First Substitute H.B. 34

Representative Rebecca D. Lockhart proposes the following substitute bill:

1 SALES AND USE TAX EXEMPTIONS FOR
2 CERTAIN PROPERTY BROUGHT INTO THE
3 STATE
4 2007 GENERAL SESSION
5 STATE OF UTAH
6 Chief Sponsor: Rebecca D. Lockhart
7 Senate Sponsor: ____________
8
9 LONG TITLE
10 General Description:
11 This bill amends the Sales and Use Tax Act by modifying and enacting sales and use
12 tax exemptions.
13 Highlighted Provisions:
14 This bill:
15 . modifies a sales and use tax exemption for sales, leases, or rentals of certain
16 property brought into the state by a nonresident if that property is not used to
17 conduct business in the state;
18 . enacts a sales and use tax exemption under certain circumstances for sales of
19 property:
20 * sold outside of the state;
21 * brought into the state; and
22 * used to conduct business in the state; and
23 . makes technical changes.
24 Monies Appropriated in this Bill:
25 None

26 Other Special Clauses:
27 This bill takes effect on July 1, 2007.
28 Utah Code Sections Affected:
29 AMENDS:
30 59-12-104, as last amended by Chapters 181, 182, 217, 218, 219, 220, 246, 268 and
31 346, Laws of Utah 2006
32
33 Be it enacted by the Legislature of the state of Utah:
34 Section 1. Section 59-12-104 is amended to read:
35 59-12-104. Exemptions.
36 The following sales and uses are exempt from the taxes imposed by this chapter:
37 (1) sales of aviation fuel, motor fuel, and special fuel subject to a Utah state excise tax
38 under Chapter 13, Motor and Special Fuel Tax Act;
39 (2) sales to the state, its institutions, and its political subdivisions; however, this
40 exemption does not apply to sales of:
41 (a) construction materials except:
42 (i) construction materials purchased by or on behalf of institutions of the public
43 education system as defined in Utah Constitution Article X, Section 2, provided the
44 construction materials are clearly identified and segregated and installed or converted to real
45 property which is owned by institutions of the public education system; and
46 (ii) construction materials purchased by the state, its institutions, or its political
47 subdivisions which are installed or converted to real property by employees of the state, its
48 institutions, or its political subdivisions; or
49 (b) tangible personal property in connection with the construction, operation,
50 maintenance, repair, or replacement of a project, as defined in Section 11-13-103 , or facilities
51 providing additional project capacity, as defined in Section 11-13-103 ;
52 (3) (a) sales of an item described in Subsection (3)(b) from a vending machine if:
53 (i) the proceeds of each sale do not exceed $1; and
54 (ii) the seller or operator of the vending machine reports an amount equal to 150% of
55 the cost of the item described in Subsection (3)(b) as goods consumed; and
56 (b) Subsection (3)(a) applies to:

57 (i) food and food ingredients; or
58 (ii) prepared food;
59 (4) sales of the following to a commercial airline carrier for in-flight consumption:
60 (a) food and food ingredients;
61 (b) prepared food; or
62 (c) services related to Subsection (4)(a) or (b);
63 (5) sales of parts and equipment for installation in aircraft operated by common carriers
64 in interstate or foreign commerce;
65 (6) sales of commercials, motion picture films, prerecorded audio program tapes or
66 records, and prerecorded video tapes by a producer, distributor, or studio to a motion picture
67 exhibitor, distributor, or commercial television or radio broadcaster;
68 (7) (a) subject to Subsection (7)(b), sales of cleaning or washing of tangible personal
69 property if the cleaning or washing of the tangible personal property is not assisted cleaning or
70 washing of tangible personal property;
71 (b) if a seller that sells at the same business location assisted cleaning or washing of
72 tangible personal property and cleaning or washing of tangible personal property that is not
73 assisted cleaning or washing of tangible personal property, the exemption described in
74 Subsection (7)(a) applies if the seller separately accounts for the sales of the assisted cleaning
75 or washing of the tangible personal property; and
76 (c) for purposes of Subsection (7)(b) and in accordance with Title 63, Chapter 46a,
77 Utah Administrative Rulemaking Act, the commission may make rules:
78 (i) governing the circumstances under which sales are at the same business location;
79 and
80 (ii) establishing the procedures and requirements for a seller to separately account for
81 sales of assisted cleaning or washing of tangible personal property;
82 (8) sales made to or by religious or charitable institutions in the conduct of their regular
83 religious or charitable functions and activities, if the requirements of Section 59-12-104.1 are
84 fulfilled;
85 (9) sales of a vehicle of a type required to be registered under the motor vehicle laws of
86 this state if the vehicle is both not:
87 (a) registered in this state; and

