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First Substitute S.B. 174

Senator Curtis S. Bramble proposes to substitute the following bill:


             1     
SALES AND USE TAX - EXEMPTION FOR

             2     
SEMICONDUCTOR FABRICATING OR

             3     
PROCESSING MATERIALS

             4     
2001 GENERAL SESSION

             5     
STATE OF UTAH

             6     
Sponsor: Curtis S. Bramble

             7      This act amends the Sales and Use Tax Act to provide for an exemption beginning on July
             8      1, S [ 2002 ] 2001 s , through June 30, S [ 2007 ] 2004 s , for semiconductor fabricating or
             8a      processing materials. The
             9      act provides that the exemption is phased in over S [ a ] the s three-year period. The act
             9a      requires
             10      amounts of the exemption to be reported to the State Tax Commission, and requires the State
             11      Tax Commission to provide to the Legislature upon request the amounts of the exemption
             12      reported to the State Tax Commission. The act requires the Revenue and Taxation Interim
             13      Committee to conduct an annual study of the exemption. The act defines terms and makes
             14      technical changes. This act provides a July 1, 2001 effective date S [ for the definitional section ] s .
             15      This act affects sections of Utah Code Annotated 1953 as follows:
             16      AMENDS:
             17          59-1-403, as last amended by Chapters 190 and 229, Laws of Utah 2000
             18          59-12-102 (Effective 07/01/01), as last amended by Chapter 253, Laws of Utah 2000
             19          59-12-104, as last amended by Chapter 325, Laws of Utah 2000
             20          59-12-105, as last amended by Chapter 147, Laws of Utah 1999
             21      Be it enacted by the Legislature of the state of Utah:
             22          Section 1. Section 59-1-403 is amended to read:
             23           59-1-403. Confidentiality -- Penalty -- Application to property tax.
             24          (1) Any tax commissioner, agent, clerk, or other officer or employee of the commission
             25      or any representative, agent, clerk, or other officer or employee of any county, city, or town may


             26      not divulge or make known in any manner any information gained by him from any return filed
             27      with the commission. The officials charged with the custody of such returns are not required to
             28      produce any of them or evidence of anything contained in them in any action or proceeding in any
             29      court, except:
             30          (a) in accordance with judicial order;
             31          (b) on behalf of the commission in any action or proceeding under this title or other law
             32      under which persons are required to file returns with the commission;
             33          (c) on behalf of the commission in any action or proceeding to which the commission is
             34      a party; or
             35          (d) on behalf of any party to any action or proceeding under this title when the report or
             36      facts shown thereby are directly involved in such action or proceeding. In any event, the court may
             37      require the production of, and may admit in evidence, any portion of reports or of the facts shown
             38      by them, as are specifically pertinent to the action or proceeding.
             39          (2) This section does not prohibit:
             40          (a) a person or his duly authorized representative from receiving a copy of any return or
             41      report filed in connection with that person's own tax;
             42          (b) the publication of statistics as long as they are classified to prevent the identification
             43      of particular reports or returns; and
             44          (c) the inspection by the attorney general or other legal representative of the state of the
             45      report or return of any taxpayer:
             46          (i) who brings action to set aside or review the tax based on such report or return;
             47          (ii) against whom an action or proceeding is contemplated or has been instituted under this
             48      title; or
             49          (iii) against whom the state has an unsatisfied money judgment.
             50          (3) (a) Notwithstanding Subsection (1) and for purposes of administration, the commission
             51      may, by rule, provide for a reciprocal exchange of information with the United States Internal
             52      Revenue Service or the revenue service of any other state.
             53          (b) Notwithstanding Subsection (1) and for all taxes except individual income tax and
             54      corporate franchise tax, the commission may, by rule, share information gathered from returns and
             55      other written statements with the federal government, any other state, any of their political
             56      subdivisions, or any political subdivision of this state, except as limited by Sections 59-12-209 and


             57      59-12-210 , if these political subdivisions or the federal government grant substantially similar
             58      privileges to this state.
             59          (c) Notwithstanding Subsection (1) and for all taxes except individual income tax and
             60      corporate franchise tax, the commission may, by rule, provide for the issuance of information
             61      concerning the identity and other information of taxpayers who have failed to file tax returns or
             62      to pay any tax due.
             63          (d) Notwithstanding Subsection (1), the commission shall provide to the Solid and
             64      Hazardous Waste Control Board executive secretary, as defined in Section 19-6-102 , any records,
             65      returns, and other information filed with the commission under Title 59, Chapter 13, Motor and
             66      Special Fuel Tax Act, or Section 19-6-410.5 regarding the environmental assurance program
             67      participation fee, as requested by the executive secretary.
             68          (e) Notwithstanding Subsection (1), upon request from a tobacco product manufacturer,
             69      as defined in Section 59-22-202 , the commission shall report to the manufacturer:
             70          (i) the quantity of cigarettes, as defined in Section 59-22-202 , produced by the
             71      manufacturer and reported to the commission for the previous calendar year under Section
             72      59-14-407 ; and
             73          (ii) the quantity of cigarettes, as defined in Section 59-22-202 , produced by the
             74      manufacturer for which a tax refund was granted during the previous calendar year under Section
             75      59-14-401 and reported to the commission under Subsection 59-14-401 (1)(a)(v).
             76          (f) Notwithstanding Subsection (1), the commission may:
             77          (i) provide to the Division of Consumer Protection within the Department of Commerce
             78      and the attorney general data:
             79          (A) reported to the commission under Section 59-14-212 ; or
             80          (B) related to a violation under Section 59-14-211 ; and
             81          (ii) upon request provide to any person data reported to the commission under Subsections
             82      59-14-212 (1)(a) through (1)(c) and Subsection 59-14-212 (1)(g).
             83          (g) Notwithstanding Subsection (1), the commission shall at the request of the Legislature
             84      provide to the Legislature the total amount of sales or uses exempt under Subsection
             85      59-12-104 (52) reported to the commission in accordance with Section 59-12-105 .
             86          (4) Reports and returns shall be preserved for at least three years and then the commission
             87      may destroy them.


