(A);
141 [(iv)] (vii) Section 59-12-301 ;
142 [(v)] (viii) Section 59-12-352 ;
143 [(vi)] (ix) Section 59-12-353 ;
144 [(vii)] (x) Section 59-12-603 ; or
145 [(viii)] (xi) Section 59-12-1201 .
146 (6) (a) "Sales and use tax incentive payment" means a payment of revenues:
147 (i) to a person;
148 (ii) by a:
149 (A) county; or
150 (B) municipality;
151 (iii) to induce the person to locate or relocate a regional retail business within the:

152 (A) county; or
153 (B) municipality; and
154 (iv) that are derived from a sales and use tax.
155 (b) "Sales and use tax incentive payment" does not include funding for public
156 infrastructure.
157 Section 3. Section 59-12-102 is amended to read:
158 59-12-102. Definitions.
159 As used in this chapter:
160 (1) (a) "Admission or user fees" includes season passes.
161 (b) "Admission or user fees" does not include annual membership dues to private
162 organizations.
163 (2) "Agreement" means the Streamlined Sales and Use Tax Agreement described in
164 Section 59-12-102.1 .
165 (3) "Agreement combined tax rate" means the sum of the tax rates:
166 (a) listed under Subsection (4); and
167 (b) that are imposed within a local taxing jurisdiction.
168 (4) "Agreement sales and use tax" means a tax imposed under:
169 (a) Subsection 59-12-103 (2)(a)(i) [or (2)(b)(iii)(A)];
170 (b) Subsection 59-12-103 (2)(b)(i);
171 (c) Subsection 59-12-103 (2)(c)(i);
172 (d) Subsection 59-12-103 (2)(d)(i);
173 (e) Subsection 59-12-103 (2)(e)(ii)(A);
174 (f) Subsection 59-12-103 (2)(e)(iii)(A);
175 [(b)] (g) Section 59-12-204 ;
176 [(c)] (h) Section 59-12-401 ;
177 [(d)] (i) Section 59-12-402 ;
178 [(e)] (j) Section 59-12-501 ;
179 [(f)] (k) Section 59-12-502 ;
180 [(g)] (l) Section 59-12-703 ;
181 [(h)] (m) Section 59-12-802 ;
182 [(i)] (n) Section 59-12-804 ;

183 [(j)] (o) Section 59-12-1001 ;
184 [(k)] (p) Section 59-12-1102 ;
185 [(l)] (q) Section 59-12-1302 ;
186 [(m)] (r) Section 59-12-1402 ; or
187 [(n)] (s) Section 59-12-1503 .
188 (5) "Aircraft" is as defined in Section 72-10-102 .
189 (6) "Alcoholic beverage" means a beverage that:
190 (a) is suitable for human consumption; and
191 (b) contains .5% or more alcohol by volume.
192 (7) "Area agency on aging" is as defined in Section 62A-3-101 .
193 (8) "Assisted amusement device" means an amusement device, skill device, or ride
194 device that is started and stopped by an individual:
195 (a) who is not the purchaser or renter of the right to use or operate the amusement
196 device, skill device, or ride device; and
197 (b) at the direction of the seller of the right to use the amusement device, skill device,
198 or ride device.
199 (9) "Assisted cleaning or washing of tangible personal property" means cleaning or
200 washing of tangible personal property if the cleaning or washing labor is primarily performed
201 by an individual:
202 (a) who is not the purchaser of the cleaning or washing of the tangible personal
203 property; and
204 (b) at the direction of the seller of the cleaning or washing of the tangible personal
205 property.
206 (10) "Authorized carrier" means:
207 (a) in the case of vehicles operated over public highways, the holder of credentials
208 indicating that the vehicle is or will be operated pursuant to both the International Registration
209 Plan and the International Fuel Tax Agreement;
210 (b) in the case of aircraft, the holder of a Federal Aviation Administration operating
211 certificate or air carrier's operating certificate; or
212 (c) in the case of locomotives, freight cars, railroad work equipment, or other rolling
213 stock, the holder of a certificate issued by the United States Surface Transportation Board.