88 (b) used in this state except as necessary to transport the vehicle to the borders of this
89 state;
90 (10) (a) amounts paid for an item described in Subsection (10)(b) if:
91 (i) the item is intended for human use; and
92 (ii) (A) a prescription was issued for the item; or
93 (B) the item was purchased by a hospital or other medical facility; and
94 (b) (i) Subsection (10)(a) applies to:
95 (A) a drug;
96 (B) a syringe; or
97 (C) a stoma supply; and
98 (ii) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
99 commission may by rule define the terms:
100 (A) "syringe"; or
101 (B) "stoma supply";
102 (11) sales or use of property, materials, or services used in the construction of or
103 incorporated in pollution control facilities allowed by Sections 19-2-123 through 19-2-127 ;
104 (12) (a) sales of an item described in Subsection (12)(c) served by:
105 (i) the following if the item described in Subsection (12)(c) is not available to the
106 general public:
107 (A) a church; or
108 (B) a charitable institution;
109 (ii) an institution of higher education if:
110 (A) the item described in Subsection (12)(c) is not available to the general public; or
111 (B) the item described in Subsection (12)(c) is prepaid as part of a student meal plan
112 offered by the institution of higher education; or
113 (b) sales of an item described in Subsection (12)(c) provided for a patient by:
114 (i) a medical facility; or
115 (ii) a nursing facility; and
116 (c) Subsections (12)(a) and (b) apply to:
117 (i) food and food ingredients;
118 (ii) prepared food; or

119 (iii) alcoholic beverages;
120 (13) (a) except as provided in Subsection (13)(b), the sale of tangible personal property
121 by a person:
122 (i) regardless of the number of transactions involving the sale of that tangible personal
123 property by that person; and
124 (ii) not regularly engaged in the business of selling that type of tangible personal
125 property;
126 (b) this Subsection (13) does not apply if:
127 (i) the sale is one of a series of sales of a character to indicate that the person is
128 regularly engaged in the business of selling that type of tangible personal property;
129 (ii) the person holds that person out as regularly engaged in the business of selling that
130 type of tangible personal property;
131 (iii) the person sells an item of tangible personal property that the person purchased as
132 a sale that is exempt under Subsection (25); or
133 (iv) the sale is of a vehicle or vessel required to be titled or registered under the laws of
134 this state in which case the tax is based upon:
135 (A) the bill of sale or other written evidence of value of the vehicle or vessel being
136 sold; or
137 (B) in the absence of a bill of sale or other written evidence of value, the fair market
138 value of the vehicle or vessel being sold at the time of the sale as determined by the
139 commission; and
140 (c) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
141 commission shall make rules establishing the circumstances under which:
142 (i) a person is regularly engaged in the business of selling a type of tangible personal
143 property;
144 (ii) a sale of tangible personal property is one of a series of sales of a character to
145 indicate that a person is regularly engaged in the business of selling that type of tangible
146 personal property; or
147 (iii) a person holds that person out as regularly engaged in the business of selling a type
148 of tangible personal property;
149 (14) (a) except as provided in Subsection (14)(b), amounts paid or charged on or after

150 July 1, 2006, for a purchase or lease by a manufacturing facility other than a cogeneration
151 facility, for the following:
152 (i) machinery and equipment that:
153 (A) is used:
154 (I) for a manufacturing facility other than a manufacturing facility that is a scrap
155 recycler described in Subsection 59-12-102 (45)(b):
156 (Aa) in the manufacturing process; and
157 (Bb) to manufacture an item sold as tangible personal property; or
158 (II) for a manufacturing facility that is a scrap recycler described in Subsection
159 59-12-102 (45)(b), to process an item sold as tangible personal property; and
160 (B) has an economic life of three or more years; and
161 (ii) normal operating repair or replacement parts that:
162 (A) have an economic life of three or more years; and
163 (B) are used:
164 (I) for a manufacturing facility in the state other than a manufacturing facility that is a
165 scrap recycler described in Subsection 59-12-102 (45)(b), in the manufacturing process; or
166 (II) for a manufacturing facility in the state that is a scrap recycler described in
167 Subsection 59-12-102 (45)(b), to process an item sold as tangible personal property;
168 (b) (i) amounts paid or charged on or after July 1, 2005, for a purchase or lease by a
169 manufacturing facility that is a cogeneration facility placed in service on or after May 1, 2006,
170 for the following:
171 (A) machinery and equipment that:
172 (I) is used:
173 (Aa) in the manufacturing process; and
174 (Bb) to manufacture an item sold as tangible personal property; and
175 (II) has an economic life of three or more years; and
176 (B) normal operating repair or replacement parts that:
177 (I) are used in the manufacturing process in a manufacturing facility in the state; and
178 (II) have an economic life of three or more years; and
179 (ii) for amounts paid or charged on or after July 1, 2005, but on or before June 30,
180 2006, for a purchase or lease described in Subsection (14)(b)(i), a cogeneration facility may