             88          (5) Any person who violates this section is guilty of a class A misdemeanor. If the
             89      offender is an officer or employee of the state, he shall be dismissed from office and be
             90      disqualified from holding public office in this state for a period of five years thereafter.
             91          (6) This part does not apply to the property tax.
             92          Section 2. Section 59-12-102 (Effective 07/01/01) is amended to read:
             93           59-12-102 (Effective 07/01/01). Definitions.
             94          As used in this chapter:
             95          (1) (a) "Admission or user fees" includes season passes.
             96          (b) "Admission or user fees" does not include annual membership dues to private
             97      organizations.
             98          (2) "Area agency on aging" is as defined in Section 62A-3-101 .
             99          (3) "Authorized carrier" means:
             100          (a) in the case of vehicles operated over public highways, the holder of credentials
             101      indicating that the vehicle is or will be operated pursuant to both the International Registration
             102      Plan (IRP) and the International Fuel Tax Agreement (IFTA);
             103          (b) in the case of aircraft, the holder of a Federal Aviation Administration (FAA) operating
             104      certificate or air carrier's operating certificate; or
             105          (c) in the case of locomotives, freight cars, railroad work equipment, or other rolling stock,
             106      the holder of a certificate issued by the United States Interstate Commerce Commission.
             107          (4) (a) For purposes of Subsection 59-12-104 (43), "coin-operated amusement device"
             108      means:
             109          (i) a coin-operated amusement, skill, or ride device;
             110          (ii) that is not controlled through vendor-assisted, over-the-counter, sales of tokens; and
             111          (iii) includes a music machine, pinball machine, billiard machine, video game machine,
             112      arcade machine, and a mechanical or electronic skill game or ride.
             113          (b) For purposes of Subsection 59-12-104 (43), "coin-operated amusement device" does
             114      not mean a coin-operated amusement device possessing a coinage mechanism that:
             115          (i) accepts and registers multiple denominations of coins; and
             116          (ii) allows the vendor to collect the sales and use tax at the time an amusement device is
             117      activated and operated by a person inserting coins into the device.
             118          (5) "Commercial use" means the use of gas, electricity, heat, coal, fuel oil, or other fuels


             119      that does not constitute industrial use under Subsection (13) or residential use under Subsection
             120      (21).
             121          (6) (a) "Common carrier" means a person engaged in or transacting the business of
             122      transporting passengers, freight, merchandise, or other property for hire within this state.
             123          (b) (i) "Common carrier" does not include a person who, at the time the person is traveling
             124      to or from that person's place of employment, transports a passenger to or from the passenger's
             125      place of employment.
             126          (ii) For purposes of Subsection (6)(b)(i), in accordance with Title 63, Chapter 46a, Utah
             127      Administrative Rulemaking Act, the commission may make rules defining what constitutes a
             128      person's place of employment.
             129          (7) "Component part" includes:
             130          (a) poultry, dairy, and other livestock feed, and their components;
             131          (b) baling ties and twine used in the baling of hay and straw;
             132          (c) fuel used for providing temperature control of orchards and commercial greenhouses
             133      doing a majority of their business in wholesale sales, and for providing power for off-highway type
             134      farm machinery; and
             135          (d) feed, seeds, and seedlings.
             136          (8) "Construction materials" means any tangible personal property that will be converted
             137      into real property.
             138          (9) (a) "Fundraising sales" means sales:
             139          (i) (A) made by a public or private elementary or secondary school; or
             140          (B) made by a public or private elementary or secondary school student, grades
             141      kindergarten through 12;
             142          (ii) that are for the purpose of raising funds for the school to purchase equipment,
             143      materials, or provide transportation; and
             144          (iii) that are part of an officially sanctioned school activity.
             145          (b) For purposes of Subsection (9)(a)(iii), "officially sanctioned school activity" means a
             146      school activity:
             147          (i) that is conducted in accordance with a formal policy adopted by the school or school
             148      district governing the authorization and supervision of fundraising activities;
             149          (ii) that does not directly or indirectly compensate an individual teacher or other


             150      educational personnel by direct payment, commissions, or payment in kind; and
             151          (iii) the net or gross revenues from which are deposited in a dedicated account controlled
             152      by the school or school district.
             153          (10) (a) "Hearing aid" means:
             154          (i) an instrument or device having an electronic component that is designed to:
             155          (A) (I) improve impaired human hearing; or
             156          (II) correct impaired human hearing; and
             157          (B) (I) be worn in the human ear; or
             158          (II) affixed behind the human ear;
             159          (ii) an instrument or device that is surgically implanted into the cochlea; or
             160          (iii) a telephone amplifying device.
             161          (b) "Hearing aid" does not include:
             162          (i) except as provided in Subsection (10)(a)(i)(B) or (10)(a)(ii), an instrument or device
             163      having an electronic component that is designed to be worn on the body;
             164          (ii) except as provided in Subsection (10)(a)(iii), an assistive listening device or system
             165      designed to be used by one individual, including:
             166          (A) a personal amplifying system;
             167          (B) a personal FM system;
             168          (C) a television listening system; or
             169          (D) a device or system similar to a device or system described in Subsections
             170      (10)(b)(ii)(A) through (C); or
             171          (iii) an assistive listening device or system designed to be used by more than one
             172      individual, including:
             173          (A) a device or system installed in:
             174          (I) an auditorium;
             175          (II) a church;
             176          (III) a conference room;
             177          (IV) a synagogue; or
             178          (V) a theater; or
             179          (B) a device or system similar to a device or system described in Subsections
             180      (10)(b)(iii)(A)(I) through (V).


