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S.B. 174 Enrolled

                 

SALES AND USE TAX - EXEMPTION FOR

                 
SEMICONDUCTOR FABRICATING OR

                 
PROCESSING MATERIALS

                 
2001 GENERAL SESSION

                 
STATE OF UTAH

                 
Sponsor: Curtis S. Bramble

                  This act amends the Sales and Use Tax Act to provide for an exemption for a three-year
                  period beginning on July 1, 2001, through June 30, 2004, for semiconductor fabricating or
                  processing materials. The act provides that the exemption is phased in over the three-year
                  period. The act requires amounts of the exemption to be reported to the State Tax
                  Commission, and requires the State Tax Commission to provide to the Legislature upon
                  request the amounts of the exemption reported to the State Tax Commission. The act
                  requires the Revenue and Taxation Interim Committee to conduct an annual study of the
                  exemption. The act defines terms and makes technical changes. This act provides a July 1,
                  2001 effective date.
                  This act affects sections of Utah Code Annotated 1953 as follows:
                  AMENDS:
                      59-1-403, as last amended by Chapters 190 and 229, Laws of Utah 2000
                      59-12-102 (Effective 07/01/01), as last amended by Chapter 253, Laws of Utah 2000
                      59-12-104, as last amended by Chapter 325, Laws of Utah 2000
                      59-12-105, as last amended by Chapter 147, Laws of Utah 1999
                  Be it enacted by the Legislature of the state of Utah:
                      Section 1. Section 59-1-403 is amended to read:
                       59-1-403. Confidentiality -- Exceptions -- Penalty -- Application to property tax.
                      (1) Any tax commissioner, agent, clerk, or other officer or employee of the commission
                  or any representative, agent, clerk, or other officer or employee of any county, city, or town may
                  not divulge or make known in any manner any information gained by him from any return filed
                  with the commission. The officials charged with the custody of such returns are not required to
                  produce any of them or evidence of anything contained in them in any action or proceeding in any


                  court, except:
                      (a) in accordance with judicial order;
                      (b) on behalf of the commission in any action or proceeding under this title or other law
                  under which persons are required to file returns with the commission;
                      (c) on behalf of the commission in any action or proceeding to which the commission is a
                  party; or
                      (d) on behalf of any party to any action or proceeding under this title when the report or facts
                  shown thereby are directly involved in such action or proceeding. In any event, the court may                   require
                  the production of, and may admit in evidence, any portion of reports or of the facts shown by them,
                  as are specifically pertinent to the action or proceeding.
                      (2) This section does not prohibit:
                      (a) a person or his duly authorized representative from receiving a copy of any return or
                  report filed in connection with that person's own tax;
                      (b) the publication of statistics as long as they are classified to prevent the identification of
                  particular reports or returns; and
                      (c) the inspection by the attorney general or other legal representative of the state of the
                  report or return of any taxpayer:
                      (i) who brings action to set aside or review the tax based on such report or return;
                      (ii) against whom an action or proceeding is contemplated or has been instituted under this
                  title; or
                      (iii) against whom the state has an unsatisfied money judgment.
                      (3) (a) Notwithstanding Subsection (1) and for purposes of administration, the commission
                  may, by rule, provide for a reciprocal exchange of information with the United States Internal
                  Revenue Service or the revenue service of any other state.
                      (b) Notwithstanding Subsection (1) and for all taxes except individual income tax and
                  corporate franchise tax, the commission may, by rule, share information gathered from returns and
                  other written statements with the federal government, any other state, any of their political
                  subdivisions, or any political subdivision of this state, except as limited by Sections 59-12-209 and