181 claim the exemption allowed by Subsection (14)(b)(i) by filing for a refund:
182 (A) for sales and use taxes paid under this chapter on the purchase or lease payment;
183 and
184 (B) in accordance with Section 59-12-110 ;
185 (c) for purposes of this Subsection (14) and in accordance with Title 63, Chapter 46a,
186 Utah Administrative Rulemaking Act, the commission:
187 (i) shall by rule define the term "establishment"; and
188 (ii) may by rule define what constitutes processing an item sold as tangible personal
189 property; and
190 (d) on or before October 1, 1991, and every five years after October 1, 1991, the
191 commission shall:
192 (i) review the exemptions described in this Subsection (14) and make
193 recommendations to the Revenue and Taxation Interim Committee concerning whether the
194 exemptions should be continued, modified, or repealed; and
195 (ii) include in its report:
196 (A) the cost of the exemptions;
197 (B) the purpose and effectiveness of the exemptions; and
198 (C) the benefits of the exemptions to the state;
199 (15) (a) sales of the following if the requirements of Subsection (15)(b) are met:
200 (i) tooling;
201 (ii) special tooling;
202 (iii) support equipment;
203 (iv) special test equipment; or
204 (v) parts used in the repairs or renovations of tooling or equipment described in
205 Subsections (15)(a)(i) through (iv); and
206 (b) sales of tooling, equipment, or parts described in Subsection (15)(a) are exempt if:
207 (i) the tooling, equipment, or parts are used or consumed exclusively in the
208 performance of any aerospace or electronics industry contract with the United States
209 government or any subcontract under that contract; and
210 (ii) under the terms of the contract or subcontract described in Subsection (15)(b)(i),
211 title to the tooling, equipment, or parts is vested in the United States government as evidenced

212 by:
213 (A) a government identification tag placed on the tooling, equipment, or parts; or
214 (B) listing on a government-approved property record if placing a government
215 identification tag on the tooling, equipment, or parts is impractical;
216 (16) sales of newspapers or newspaper subscriptions;
217 (17) (a) except as provided in Subsection (17)(b), tangible personal property traded in
218 as full or part payment of the purchase price, except that for purposes of calculating sales or use
219 tax upon vehicles not sold by a vehicle dealer, trade-ins are limited to other vehicles only, and
220 the tax is based upon:
221 (i) the bill of sale or other written evidence of value of the vehicle being sold and the
222 vehicle being traded in; or
223 (ii) in the absence of a bill of sale or other written evidence of value, the then existing
224 fair market value of the vehicle being sold and the vehicle being traded in, as determined by the
225 commission; and
226 (b) notwithstanding Subsection (17)(a), Subsection (17)(a) does not apply to the
227 following items of tangible personal property traded in as full or part payment of the purchase
228 price:
229 (i) money;
230 (ii) electricity;
231 (iii) water;
232 (iv) gas; or
233 (v) steam;
234 (18) (a) (i) except as provided in Subsection (18)(b), sales of tangible personal property
235 used or consumed primarily and directly in farming operations, regardless of whether the
236 tangible personal property:
237 (A) becomes part of real estate; or
238 (B) is installed by a:
239 (I) farmer;
240 (II) contractor; or
241 (III) subcontractor; or
242 (ii) sales of parts used in the repairs or renovations of tangible personal property if the