             181          (11) (a) "Hearing aid accessory" means a hearing aid:
             182          (i) component;
             183          (ii) attachment; or
             184          (iii) accessory.
             185          (b) "Hearing aid accessory" includes:
             186          (i) a hearing aid neck loop;
             187          (ii) a hearing aid cord;
             188          (iii) a hearing aid ear mold;
             189          (iv) hearing aid tubing;
             190          (v) a hearing aid ear hook; or
             191          (vi) a hearing aid remote control.
             192          (c) "Hearing aid accessory" does not include:
             193          (i) a component, attachment, or accessory designed to be used only with an:
             194          (A) instrument or device described in Subsection (10)(b)(i); or
             195          (B) assistive listening device or system described in Subsection (10)(b)(ii) or (iii); or
             196          (ii) a hearing aid battery.
             197          (12) (a) "Home medical equipment and supplies" means equipment and supplies that:
             198          (i) a licensed physician prescribes or authorizes in writing as necessary for the treatment
             199      of a medical illness or injury or as necessary to mitigate an impairment resulting from illness or
             200      injury;
             201          (ii) are used exclusively by the person for whom they are prescribed to serve a medical
             202      purpose; and
             203          (iii) are listed as eligible for payment under Title 18 of the federal Social Security Act or
             204      under the state plan for medical assistance under Title 19 of the federal Social Security Act.
             205          (b) "Home medical equipment and supplies" does not include:
             206          (i) equipment and supplies purchased by, for, or on behalf of any health care facility, as
             207      defined in Subsection (12)(c), doctor, nurse, or other health care provider for use in their
             208      professional practice;
             209          (ii) eyeglasses, contact lenses, or equipment to correct impaired vision; or
             210          (iii) hearing aids or hearing aid accessories.
             211          (c) For purposes of Subsection (12)(b)(i), "health care facility" includes:


             212          (i) a clinic;
             213          (ii) a doctor's office; and
             214          (iii) a health care facility as defined in Section 26-21-2 .
             215          (13) "Industrial use" means the use of natural gas, electricity, heat, coal, fuel oil, or other
             216      fuels in:
             217          (a) mining or extraction of minerals;
             218          (b) agricultural operations to produce an agricultural product up to the time of harvest or
             219      placing the agricultural product into a storage facility, including:
             220          (i) commercial greenhouses;
             221          (ii) irrigation pumps;
             222          (iii) farm machinery;
             223          (iv) implements of husbandry as defined in Subsection 41-1a-102 (23) that are not
             224      registered under Title 41, Chapter 1a, Part 2, Registration; and
             225          (v) other farming activities; and
             226          (c) manufacturing tangible personal property at an establishment described in SIC Codes
             227      2000 to 3999 of the 1987 Standard Industrial Classification Manual of the federal Executive Office
             228      of the President, Office of Management and Budget.
             229          (14) "Manufactured home" means any manufactured home or mobile home as defined in
             230      Title 58, Chapter 56, Utah Uniform Building Standards Act.
             231          (15) For purposes of Subsection 59-12-104 (14), "manufacturing facility" means:
             232          (a) an establishment described in SIC Codes 2000 to 3999 of the 1987 Standard Industrial
             233      Classification Manual of the federal Executive Office of the President, Office of Management and
             234      Budget; or
             235          (b) a scrap recycler if:
             236          (i) from a fixed location, the scrap recycler utilizes machinery or equipment to process one
             237      or more of the following items into prepared grades of processed materials for use in new products:
             238          (A) iron;
             239          (B) steel;
             240          (C) nonferrous metal;
             241          (D) paper;
             242          (E) glass;


             243          (F) plastic;
             244          (G) textile; or
             245          (H) rubber; and
             246          (ii) the new products under Subsection (15)(b)(i) would otherwise be made with
             247      nonrecycled materials.
             248          (16) (a) "Medicine" means:
             249          (i) insulin, syringes, and any medicine prescribed for the treatment of human ailments by
             250      a person authorized to prescribe treatments and dispensed on prescription filled by a registered
             251      pharmacist, or supplied to patients by a physician, surgeon, or podiatric physician;
             252          (ii) any medicine dispensed to patients in a county or other licensed hospital if prescribed
             253      for that patient and dispensed by a registered pharmacist or administered under the direction of a
             254      physician; and
             255          (iii) any oxygen or stoma supplies prescribed by a physician or administered under the
             256      direction of a physician or paramedic.
             257          (b) "Medicine" does not include:
             258          (i) any auditory, prosthetic, ophthalmic, or ocular device or appliance; or
             259          (ii) any alcoholic beverage.
             260          (17) "Olympic merchandise" means tangible personal property bearing an Olympic
             261      designation, emblem, insignia, mark, logo, service mark, symbol, terminology, trademark, or other
             262      copyrighted or protected material, including:
             263          (a) one or more of the following terms:
             264          (i) "Olympic";
             265          (ii) "Olympiad"; or
             266          (iii) "Citius Altius Fortius";
             267          (b) the symbol of the International Olympic Committee, consisting of five interlocking
             268      rings;
             269          (c) the emblem of the International Olympic Committee Corporation;
             270          (d) a United States Olympic Committee designation, emblem, insignia, mark, logo, service
             271      mark, symbol, terminology, trademark, or other copyrighted or protected material;
             272          (e) any emblem of the Olympic Winter Games of 2002 that is officially designated by the
             273      Salt Lake Organizing Committee of the Olympic Winter Games of 2002; or