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                  59-12-210 , if these political subdivisions or the federal government grant substantially similar
                  privileges to this state.
                      (c) Notwithstanding Subsection (1) and for all taxes except individual income tax and
                  corporate franchise tax, the commission may, by rule, provide for the issuance of information
                  concerning the identity and other information of taxpayers who have failed to file tax returns or to
                  pay any tax due.
                      (d) Notwithstanding Subsection (1), the commission shall provide to the Solid and
                  Hazardous Waste Control Board executive secretary, as defined in Section 19-6-102 , any records,
                  returns, and other information filed with the commission under Title 59, Chapter 13, Motor and
                  Special Fuel Tax Act, or Section 19-6-410.5 regarding the environmental assurance program
                  participation fee, as requested by the executive secretary.
                      (e) Notwithstanding Subsection (1), upon request from a tobacco product manufacturer, as
                  defined in Section 59-22-202 , the commission shall report to the manufacturer:
                      (i) the quantity of cigarettes, as defined in Section 59-22-202 , produced by the manufacturer
                  and reported to the commission for the previous calendar year under Section 59-14-407 ; and
                      (ii) the quantity of cigarettes, as defined in Section 59-22-202 , produced by the manufacturer
                  for which a tax refund was granted during the previous calendar year under Section 59-14-401 and
                  reported to the commission under Subsection 59-14-401 (1)(a)(v).
                      (f) Notwithstanding Subsection (1), the commission may:
                      (i) provide to the Division of Consumer Protection within the Department of Commerce and
                  the attorney general data:
                      (A) reported to the commission under Section 59-14-212 ; or
                      (B) related to a violation under Section 59-14-211 ; and
                      (ii) upon request provide to any person data reported to the commission under Subsections
                  59-14-212 (1)(a) through (1)(c) and Subsection 59-14-212 (1)(g).
                      (g) Notwithstanding Subsection (1), the commission shall at the request of the Legislature
                  provide to the Legislature the total amount of sales or uses exempt under Subsection 59-12-104 (52)
                  reported to the commission in accordance with Section 59-12-105 .

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                      (4) Reports and returns shall be preserved for at least three years and then the commission
                  may destroy them.
                      (5) Any person who violates this section is guilty of a class A misdemeanor. If the offender
                  is an officer or employee of the state, he shall be dismissed from office and be disqualified from
                  holding public office in this state for a period of five years thereafter.
                      (6) This part does not apply to the property tax.
                      Section 2. Section 59-12-102 (Effective 07/01/01) is amended to read:
                       59-12-102 (Effective 07/01/01). Definitions.
                      As used in this chapter:
                      (1) (a) "Admission or user fees" includes season passes.
                      (b) "Admission or user fees" does not include annual membership dues to private
                  organizations.
                      (2) "Area agency on aging" is as defined in Section 62A-3-101 .
                      (3) "Authorized carrier" means:
                      (a) in the case of vehicles operated over public highways, the holder of credentials indicating
                  that the vehicle is or will be operated pursuant to both the International Registration Plan (IRP) and
                  the International Fuel Tax Agreement (IFTA);
                      (b) in the case of aircraft, the holder of a Federal Aviation Administration (FAA) operating
                  certificate or air carrier's operating certificate; or
                      (c) in the case of locomotives, freight cars, railroad work equipment, or other rolling stock,
                  the holder of a certificate issued by the United States Interstate Commerce Commission.
                      (4) (a) For purposes of Subsection 59-12-104 (43), "coin-operated amusement device" means:
                      (i) a coin-operated amusement, skill, or ride device;
                      (ii) that is not controlled through vendor-assisted, over-the-counter, sales of tokens; and
                      (iii) includes a music machine, pinball machine, billiard machine, video game machine,
                  arcade machine, and a mechanical or electronic skill game or ride.
                      (b) For purposes of Subsection 59-12-104 (43), "coin-operated amusement device" does not
                  mean a coin-operated amusement device possessing a coinage mechanism that:

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                      (i) accepts and registers multiple denominations of coins; and
                      (ii) allows the vendor to collect the sales and use tax at the time an amusement device is
                  activated and operated by a person inserting coins into the device.
                      (5) "Commercial use" means the use of gas, electricity, heat, coal, fuel oil, or other fuels that
                  does not constitute industrial use under Subsection (13) or residential use under Subsection (21).
                      (6) (a) "Common carrier" means a person engaged in or transacting the business of
                  transporting passengers, freight, merchandise, or other property for hire within this state.
                      (b) (i) "Common carrier" does not include a person who, at the time the person is traveling
                  to or from that person's place of employment, transports a passenger to or from the passenger's place
                  of employment.
                      (ii) For purposes of Subsection (6)(b)(i), in accordance with Title 63, Chapter 46a, Utah
                  Administrative Rulemaking Act, the commission may make rules defining what constitutes a
                  person's place of employment.
                      (7) "Component part" includes:
                      (a) poultry, dairy, and other livestock feed, and their components;
                      (b) baling ties and twine used in the baling of hay and straw;
                      (c) fuel used for providing temperature control of orchards and commercial greenhouses
                  doing a majority of their business in wholesale sales, and for providing power for off-highway type
                  farm machinery; and
                      (d) feed, seeds, and seedlings.
                      (8) "Construction materials" means any tangible personal property that will be converted into
                  real property.
                      (9) (a) "Fundraising sales" means sales:
                      (i) (A) made by a public or private elementary or secondary school; or
                      (B) made by a public or private elementary or secondary school student, grades kindergarten
                  through 12;
                      (ii) that are for the purpose of raising funds for the school to purchase equipment, materials,
                  or provide transportation; and

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                      (iii) that are part of an officially sanctioned school activity.
                      (b) For purposes of Subsection (9)(a)(iii), "officially sanctioned school activity" means a
                  school activity:
                      (i) that is conducted in accordance with a formal policy adopted by the school or school
                  district governing the authorization and supervision of fundraising activities;
                      (ii) that does not directly or indirectly compensate an individual teacher or other educational
                  personnel by direct payment, commissions, or payment in kind; and
                      (iii) the net or gross revenues from which are deposited in a dedicated account controlled
                  by the school or school district.
                      (10) (a) "Hearing aid" means:
                      (i) an instrument or device having an electronic component that is designed to:
                      (A) (I) improve impaired human hearing; or
                      (II) correct impaired human hearing; and
                      (B) (I) be worn in the human ear; or
                      (II) affixed behind the human ear;
                      (ii) an instrument or device that is surgically implanted into the cochlea; or
                      (iii) a telephone amplifying device.
                      (b) "Hearing aid" does not include:
                      (i) except as provided in Subsection (10)(a)(i)(B) or (10)(a)(ii), an instrument or device
                  having an electronic component that is designed to be worn on the body;
                      (ii) except as provided in Subsection (10)(a)(iii), an assistive listening device or system
                  designed to be used by one individual, including:
                      (A) a personal amplifying system;
                      (B) a personal FM system;
                      (C) a television listening system; or
                      (D) a device or system similar to a device or system described in Subsections (10)(b)(ii)(A)
                  through (C); or
                      (iii) an assistive listening device or system designed to be used by more than one individual,

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                  including:
                      (A) a device or system installed in:
                      (I) an auditorium;
                      (II) a church;
                      (III) a conference room;
                      (IV) a synagogue; or
                      (V) a theater; or
                      (B) a device or system similar to a device or system described in Subsections
                  (10)(b)(iii)(A)(I) through (V).
                      (11) (a) "Hearing aid accessory" means a hearing aid:
                      (i) component;
                      (ii) attachment; or
                      (iii) accessory.
                      (b) "Hearing aid accessory" includes:
                      (i) a hearing aid neck loop;
                      (ii) a hearing aid cord;
                      (iii) a hearing aid ear mold;
                      (iv) hearing aid tubing;
                      (v) a hearing aid ear hook; or
                      (vi) a hearing aid remote control.
                      (c) "Hearing aid accessory" does not include:
                      (i) a component, attachment, or accessory designed to be used only with an:
                      (A) instrument or device described in Subsection (10)(b)(i); or
                      (B) assistive listening device or system described in Subsection (10)(b)(ii) or (iii); or
                      (ii) a hearing aid battery.
                      (12) (a) "Home medical equipment and supplies" means equipment and supplies that:
                      (i) a licensed physician prescribes or authorizes in writing as necessary for the treatment of
                  a medical illness or injury or as necessary to mitigate an impairment resulting from illness or injury;