243 tangible personal property is exempt under Subsection (18)(a)(i); and
244 (b) notwithstanding Subsection (18)(a), amounts paid or charged for the following
245 tangible personal property are subject to the taxes imposed by this chapter:
246 (i) (A) subject to Subsection (18)(b)(i)(B), the following tangible personal property if
247 the tangible personal property is used in a manner that is incidental to farming:
248 (I) machinery;
249 (II) equipment;
250 (III) materials; or
251 (IV) supplies; and
252 (B) tangible personal property that is considered to be used in a manner that is
253 incidental to farming includes:
254 (I) hand tools; or
255 (II) maintenance and janitorial equipment and supplies;
256 (ii) (A) subject to Subsection (18)(b)(ii)(B), tangible personal property if the tangible
257 personal property is used in an activity other than farming; and
258 (B) tangible personal property that is considered to be used in an activity other than
259 farming includes:
260 (I) office equipment and supplies; or
261 (II) equipment and supplies used in:
262 (Aa) the sale or distribution of farm products;
263 (Bb) research; or
264 (Cc) transportation; or
265 (iii) a vehicle required to be registered by the laws of this state during the period
266 ending two years after the date of the vehicle's purchase;
267 (19) sales of hay;
268 (20) exclusive sale during the harvest season of seasonal crops, seedling plants, or
269 garden, farm, or other agricultural produce if the seasonal crops are, seedling plants are, or
270 garden, farm, or other agricultural produce is sold by:
271 (a) the producer of the seasonal crops, seedling plants, or garden, farm, or other
272 agricultural produce;
273 (b) an employee of the producer described in Subsection (20)(a); or

274 (c) a member of the immediate family of the producer described in Subsection (20)(a);
275 (21) purchases made using a coupon as defined in 7 U.S.C. Sec. 2012 that is issued
276 under the Food Stamp Program, 7 U.S.C. Sec. 2011 et seq.;
277 (22) sales of nonreturnable containers, nonreturnable labels, nonreturnable bags,
278 nonreturnable shipping cases, and nonreturnable casings to a manufacturer, processor,
279 wholesaler, or retailer for use in packaging tangible personal property to be sold by that
280 manufacturer, processor, wholesaler, or retailer;
281 (23) property stored in the state for resale;
282 [(24) property brought into the state by a nonresident for his or her own personal use or
283 enjoyment while within the state, except property purchased for use in Utah by a nonresident
284 living and working in Utah at the time of purchase;]
285 (24) (a) purchases of property if:
286 (i) the property is:
287 (A) purchased outside of this state;
288 (B) brought into this state:
289 (I) at any time after the purchase described in Subsection (24)(a)(i)(A); and
290 (II) by a nonresident person who is not living or working in this state at the time of the
291 purchase;
292 (C) used for the personal use or enjoyment of the nonresident person described in
293 Subsection (24)(a)(i)(B)(II) while that nonresident person is within the state; and
294 (D) not used in conducting business in this state; and
295 (ii) for:
296 (A) property other than the property described in Subsection (24)(a)(ii)(B), the first use
297 of the property for a purpose for which the property is designed occurs outside of this state;
298 (B) a boat, the boat is registered outside of this state; or
299 (C) a vehicle other than a vehicle sold to an authorized carrier, the vehicle is registered
300 outside of this state;
301 (b) the exemption provided for in Subsection (24)(a) does not apply to:
302 (i) a lease or rental of property; or
303 (ii) a sale of a vehicle exempt under Subsection (33); and
304 (c) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, for

305 purposes of Subsection (24)(a), the commission may by rule define what constitutes the
306 following:
307 (i) conducting business in this state if that phrase has the same meaning in this
308 Subsection (24) as in Subsection (66);
309 (ii) the first use of property if that phrase has the same meaning in this Subsection (24)
310 as in Subsection (66); or
311 (iii) a purpose for which property is designed if that phrase has the same meaning in
312 this Subsection (66) as in Subsection (24);
313 (25) property purchased for resale in this state, in the regular course of business, either
314 in its original form or as an ingredient or component part of a manufactured or compounded
315 product;
316 (26) property upon which a sales or use tax was paid to some other state, or one of its
317 subdivisions, except that the state shall be paid any difference between the tax paid and the tax
318 imposed by this part and Part 2, Local Sales and Use Tax Act, and no adjustment is allowed if
319 the tax paid was greater than the tax imposed by this part and Part 2, Local Sales and Use Tax
320 Act;
321 (27) any sale of a service described in Subsections 59-12-103 (1)(b), (c), and (d) to a
322 person for use in compounding a service taxable under the subsections;
323 (28) purchases made in accordance with the special supplemental nutrition program for
324 women, infants, and children established in 42 U.S.C. Sec. 1786;
325 (29) beginning on July 1, 1999, through June 30, 2014, sales or leases of rolls, rollers,
326 refractory brick, electric motors, or other replacement parts used in the furnaces, mills, or ovens
327 of a steel mill described in SIC Code 3312 of the 1987 Standard Industrial Classification
328 Manual of the federal Executive Office of the President, Office of Management and Budget;
329 (30) sales of a boat of a type required to be registered under Title 73, Chapter 18, State
330 Boating Act, a boat trailer, or an outboard motor if the boat, trailer, or outboard motor is both
331 not:
332 (a) registered in this state; and
333 (b) used in this state except as necessary to transport the boat, boat trailer, or outboard
334 motor to the borders of this state;
335 (31) sales of aircraft manufactured in Utah if sold for delivery and use outside Utah