             274          (f) the mascot of the Olympic Winter Games of 2002.
             275          (18) (a) "Other fuels" means products that burn independently to produce heat or energy.
             276          (b) "Other fuels" includes oxygen when it is used in the manufacturing of tangible personal
             277      property.
             278          (19) "Person" includes any individual, firm, partnership, joint venture, association,
             279      corporation, estate, trust, business trust, receiver, syndicate, this state, any county, city,
             280      municipality, district, or other local governmental entity of the state, or any group or combination
             281      acting as a unit.
             282          (20) "Purchase price" means the amount paid or charged for tangible personal property or
             283      any other taxable transaction under Subsection 59-12-103 (1), excluding only cash discounts taken
             284      or any excise tax imposed on the purchase price by the federal government.
             285          (21) "Residential use" means the use in or around a home, apartment building, sleeping
             286      quarters, and similar facilities or accommodations.
             287          (22) (a) "Retail sale" means any sale within the state of tangible personal property or any
             288      other taxable transaction under Subsection 59-12-103 (1), other than resale of such property, item,
             289      or service by a retailer or wholesaler to a user or consumer.
             290          (b) "Retail sale" includes sales by any farmer or other agricultural producer of poultry,
             291      eggs, or dairy products to consumers if the sales have an average monthly sales value of $125 or
             292      more.
             293          (c) "Retail sale" does not include, and no additional sales or use tax shall be assessed
             294      against, those transactions where a purchaser of tangible personal property pays applicable sales
             295      or use taxes on its initial nonexempt purchases of property and then enters into a sale-leaseback
             296      transaction by which title to such property is transferred by the purchaser-lessee to a lessor for
             297      consideration, provided:
             298          (i) the transaction is intended as a form of financing for the property to the
             299      purchaser-lessee; and
             300          (ii) pursuant to generally accepted accounting principles, the purchaser-lessee is required
             301      to capitalize the subject property for financial reporting purposes, and account for the lease
             302      payments as payments made under a financing arrangement.
             303          (23) (a) "Retailer" means any person engaged in a regularly organized retail business in
             304      tangible personal property or any other taxable transaction under Subsection 59-12-103 (1), and


             305      who is selling to the user or consumer and not for resale.
             306          (b) "Retailer" includes commission merchants, auctioneers, and any person regularly
             307      engaged in the business of selling to users or consumers within the state.
             308          (c) "Retailer" does not include farmers, gardeners, stockmen, poultrymen, or other growers
             309      or agricultural producers producing and doing business on their own premises, except those who
             310      are regularly engaged in the business of buying or selling for a profit.
             311          (d) For purposes of this chapter the commission may regard as retailers the following if
             312      they determine it is necessary for the efficient administration of this chapter: salesmen,
             313      representatives, peddlers, or canvassers as the agents of the dealers, distributors, supervisors, or
             314      employers under whom they operate or from whom they obtain the tangible personal property sold
             315      by them, irrespective of whether they are making sales on their own behalf or on behalf of these
             316      dealers, distributors, supervisors, or employers, except that:
             317          (i) a printer's facility with which a retailer has contracted for printing shall not be
             318      considered to be a salesman, representative, peddler, canvasser, or agent of the retailer; and
             319          (ii) the ownership of property that is located at the premises of a printer's facility with
             320      which the retailer has contracted for printing and that consists of the final printed product, property
             321      that becomes a part of the final printed product, or copy from which the printed product is
             322      produced, shall not result in the retailer being deemed to have or maintain an office, distribution
             323      house, sales house, warehouse, service enterprise, or other place of business, or to maintain a stock
             324      of goods, within this state.
             325          (24) "Sale" means any transfer of title, exchange, or barter, conditional or otherwise, in any
             326      manner, of tangible personal property or any other taxable transaction under Subsection
             327      59-12-103 (1), for consideration. It includes:
             328          (a) installment and credit sales;
             329          (b) any closed transaction constituting a sale;
             330          (c) any sale of electrical energy, gas, services, or entertainment taxable under this chapter;
             331          (d) any transaction if the possession of property is transferred but the seller retains the title
             332      as security for the payment of the price; and
             333          (e) any transaction under which right to possession, operation, or use of any article of
             334      tangible personal property is granted under a lease or contract and the transfer of possession would
             335      be taxable if an outright sale were made.


             336          (25) (a) "Sales relating to schools" means sales by a public school district or public or
             337      private elementary or secondary school, grades kindergarten through 12, that are directly related
             338      to the school's or school district's educational functions or activities and include:
             339          (i) the sale of textbooks, textbook fees, laboratory fees, laboratory supplies, and safety
             340      equipment;
             341          (ii) the sale of clothing that:
             342          (A) a student is specifically required to wear as a condition of participation in a
             343      school-related event or activity; and
             344          (B) is not readily adaptable to general or continued usage to the extent that it takes the
             345      place of ordinary clothing;
             346          (iii) sales of food if the net or gross revenues generated by the food sales are deposited into
             347      a school district fund or school fund dedicated to school meals; and
             348          (iv) transportation charges for official school activities.
             349          (b) "Sales relating to schools" does not include:
             350          (i) gate receipts;
             351          (ii) special event admission fees;
             352          (iii) bookstore sales of items that are not educational materials or supplies; and
             353          (iv) except as provided in Subsection (25)(a)(ii), clothing.
             354          (26) (a) "Semiconductor fabricating or processing materials" means tangible personal
             355      property:
             356          (i) used primarily in the process of:
             357          (A) (I) manufacturing a semiconductor; or
             358          (II) fabricating a semiconductor; or
             359          (B) maintaining an environment suitable for a semiconductor; or
             360          (ii) consumed primarily in the process of:
             361          (A) (I) manufacturing a semiconductor; or
             362          (II) fabricating a semiconductor; or
             363          (B) maintaining an environment suitable for a semiconductor.
             364          (b) "Semiconductor fabricating or processing materials" includes a chemical, catalyst, or
             365      other material used to:
             366          (i) produce or induce in a semiconductor a:


             367          (A) chemical change; or
             368          (B) physical change;
             369          (ii) remove impurities from a semiconductor; or
             370          (iii) improve the marketable condition of a semiconductor.
             371          [(26)] (27) "Senior citizen center" means a facility having the primary purpose of
             372      providing services to the aged as defined in Section 62A-3-101 .
             373          [(27)] (28) "State" means the state of Utah, its departments, and agencies.
             374          [(28)] (29) "Storage" means any keeping or retention of tangible personal property or any
             375      other taxable transaction under Subsection 59-12-103 (1), in this state for any purpose except sale
             376      in the regular course of business.
             377          [(29)] (30) (a) "Tangible personal property" means:
             378          (i) all goods, wares, merchandise, produce, and commodities;
             379          (ii) all tangible or corporeal things and substances which are dealt in or capable of being
             380      possessed or exchanged;
             381          (iii) water in bottles, tanks, or other containers; and
             382          (iv) all other physically existing articles or things, including property severed from real
             383      estate.
             384          (b) "Tangible personal property" does not include:
             385          (i) real estate or any interest or improvements in real estate;
             386          (ii) bank accounts, stocks, bonds, mortgages, notes, and other evidence of debt;
             387          (iii) insurance certificates or policies;
             388          (iv) personal or governmental licenses;
             389          (v) water in pipes, conduits, ditches, or reservoirs;
             390          (vi) currency and coinage constituting legal tender of the United States or of a foreign
             391      nation; and
             392          (vii) all gold, silver, or platinum ingots, bars, medallions, or decorative coins, not
             393      constituting legal tender of any nation, with a gold, silver, or platinum content of not less than
             394      80%.
             395          [(30)] (31) (a) "Use" means the exercise of any right or power over tangible personal
             396      property under Subsection 59-12-103 (1), incident to the ownership or the leasing of that property,
             397      item, or service.


             398          (b) "Use" does not include the sale, display, demonstration, or trial of that property in the
             399      regular course of business and held for resale.
             400          [(31)] (32) "Vehicle" means any aircraft, as defined in Section 72-10-102 ; any vehicle, as
             401      defined in Section 41-1a-102 ; any off-highway vehicle, as defined in Section 41-22-2 ; and any
             402      vessel, as defined in Section 41-1a-102 ; that is required to be titled, registered, or both. "Vehicle"
             403      for purposes of Subsection 59-12-104 (36) only, also includes any locomotive, freight car, railroad
             404      work equipment, or other railroad rolling stock.
             405          [(32)] (33) "Vehicle dealer" means a person engaged in the business of buying, selling, or
             406      exchanging vehicles as defined in Subsection [(31)] (32).
             407          [(33)] (34) (a) "Vendor" means any person receiving any payment or consideration upon
             408      a sale of tangible personal property or any other taxable transaction under Subsection
             409      59-12-103 (1), or to whom the payment or consideration is payable.
             410          (b) "Vendor" does not mean a printer's facility described in Subsection (23)(d).
             411          Section 3. Section 59-12-104 is amended to read:
             412           59-12-104. Exemptions.
             413          The following sales and uses are exempt from the taxes imposed by this chapter:
             414          (1) sales of aviation fuel, motor fuel, and special fuel subject to a Utah state excise tax
             415      under Title 59, Chapter 13, Motor and Special Fuel Tax Act;
             416          (2) sales to the state, its institutions, and its political subdivisions; however, this exemption
             417      does not apply to sales of construction materials except:
             418          (a) construction materials purchased by or on behalf of institutions of the public education
             419      system as defined in Utah Constitution Article X, Section 2, provided the construction materials
             420      are clearly identified and segregated and installed or converted to real property which is owned by
             421      institutions of the public education system; and
             422          (b) construction materials purchased by the state, its institutions, or its political
             423      subdivisions which are installed or converted to real property by employees of the state, its
             424      institutions, or its political subdivisions;
             425          (3) sales of food, beverage, and dairy products from vending machines in which the
             426      proceeds of each sale do not exceed $1 if the vendor or operator of the vending machine reports
             427      an amount equal to 150% of the cost of items as goods consumed;
             428          (4) sales of food, beverage, dairy products, similar confections, and related services to


             429      commercial airline carriers for in-flight consumption;
             430          (5) sales of parts and equipment installed in aircraft operated by common carriers in
             431      interstate or foreign commerce;
             432          (6) sales of commercials, motion picture films, prerecorded audio program tapes or
             433      records, and prerecorded video tapes by a producer, distributor, or studio to a motion picture
             434      exhibitor, distributor, or commercial television or radio broadcaster;
             435          (7) sales of cleaning or washing of tangible personal property by a coin-operated laundry
             436      or dry cleaning machine;
             437          (8) (a) except as provided in Subsection (8)(b), sales made to or by religious or charitable
             438      institutions in the conduct of their regular religious or charitable functions and activities, if the
             439      requirements of Section 59-12-104.1 are fulfilled;
             440          (b) the exemption provided for in Subsection (8)(a) does not apply to the following sales,
             441      uses, leases, or rentals relating to the Olympic Winter Games of 2002 made to or by an
             442      organization exempt from federal income taxation under Section 501(c)(3), Internal Revenue
             443      Code:
             444          (i) retail sales of Olympic merchandise;
             445          (ii) except as provided in Subsection (51), admissions or user fees described in Subsection
             446      59-12-103 (1)(f);
             447          (iii) sales of accommodations and services as provided in Subsection 59-12-103 (1)(i),
             448      except for accommodations and services:
             449          (A) paid for in full by the Salt Lake Organizing Committee for the Olympic Winter Games
             450      of 2002;
             451          (B) exclusively used by:
             452          (I) an officer, a trustee, or an employee of the Salt Lake Organizing Committee for the
             453      Olympic Winter Games of 2002; or
             454          (II) a volunteer supervised by the Salt Lake Organizing Committee for the Olympic Winter
             455      Games of 2002; and
             456          (C) for which the Salt Lake Organizing Committee for the Olympic Winter Games of 2002
             457      does not receive reimbursement; or
             458          (iv) a lease or rental of a vehicle as defined in Section 41-1a-102 , except for a lease or
             459      rental of a vehicle:


             460          (A) paid for in full by the Salt Lake Organizing Committee for the Olympic Winter Games
             461      of 2002;
             462          (B) exclusively used by:
             463          (I) an officer, a trustee, or an employee of the Salt Lake Organizing Committee for the
             464      Olympic Winter Games of 2002; or
             465          (II) a volunteer supervised by the Salt Lake Organizing Committee for the Olympic Winter
             466      Games of 2002; and
             467          (C) for which the Salt Lake Organizing Committee for the Olympic Winter Games of 2002
             468      does not receive reimbursement;
             469          (9) sales of vehicles of a type required to be registered under the motor vehicle laws of this
             470      state which are made to bona fide nonresidents of this state and are not afterwards registered or
             471      used in this state except as necessary to transport them to the borders of this state;
             472          (10) sales of medicine;
             473          (11) sales or use of property, materials, or services used in the construction of or
             474      incorporated in pollution control facilities allowed by Sections 19-2-123 through 19-2-127 ;
             475          (12) sales of meals served by:
             476          (a) churches, charitable institutions, and institutions of higher education, if the meals are
             477      not available to the general public; and
             478          (b) inpatient meals provided at medical or nursing facilities;
             479          (13) isolated or occasional sales by persons not regularly engaged in business, except the
             480      sale of vehicles or vessels required to be titled or registered under the laws of this state in which
             481      case the tax is based upon:
             482          (a) the bill of sale or other written evidence of value of the vehicle or vessel being sold;
             483      or
             484          (b) in the absence of a bill of sale or other written evidence of value, the then existing fair
             485      market value of the vehicle or vessel being sold as determined by the commission;
             486          (14) (a) the following purchases or leases by a manufacturer on or after July 1, 1995:
             487          (i) machinery and equipment:
             488          (A) used in the manufacturing process;
             489          (B) having an economic life of three or more years; and
             490          (C) used:


             491          (I) to manufacture an item sold as tangible personal property; and
             492          (II) in new or expanding operations in a manufacturing facility in the state; and
             493          (ii) subject to the provisions of Subsection (14)(b), normal operating replacements that:
             494          (A) have an economic life of three or more years;
             495          (B) are used in the manufacturing process in a manufacturing facility in the state;
             496          (C) are used to replace or adapt an existing machine to extend the normal estimated useful
             497      life of the machine; and
             498          (D) do not include repairs and maintenance;
             499          (b) the rates for the exemption under Subsection (14)(a)(ii) are as follows:
             500          (i) beginning July 1, 1996, through June 30, 1997, 30% of the sale or lease described in
             501      Subsection (14)(a)(ii) is exempt;
             502          (ii) beginning July 1, 1997, through June 30, 1998, 60% of the sale or lease described in
             503      Subsection (14)(a)(ii) is exempt; and
             504          (iii) beginning July 1, 1998, 100% of the sale or lease described in Subsection (14)(a)(ii)
             505      is exempt;
             506          (c) for purposes of this Subsection (14), the commission shall by rule define the terms
             507      "new or expanding operations" and "establishment"; and
             508          (d) on or before October 1, 1991, and every five years after October 1, 1991, the
             509      commission shall:
             510          (i) review the exemptions described in Subsection (14)(a) and make recommendations to
             511      the Revenue and Taxation Interim Committee concerning whether the exemptions should be
             512      continued, modified, or repealed; and
             513          (ii) include in its report:
             514          (A) the cost of the exemptions;
             515          (B) the purpose and effectiveness of the exemptions; and
             516          (C) the benefits of the exemptions to the state;
             517          (15) sales of tooling, special tooling, support equipment, and special test equipment used
             518      or consumed exclusively in the performance of any aerospace or electronics industry contract with
             519      the United States government or any subcontract under that contract, but only if, under the terms
             520      of that contract or subcontract, title to the tooling and equipment is vested in the United States
             521      government as evidenced by a government identification tag placed on the tooling and equipment


             522      or by listing on a government-approved property record if a tag is impractical;
             523          (16) intrastate movements of:
             524          (a) freight by common carriers; and
             525          (b) passengers:
             526          (i) by taxicabs as described in SIC Code 4121 of the 1987 Standard Industrial
             527      Classification Manual of the federal Executive Office of the President, Office of Management and
             528      Budget; or
             529          (ii) transported by an establishment described in SIC Code 4111 of the 1987 Standard
             530      Industrial Classification Manual of the federal Executive Office of the President, Office of
             531      Management and Budget, if the transportation originates and terminates within a county of the
             532      first, second, or third class;
             533          (17) sales of newspapers or newspaper subscriptions;
             534          (18) tangible personal property, other than money, traded in as full or part payment of the
             535      purchase price, except that for purposes of calculating sales or use tax upon vehicles not sold by
             536      a vehicle dealer, trade-ins are limited to other vehicles only, and the tax is based upon:
             537          (a) the bill of sale or other written evidence of value of the vehicle being sold and the
             538      vehicle being traded in; or
             539          (b) in the absence of a bill of sale or other written evidence of value, the then existing fair
             540      market value of the vehicle being sold and the vehicle being traded in, as determined by the
             541      commission;
             542          (19) sprays and insecticides used to control insects, diseases, and weeds for commercial
             543      production of fruits, vegetables, feeds, seeds, and animal products, but not those sprays and
             544      insecticides used in the processing of the products;
             545          (20) (a) sales of tangible personal property used or consumed primarily and directly in
             546      farming operations, including sales of irrigation equipment and supplies used for agricultural
             547      production purposes, whether or not they become part of real estate and whether or not installed
             548      by farmer, contractor, or subcontractor, but not sales of:
             549          (i) machinery, equipment, materials, and supplies used in a manner that is incidental to
             550      farming, such as hand tools with a unit purchase price not in excess of $250, and maintenance and
             551      janitorial equipment and supplies;
             552          (ii) tangible personal property used in any activities other than farming, such as office