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                      (ii) are used exclusively by the person for whom they are prescribed to serve a medical
                  purpose; and
                      (iii) are listed as eligible for payment under Title 18 of the federal Social Security Act or
                  under the state plan for medical assistance under Title 19 of the federal Social Security Act.
                      (b) "Home medical equipment and supplies" does not include:
                      (i) equipment and supplies purchased by, for, or on behalf of any health care facility, as
                  defined in Subsection (12)(c), doctor, nurse, or other health care provider for use in their professional
                  practice;
                      (ii) eyeglasses, contact lenses, or equipment to correct impaired vision; or
                      (iii) hearing aids or hearing aid accessories.
                      (c) For purposes of Subsection (12)(b)(i), "health care facility" includes:
                      (i) a clinic;
                      (ii) a doctor's office; and
                      (iii) a health care facility as defined in Section 26-21-2 .
                      (13) "Industrial use" means the use of natural gas, electricity, heat, coal, fuel oil, or other
                  fuels in:
                      (a) mining or extraction of minerals;
                      (b) agricultural operations to produce an agricultural product up to the time of harvest or
                  placing the agricultural product into a storage facility, including:
                      (i) commercial greenhouses;
                      (ii) irrigation pumps;
                      (iii) farm machinery;
                      (iv) implements of husbandry as defined in Subsection 41-1a-102 (23) that are not registered
                  under Title 41, Chapter 1a, Part 2, Registration; and
                      (v) other farming activities; and
                      (c) manufacturing tangible personal property at an establishment described in SIC Codes
                  2000 to 3999 of the 1987 Standard Industrial Classification Manual of the federal Executive Office
                  of the President, Office of Management and Budget.

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                      (14) "Manufactured home" means any manufactured home or mobile home as defined in
                  Title 58, Chapter 56, Utah Uniform Building Standards Act.
                      (15) For purposes of Subsection 59-12-104 (14), "manufacturing facility" means:
                      (a) an establishment described in SIC Codes 2000 to 3999 of the 1987 Standard Industrial
                  Classification Manual of the federal Executive Office of the President, Office of Management and
                  Budget; or
                      (b) a scrap recycler if:
                      (i) from a fixed location, the scrap recycler utilizes machinery or equipment to process one
                  or more of the following items into prepared grades of processed materials for use in new products:
                      (A) iron;
                      (B) steel;
                      (C) nonferrous metal;
                      (D) paper;
                      (E) glass;
                      (F) plastic;
                      (G) textile; or
                      (H) rubber; and
                      (ii) the new products under Subsection (15)(b)(i) would otherwise be made with nonrecycled
                  materials.
                      (16) (a) "Medicine" means:
                      (i) insulin, syringes, and any medicine prescribed for the treatment of human ailments by a
                  person authorized to prescribe treatments and dispensed on prescription filled by a registered
                  pharmacist, or supplied to patients by a physician, surgeon, or podiatric physician;
                      (ii) any medicine dispensed to patients in a county or other licensed hospital if prescribed
                  for that patient and dispensed by a registered pharmacist or administered under the direction of a
                  physician; and
                      (iii) any oxygen or stoma supplies prescribed by a physician or administered under the
                  direction of a physician or paramedic.