336 where a sales or use tax is not imposed, even if the title is passed in Utah;
337 (32) amounts paid for the purchase of telephone service for purposes of providing
338 telephone service;
339 (33) sales or leases of vehicles to, or use of vehicles by an authorized carrier;
340 (34) (a) 45% of the sales price of any new manufactured home; and
341 (b) 100% of the sales price of any used manufactured home;
342 (35) sales relating to schools and fundraising sales;
343 (36) sales or rentals of durable medical equipment if:
344 (a) a person presents a prescription for the durable medical equipment; and
345 (b) the durable medical equipment is used for home use only;
346 (37) (a) sales to a ski resort of electricity to operate a passenger ropeway as defined in
347 Section 72-11-102 ; and
348 (b) the commission shall by rule determine the method for calculating sales exempt
349 under Subsection (37)(a) that are not separately metered and accounted for in utility billings;
350 (38) sales to a ski resort of:
351 (a) snowmaking equipment;
352 (b) ski slope grooming equipment;
353 (c) passenger ropeways as defined in Section 72-11-102 ; or
354 (d) parts used in the repairs or renovations of equipment or passenger ropeways
355 described in Subsections (38)(a) through (c);
356 (39) sales of natural gas, electricity, heat, coal, fuel oil, or other fuels for industrial use;
357 (40) (a) subject to Subsection (40)(b), sales or rentals of the right to use or operate for
358 amusement, entertainment, or recreation an unassisted amusement device as defined in Section
359 59-12-102 ;
360 (b) if a seller that sells or rents at the same business location the right to use or operate
361 for amusement, entertainment, or recreation one or more unassisted amusement devices and
362 one or more assisted amusement devices, the exemption described in Subsection (40)(a)
363 applies if the seller separately accounts for the sales or rentals of the right to use or operate for
364 amusement, entertainment, or recreation for the assisted amusement devices; and
365 (c) for purposes of Subsection (40)(b) and in accordance with Title 63, Chapter 46a,
366 Utah Administrative Rulemaking Act, the commission may make rules:

367 (i) governing the circumstances under which sales are at the same business location;
368 and
369 (ii) establishing the procedures and requirements for a seller to separately account for
370 the sales or rentals of the right to use or operate for amusement, entertainment, or recreation for
371 assisted amusement devices;
372 (41) sales by the state or a political subdivision of the state, except state institutions of
373 higher education as defined in Section 53B-3-102 , of:
374 (a) photocopies; or
375 (b) other copies of records held or maintained by the state or a political subdivision of
376 the state;
377 (42) amounts paid for admission to an athletic event at an institution of higher
378 education that is subject to the provisions of Title IX of the Education Amendments of 1972,
379 20 U.S.C. Sec. 1681 et seq.;
380 (43) sales of telephone service charged to a prepaid telephone calling card;
381 (44) (a) sales of:
382 (i) hearing aids;
383 (ii) hearing aid accessories; or
384 (iii) except as provided in Subsection (44)(b), parts used in the repairs or renovations
385 of hearing aids or hearing aid accessories; and
386 (b) for purposes of this Subsection (44), notwithstanding Subsection (44)(a)(iii),
387 "parts" does not include batteries;
388 (45) (a) sales made to or by:
389 (i) an area agency on aging; or
390 (ii) a senior citizen center owned by a county, city, or town; or
391 (b) sales made by a senior citizen center that contracts with an area agency on aging;
392 (46) sales or leases of semiconductor fabricating, processing, research, or development
393 materials regardless of whether the semiconductor fabricating, processing, research, or
394 development materials:
395 (a) actually come into contact with a semiconductor; or
396 (b) ultimately become incorporated into real property;