             553      equipment and supplies, equipment and supplies used in sales or distribution of farm products, in
             554      research, or in transportation; or
             555          (iii) any vehicle required to be registered by the laws of this state, without regard to the use
             556      to which the vehicle is put;
             557          (b) sales of hay;
             558          (21) exclusive sale of locally grown seasonal crops, seedling plants, or garden, farm, or
             559      other agricultural produce if sold by a producer during the harvest season;
             560          (22) purchases of food as defined in 7 U.S.C. Sec. 2012(g) under the Food Stamp Program,
             561      7 U.S.C. Sec. 2011 et seq.;
             562          (23) sales of nonreturnable containers, nonreturnable labels, nonreturnable bags,
             563      nonreturnable shipping cases, and nonreturnable casings to a manufacturer, processor, wholesaler,
             564      or retailer for use in packaging tangible personal property to be sold by that manufacturer,
             565      processor, wholesaler, or retailer;
             566          (24) property stored in the state for resale;
             567          (25) property brought into the state by a nonresident for his or her own personal use or
             568      enjoyment while within the state, except property purchased for use in Utah by a nonresident living
             569      and working in Utah at the time of purchase;
             570          (26) property purchased for resale in this state, in the regular course of business, either in
             571      its original form or as an ingredient or component part of a manufactured or compounded product;
             572          (27) property upon which a sales or use tax was paid to some other state, or one of its
             573      subdivisions, except that the state shall be paid any difference between the tax paid and the tax
             574      imposed by this part and Part 2, Local Sales and Use Tax Act, and no adjustment is allowed if the
             575      tax paid was greater than the tax imposed by this part and Part 2, Local Sales and Use Tax Act;
             576          (28) any sale of a service described in Subsections 59-12-103 (1)(b), (c), and (d) to a person
             577      for use in compounding a service taxable under the subsections;
             578          (29) purchases of supplemental foods as defined in 42 U.S.C. Sec. 1786(b)(14) under the
             579      special supplemental nutrition program for women, infants, and children established in 42 U.S.C.
             580      Sec. 1786;
             581          (30) beginning on July 1, 1999, through June 30, 2004, sales or leases of rolls, rollers,
             582      refractory brick, electric motors, or other replacement parts used in the furnaces, mills, or ovens
             583      of a steel mill described in SIC Code 3312 of the 1987 Standard Industrial Classification Manual


             584      of the federal Executive Office of the President, Office of Management and Budget;
             585          (31) sales of boats of a type required to be registered under Title 73, Chapter 18, State
             586      Boating Act, boat trailers, and outboard motors which are made to bona fide nonresidents of this
             587      state and are not thereafter registered or used in this state except as necessary to transport them to
             588      the borders of this state;
             589          (32) sales of tangible personal property to persons within this state that is subsequently
             590      shipped outside the state and incorporated pursuant to contract into and becomes a part of real
             591      property located outside of this state, except to the extent that the other state or political entity
             592      imposes a sales, use, gross receipts, or other similar transaction excise tax on it against which the
             593      other state or political entity allows a credit for taxes imposed by this chapter;
             594          (33) sales of aircraft manufactured in Utah if sold for delivery and use outside Utah where
             595      a sales or use tax is not imposed, even if the title is passed in Utah;
             596          (34) amounts paid for the purchase of telephone service for purposes of providing
             597      telephone service;
             598          (35) fares charged to persons transported directly by a public transit district created under
             599      the authority of Title 17A, Chapter 2, Part 10, Utah Public Transit District Act;
             600          (36) sales or leases of vehicles to, or use of vehicles by an authorized carrier;
             601          (37) (a) 45% of the sales price of any new manufactured home; and
             602          (b) 100% of the sales price of any used manufactured home;
             603          (38) sales relating to schools and fundraising sales;
             604          (39) sales or rentals of home medical equipment and supplies;
             605          (40) (a) sales to a ski resort of electricity to operate a passenger ropeway as defined in
             606      Section 72-11-102 ; and
             607          (b) the commission shall by rule determine the method for calculating sales exempt under
             608      Subsection (40)(a) that are not separately metered and accounted for in utility billings;
             609          (41) sales to a ski resort of:
             610          (a) snowmaking equipment;
             611          (b) ski slope grooming equipment; and
             612          (c) passenger ropeways as defined in Section 72-11-102 ;
             613          (42) sales of natural gas, electricity, heat, coal, fuel oil, or other fuels for industrial use;
             614          (43) sales or rentals of the right to use or operate for amusement, entertainment, or