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                      (b) "Medicine" does not include:
                      (i) any auditory, prosthetic, ophthalmic, or ocular device or appliance; or
                      (ii) any alcoholic beverage.
                      (17) "Olympic merchandise" means tangible personal property bearing an Olympic
                  designation, emblem, insignia, mark, logo, service mark, symbol, terminology, trademark, or other
                  copyrighted or protected material, including:
                      (a) one or more of the following terms:
                      (i) "Olympic";
                      (ii) "Olympiad"; or
                      (iii) "Citius Altius Fortius";
                      (b) the symbol of the International Olympic Committee, consisting of five interlocking rings;
                      (c) the emblem of the International Olympic Committee Corporation;
                      (d) a United States Olympic Committee designation, emblem, insignia, mark, logo, service
                  mark, symbol, terminology, trademark, or other copyrighted or protected material;
                      (e) any emblem of the Olympic Winter Games of 2002 that is officially designated by the
                  Salt Lake Organizing Committee of the Olympic Winter Games of 2002; or
                      (f) the mascot of the Olympic Winter Games of 2002.
                      (18) (a) "Other fuels" means products that burn independently to produce heat or energy.
                      (b) "Other fuels" includes oxygen when it is used in the manufacturing of tangible personal
                  property.
                      (19) "Person" includes any individual, firm, partnership, joint venture, association,
                  corporation, estate, trust, business trust, receiver, syndicate, this state, any county, city, municipality,
                  district, or other local governmental entity of the state, or any group or combination acting as a unit.
                      (20) "Purchase price" means the amount paid or charged for tangible personal property or
                  any other taxable transaction under Subsection 59-12-103 (1), excluding only cash discounts taken
                  or any excise tax imposed on the purchase price by the federal government.
                      (21) "Residential use" means the use in or around a home, apartment building, sleeping
                  quarters, and similar facilities or accommodations.

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                      (22) (a) "Retail sale" means any sale within the state of tangible personal property or any
                  other taxable transaction under Subsection 59-12-103 (1), other than resale of such property, item,
                  or service by a retailer or wholesaler to a user or consumer.
                      (b) "Retail sale" includes sales by any farmer or other agricultural producer of poultry, eggs,
                  or dairy products to consumers if the sales have an average monthly sales value of $125 or more.
                      (c) "Retail sale" does not include, and no additional sales or use tax shall be assessed against,
                  those transactions where a purchaser of tangible personal property pays applicable sales or use taxes
                  on its initial nonexempt purchases of property and then enters into a sale-leaseback transaction by
                  which title to such property is transferred by the purchaser-lessee to a lessor for consideration,
                  provided:
                      (i) the transaction is intended as a form of financing for the property to the purchaser-lessee;
                  and
                      (ii) pursuant to generally accepted accounting principles, the purchaser-lessee is required to
                  capitalize the subject property for financial reporting purposes, and account for the lease payments
                  as payments made under a financing arrangement.
                      (23) (a) "Retailer" means any person engaged in a regularly organized retail business in
                  tangible personal property or any other taxable transaction under Subsection 59-12-103 (1), and who
                  is selling to the user or consumer and not for resale.
                      (b) "Retailer" includes commission merchants, auctioneers, and any person regularly
                  engaged in the business of selling to users or consumers within the state.
                      (c) "Retailer" does not include farmers, gardeners, stockmen, poultrymen, or other growers
                  or agricultural producers producing and doing business on their own premises, except those who are
                  regularly engaged in the business of buying or selling for a profit.
                      (d) For purposes of this chapter the commission may regard as retailers the following if they
                  determine it is necessary for the efficient administration of this chapter: salesmen, representatives,
                  peddlers, or canvassers as the agents of the dealers, distributors, supervisors, or employers under
                  whom they operate or from whom they obtain the tangible personal property sold by them,
                  irrespective of whether they are making sales on their own behalf or on behalf of these dealers,

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                  distributors, supervisors, or employers, except that:
                      (i) a printer's facility with which a retailer has contracted for printing shall not be considered
                  to be a salesman, representative, peddler, canvasser, or agent of the retailer; and
                      (ii) the ownership of property that is located at the premises of a printer's facility with which
                  the retailer has contracted for printing and that consists of the final printed product, property that
                  becomes a part of the final printed product, or copy from which the printed product is produced, shall
                  not result in the retailer being deemed to have or maintain an office, distribution house, sales house,
                  warehouse, service enterprise, or other place of business, or to maintain a stock of goods, within this
                  state.
                      (24) "Sale" means any transfer of title, exchange, or barter, conditional or otherwise, in any
                  manner, of tangible personal property or any other taxable transaction under Subsection
                  59-12-103 (1), for consideration. It includes:
                      (a) installment and credit sales;
                      (b) any closed transaction constituting a sale;
                      (c) any sale of electrical energy, gas, services, or entertainment taxable under this chapter;
                      (d) any transaction if the possession of property is transferred but the seller retains the title
                  as security for the payment of the price; and
                      (e) any transaction under which right to possession, operation, or use of any article of
                  tangible personal property is granted under a lease or contract and the transfer of possession would
                  be taxable if an outright sale were made.
                      (25) (a) "Sales relating to schools" means sales by a public school district or public or private
                  elementary or secondary school, grades kindergarten through 12, that are directly related to the
                  school's or school district's educational functions or activities and include:
                      (i) the sale of textbooks, textbook fees, laboratory fees, laboratory supplies, and safety
                  equipment;
                      (ii) the sale of clothing that:
                      (A) a student is specifically required to wear as a condition of participation in a
                  school-related event or activity; and