214 (11) (a) Except as provided in Subsection (11)(b), "biomass energy" means any of the
215 following that is used as the primary source of energy to produce fuel or electricity:
216 (i) material from a plant or tree; or
217 (ii) other organic matter that is available on a renewable basis, including:
218 (A) slash and brush from forests and woodlands;
219 (B) animal waste;
220 (C) methane produced:
221 (I) at landfills; or
222 (II) as a byproduct of the treatment of wastewater residuals;
223 (D) aquatic plants; and
224 (E) agricultural products.
225 (b) "Biomass energy" does not include:
226 (i) black liquor;
227 (ii) treated woods; or
228 (iii) biomass from municipal solid waste other than methane produced:
229 (A) at landfills; or
230 (B) as a byproduct of the treatment of wastewater residuals.
231 (12) (a) "Bundled transaction" means the sale of two or more items of tangible personal
232 property if:
233 (i) one or more of the items of tangible personal property is food and food ingredients;
234 and
235 (ii) the items of tangible personal property are:
236 (A) distinct and identifiable; and
237 (B) sold for one price that is not itemized.
238 (b) "Bundled transaction" does not include the sale of tangible personal property if the
239 sales price varies, or is negotiable, on the basis of the selection by the purchaser of the items of
240 tangible personal property included in the transaction.
241 (c) For purposes of Subsection (12)(a)(ii)(A), tangible personal property that is distinct
242 and identifiable does not include:
243 (i) packaging that:
244 (A) accompanies the sale of the tangible personal property; and

245 (B) is incidental or immaterial to the sale of the tangible personal property;
246 (ii) tangible personal property provided free of charge with the purchase of another
247 item of tangible personal property; or
248 (iii) an item of tangible personal property included in the definition of "purchase
249 price."
250 (d) For purposes of Subsection (12)(c)(ii), an item of tangible personal property is
251 provided free of charge with the purchase of another item of tangible personal property if the
252 sales price of the purchased item of tangible personal property does not vary depending on the
253 inclusion of the tangible personal property provided free of charge.
254 (13) "Certified automated system" means software certified by the governing board of
255 the agreement in accordance with Section 59-12-102.1 that:
256 (a) calculates the agreement sales and use tax imposed within a local taxing
257 jurisdiction:
258 (i) on a transaction; and
259 (ii) in the states that are members of the agreement;
260 (b) determines the amount of agreement sales and use tax to remit to a state that is a
261 member of the agreement; and
262 (c) maintains a record of the transaction described in Subsection (13)(a)(i).
263 (14) "Certified service provider" means an agent certified:
264 (a) by the governing board of the agreement in accordance with Section 59-12-102.1 ;
265 and
266 (b) to perform all of a seller's sales and use tax functions for an agreement sales and
267 use tax other than the seller's obligation under Section 59-12-107.4 to remit a tax on the seller's
268 own purchases.
269 (15) (a) Subject to Subsection (15)(b), "clothing" means all human wearing apparel
270 suitable for general use.
271 (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
272 commission shall make rules:
273 (i) listing the items that constitute "clothing"; and
274 (ii) that are consistent with the list of items that constitute "clothing" under the
275 agreement.

276 (16) "Coal-to-liquid" means the process of converting coal into a liquid synthetic fuel.
277 (17) "Commercial use" means the use of gas, electricity, heat, coal, fuel oil, or other
278 fuels that does not constitute industrial use under Subsection (39) or residential use under
279 Subsection (76).
280 (18) (a) "Common carrier" means a person engaged in or transacting the business of
281 transporting passengers, freight, merchandise, or other property for hire within this state.
282 (b) (i) "Common carrier" does not include a person who, at the time the person is
283 traveling to or from that person's place of employment, transports a passenger to or from the
284 passenger's place of employment.
285 (ii) For purposes of Subsection (18)(b)(i), in accordance with Title 63, Chapter 46a,
286 Utah Administrative Rulemaking Act, the commission may make rules defining what
287 constitutes a person's place of employment.
288 (19) "Component part" includes:
289 (a) poultry, dairy, and other livestock feed, and their components;
290 (b) baling ties and twine used in the baling of hay and straw;
291 (c) fuel used for providing temperature control of orchards and commercial
292 greenhouses doing a majority of their business in wholesale sales, and for providing power for
293 off-highway type farm machinery; and
294 (d) feed, seeds, and seedlings.
295 (20) "Computer" means an electronic device that accepts information:
296 (a) (i) in digital form; or
297 (ii) in a form similar to digital form; and
298 (b) manipulates that information for a result based on a sequence of instructions.
299 (21) "Computer software" means a set of coded instructions designed to cause:
300 (a) a computer to perform a task; or
301 (b) automatic data processing equipment to perform a task.
302 (22) "Construction materials" means any tangible personal property that will be
303 converted into real property.
304 (23) "Delivered electronically" means delivered to a purchaser by means other than
305 tangible storage media.
306 (24) (a) "Delivery charge" means a charge:

307 (i) by a seller of:
308 (A) tangible personal property; or
309 (B) services; and
310 (ii) for preparation and delivery of the tangible personal property or services described
311 in Subsection (24)(a)(i) to a location designated by the purchaser.
312 (b) "Delivery charge" includes a charge for the following:
313 (i) transportation;
314 (ii) shipping;
315 (iii) postage;
316 (iv) handling;
317 (v) crating; or
318 (vi) packing.
319 (25) "Dietary supplement" means a product, other than tobacco, that:
320 (a) is intended to supplement the diet;
321 (b) contains one or more of the following dietary ingredients:
322 (i) a vitamin;
323 (ii) a mineral;
324 (iii) an herb or other botanical;
325 (iv) an amino acid;
326 (v) a dietary substance for use by humans to supplement the diet by increasing the total
327 dietary intake; or
328 (vi) a concentrate, metabolite, constituent, extract, or combination of any ingredient
329 described in Subsections (25)(b)(i) through (v);
330 (c) (i) except as provided in Subsection (25)(c)(ii), is intended for ingestion in:
331 (A) tablet form;
332 (B) capsule form;
333 (C) powder form;
334 (D) softgel form;
335 (E) gelcap form; or
336 (F) liquid form; or
337 (ii) notwithstanding Subsection (25)(c)(i), if the product is not intended for ingestion in

338 a form described in Subsections (25)(c)(i)(A) through (F), is not represented:
339 (A) as conventional food; and
340 (B) for use as a sole item of:
341 (I) a meal; or
342 (II) the diet; and
343 (d) is required to be labeled as a dietary supplement:
344 (i) identifiable by the "Supplemental Facts" box found on the label; and
345 (ii) as required by 21 C.F.R. Sec. 101.36.
346 (26) (a) "Direct mail" means printed material delivered or distributed by United States
347 mail or other delivery service:
348 (i) to:
349 (A) a mass audience; or
350 (B) addressees on a mailing list provided by a purchaser of the mailing list; and
351 (ii) if the cost of the printed material is not billed directly to the recipients.
352 (b) "Direct mail" includes tangible personal property supplied directly or indirectly by a
353 purchaser to a seller of direct mail for inclusion in a package containing the printed material.
354 (c) "Direct mail" does not include multiple items of printed material delivered to a
355 single address.
356 (27) (a) "Drug" means a compound, substance, or preparation, or a component of a
357 compound, substance, or preparation that is:
358 (i) recognized in:
359 (A) the official United States Pharmacopoeia;
360 (B) the official Homeopathic Pharmacopoeia of the United States;
361 (C) the official National Formulary; or
362 (D) a supplement to a publication listed in Subsections (27)(a)(i)(A) through (C);
363 (ii) intended for use in the:
364 (A) diagnosis of disease;
365 (B) cure of disease;
366 (C) mitigation of disease;
367 (D) treatment of disease; or
368 (E) prevention of disease; or

369 (iii) intended to affect:
370 (A) the structure of the body; or
371 (B) any function of the body.
372 (b) "Drug" does not include:
373 (i) food and food ingredients;
374 (ii) a dietary supplement;
375 (iii) an alcoholic beverage; or
376 (iv) a prosthetic device.
377 (28) (a) Except as provided in Subsection (28)(c), "durable medical equipment" means
378 equipment that:
379 (i) can withstand repeated use;
380 (ii) is primarily and customarily used to serve a medical purpose;
381 (iii) generally is not useful to a person in the absence of illness or injury; and
382 (iv) is not worn in or on the body.
383 (b) "Durable medical equipment" includes parts used in the repair or replacement of the
384 equipment described in Subsection (28)(a).
385 (c) Notwithstanding Subsection (28)(a), "durable medical equipment" does not include
386 mobility enhancing equipment.
387 (29) "Electronic" means:
388