             615      recreation a coin-operated amusement device as defined in Section 59-12-102 ;
             616          (44) sales of cleaning or washing of tangible personal property by a coin-operated car wash
             617      machine;
             618          (45) sales by the state or a political subdivision of the state, except state institutions of
             619      higher education as defined in Section 53B-3-102 , of:
             620          (a) photocopies; or
             621          (b) other copies of records held or maintained by the state or a political subdivision of the
             622      state; and
             623          (46) (a) amounts paid:
             624          (i) to a person providing intrastate transportation to an employer's employee to or from the
             625      employee's primary place of employment;
             626          (ii) by an:
             627          (A) employee; or
             628          (B) employer; and
             629          (iii) pursuant to a written contract between:
             630          (A) the employer; and
             631          (B) (I) the employee; or
             632          (II) a person providing transportation to the employer's employee; and
             633          (b) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             634      commission may for purposes of Subsection (46)(a) make rules defining what constitutes an
             635      employee's primary place of employment;
             636          (47) amounts paid for admission to an athletic event at an institution of higher education
             637      that is subject to the provisions of Title IX of the Education Amendments of 1972, 20 U.S.C. Sec.
             638      1681 et seq.;
             639          (48) sales of telephone service charged to a prepaid telephone calling card;
             640          (49) (a) sales of hearing aids; and
             641          (b) sales of hearing aid accessories;
             642          (50) (a) sales made to or by:
             643          (i) an area agency on aging; or
             644          (ii) a senior citizen center owned by a county, city, or town; or
             645          (b) sales made by a senior citizen center that contracts with an area agency on aging; [and]


             646          (51) (a) beginning on July 1, 2000, through June 30, 2002, amounts paid or charged as
             647      admission or user fees described in Subsection 59-12-103 (1)(f) relating to the Olympic Winter
             648      Games of 2002 if the amounts paid or charged are established by the Salt Lake Organizing
             649      Committee for the Olympic Winter Games of 2002 in accordance with requirements of the
             650      International Olympic Committee; and
             651          (b) the State Olympic Officer and the Salt Lake Organizing Committee for the Olympic
             652      Winter Games of 2002 shall make at least two reports during the 2000 interim:
             653          (i) to the:
             654          (A) Olympic Coordination Committee; and
             655          (B) Revenue and Taxation Interim Committee; and
             656          (ii) regarding the status of:
             657          (A) agreements relating to the funding of public safety services for the Olympic Winter
             658      Games of 2002;
             659          (B) agreements relating to the funding of services, other than public safety services, for
             660      the Olympic Winter Games of 2002;
             661          (C) other agreements relating to the Olympic Winter Games of 2002 as requested by the
             662      Olympic Coordination Committee or the Revenue and Taxation Interim Committee;
             663          (D) other issues as requested by the Olympic Coordination Committee or the Revenue and
             664      Taxation Interim Committee; or
             665          (E) a combination of Subsections (51)(b)(ii)(A) through (D)[.]; or
             666          (52) (a) beginning on July 1, S [ 2002 ] 2001 s , through June 30, S [ 2007 ] 2004 s , and
             666a      subject to Subsection
             667      (52)(b), a sale or lease of semiconductor fabricating or processing materials regardless of whether
             668      the semiconductor fabricating or processing materials:
             669          (i) actually come into contact with a semiconductor; or
             670          (ii) ultimately become incorporated into real property;
             671          (b) (i) beginning on July 1, S [ 2002 ] 2001 s , through June 30, S [ 2003 ] 2002 s , 10% of the
             671a      sale or lease
             672      described in Subsection (52)(a) is exempt;
             673          (ii) beginning on July 1, S [ 2003 ] 2002 s , through June 30, S [ 2004 ] 2003 s , 50% of the
             673a      sale or lease described
             674      in Subsection (52)(a) is exempt; and
             675          (iii) beginning on July 1, S [ 2004 ] 2003 s , through June 30, S [ 2007 ] 2004 s , the entire
             675a      amount of the sale or
             676      lease described in Subsection (52)(a) is exempt; and


             677          (c) each year on or before the November interim meeting, the Revenue and Taxation
             678      Interim Committee shall:
             679          (i) review the exemption described in this Subsection (52) and make recommendations
             680      concerning whether the exemption should be continued, modified, or repealed; and
             681          (ii) include in the review under this Subsection (52)(c):
             682          (A) the cost of the exemption;
             683          (B) the purpose and effectiveness of the exemption; and
             684          (C) the benefits of the exemption to the state.
             685          Section 4. Section 59-12-105 is amended to read:
             686           59-12-105. Certain exempt sales to be reported -- Penalties.
             687          (1) An owner, vendor, or purchaser shall report to the commission the amount of sales or
             688      uses exempt under Subsection 59-12-104 (14), (20), (40), [or] (41), or (52).
             689          (2) Except as provided in Subsections (3) and (4), if the owner, vendor, or purchaser fails
             690      to report the full amount of the exemptions granted under Subsection 59-12-104 (14), (20), (40),
             691      [or] (41), or (52) on the owner's, vendor's, or purchaser's original filed return, the commission shall
             692      impose a penalty equal to the lesser of:
             693          (a) 10% of the sales and use tax that would have been imposed if the exemption had not
             694      applied; or
             695          (b) $1,000.
             696          (3) Notwithstanding Subsection (2), the commission may not impose a penalty under
             697      Subsection (2) if the owner, vendor, or purchaser files an amended return containing the amount
             698      of the exemption prior to the owner, vendor, or purchaser receiving a notice of audit from the
             699      commission.
             700          (4) (a) Notwithstanding Subsection (2), the commission may waive, reduce, or
             701      compromise a penalty imposed under this section if the commission finds there are reasonable
             702      grounds for the waiver, reduction, or compromise.
             703          (b) If the commission waives, reduces, or compromises a penalty under Subsection (4)(a),
             704      the commission shall make a record of the grounds for waiving, reducing, or compromising the
             705      penalty.
             706          Section 5. Effective date.
             707           S [ Section 59-12-102 ] THIS ACT s takes effect on July 1, 2001.


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