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                      (B) is not readily adaptable to general or continued usage to the extent that it takes the place
                  of ordinary clothing;
                      (iii) sales of food if the net or gross revenues generated by the food sales are deposited into
                  a school district fund or school fund dedicated to school meals; and
                      (iv) transportation charges for official school activities.
                      (b) "Sales relating to schools" does not include:
                      (i) gate receipts;
                      (ii) special event admission fees;
                      (iii) bookstore sales of items that are not educational materials or supplies; and
                      (iv) except as provided in Subsection (25)(a)(ii), clothing.
                      (26) (a) "Semiconductor fabricating or processing materials" means tangible personal
                  property:
                      (i) used primarily in the process of:
                      (A) (I) manufacturing a semiconductor; or
                      (II) fabricating a semiconductor; or
                      (B) maintaining an environment suitable for a semiconductor; or
                      (ii) consumed primarily in the process of:
                      (A) (I) manufacturing a semiconductor; or
                      (II) fabricating a semiconductor; or
                      (B) maintaining an environment suitable for a semiconductor.
                      (b) "Semiconductor fabricating or processing materials" includes a chemical, catalyst, or
                  other material used to:
                      (i) produce or induce in a semiconductor a:
                      (A) chemical change; or
                      (B) physical change;
                      (ii) remove impurities from a semiconductor; or
                      (iii) improve the marketable condition of a semiconductor.
                      [(26)] (27) "Senior citizen center" means a facility having the primary purpose of providing

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                  services to the aged as defined in Section 62A-3-101 .
                      [(27)] (28) "State" means the state of Utah, its departments, and agencies.
                      [(28)] (29) "Storage" means any keeping or retention of tangible personal property or any
                  other taxable transaction under Subsection 59-12-103 (1), in this state for any purpose except sale in
                  the regular course of business.
                      [(29)] (30) (a) "Tangible personal property" means:
                      (i) all goods, wares, merchandise, produce, and commodities;
                      (ii) all tangible or corporeal things and substances which are dealt in or capable of being
                  possessed or exchanged;
                      (iii) water in bottles, tanks, or other containers; and
                      (iv) all other physically existing articles or things, including property severed from real
                  estate.
                      (b) "Tangible personal property" does not include:
                      (i) real estate or any interest or improvements in real estate;
                      (ii) bank accounts, stocks, bonds, mortgages, notes, and other evidence of debt;
                      (iii) insurance certificates or policies;
                      (iv) personal or governmental licenses;
                      (v) water in pipes, conduits, ditches, or reservoirs;
                      (vi) currency and coinage constituting legal tender of the United States or of a foreign nation;
                  and
                      (vii) all gold, silver, or platinum ingots, bars, medallions, or decorative coins, not
                  constituting legal tender of any nation, with a gold, silver, or platinum content of not less than 80%.
                      [(30)] (31) (a) "Use" means the exercise of any right or power over tangible personal
                  property under Subsection 59-12-103 (1), incident to the ownership or the leasing of that property,
                  item, or service.
                      (b) "Use" does not include the sale, display, demonstration, or trial of that property in the
                  regular course of business and held for resale.
                      [(31)] (32) "Vehicle" means any aircraft, as defined in Section 72-10-102 ; any vehicle, as

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

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                  commercial airline carriers for in-flight consumption;
                      (5) sales of parts and equipment installed in aircraft operated by common carriers in
                  interstate or foreign commerce;
                      (6) sales of commercials, motion picture films, prerecorded audio program tapes or records,
                  and prerecorded video tapes by a producer, distributor, or studio to a motion picture exhibitor,
                  distributor, or commercial television or radio broadcaster;
                      (7) sales of cleaning or washing of tangible personal property by a coin-operated laundry or
                  dry cleaning machine;
                      (8) (a) except as provided in Subsection (8)(b), sales made to or by religious or charitable
                  institutions in the conduct of their regular religious or charitable functions and activities, if the
                  requirements of Section 59-12-104.1 are fulfilled;
                      (b) the exemption provided for in Subsection (8)(a) does not apply to the following sales,
                  uses, leases, or rentals relating to the Olympic Winter Games of 2002 made to or by an organization
                  exempt from federal income taxation under Section 501(c)(3), Internal Revenue Code:
                      (i) retail sales of Olympic merchandise;
                      (ii) except as provided in Subsection (51), admissions or user fees described in Subsection
                  59-12-103 (1)(f);
                      (iii) sales of accommodations and services as provided in Subsection 59-12-103 (1)(i), except
                  for accommodations and services:
                      (A) paid for in full by the Salt Lake Organizing Committee for the Olympic Winter Games
                  of 2002;
                      (B) exclusively used by:
                      (I) an officer, a trustee, or an employee of the Salt Lake Organizing Committee for the
                  Olympic Winter Games of 2002; or
                      (II) a volunteer supervised by the Salt Lake Organizing Committee for the Olympic Winter
                  Games of 2002; and
                      (C) for which the Salt Lake Organizing Committee for the Olympic Winter Games of 2002
                  does not receive reimbursement; or

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                      (iv) a lease or rental of a vehicle as defined in Section 41-1a-102 , except for a lease or rental
                  of a vehicle:
                      (A) paid for in full by the Salt Lake Organizing Committee for the Olympic Winter Games
                  of 2002;
                      (B) exclusively used by:
                      (I) an officer, a trustee, or an employee of the Salt Lake Organizing Committee for the
                  Olympic Winter Games of 2002; or
                      (II) a volunteer supervised by the Salt Lake Organizing Committee for the Olympic Winter
                  Games of 2002; and
                      (C) for which the Salt Lake Organizing Committee for the Olympic Winter Games of 2002
                  does not receive reimbursement;
                      (9) sales of vehicles of a type required to be registered under the motor vehicle laws of this
                  state which are made to bona fide nonresidents of this state and are not afterwards registered or used
                  in this state except as necessary to transport them to the borders of this state;
                      (10) sales of medicine;
                      (11) sales or use of property, materials, or services used in the construction of or
                  incorporated in pollution control facilities allowed by Sections 19-2-123 through 19-2-127 ;
                      (12) sales of meals served by:
                      (a) churches, charitable institutions, and institutions of higher education, if the meals are not
                  available to the general public; and
                      (b) inpatient meals provided at medical or nursing facilities;
                      (13) isolated or occasional sales by persons not regularly engaged in business, except the sale
                  of vehicles or vessels required to be titled or registered under the laws of this state in which case the
                  tax is based upon:
                      (a) the bill of sale or other written evidence of value of the vehicle or vessel being sold; or
                      (b) in the absence of a bill of sale or other written evidence of value, the then existing fair
                  market value of the vehicle or vessel being sold as determined by the commission;
                      (14) (a) the following purchases or leases by a manufacturer on or after July 1, 1995:

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                      (i) machinery and equipment:
                      (A) used in the manufacturing process;
                      (B) having an economic life of three or more years; and
                      (C) used:
                      (I) to manufacture an item sold as tangible personal property; and
                      (II) in new or expanding operations in a manufacturing facility in the state; and
                      (ii) subject to the provisions of Subsection (14)(b), normal operating replacements that:
                      (A) have an economic life of three or more years;
                      (B) are used in the manufacturing process in a manufacturing facility in the state;
                      (C) are used to replace or adapt an existing machine to extend the normal estimated useful
                  life of the machine; and
                      (D) do not include repairs and maintenance;
                      (b) the rates for the exemption under Subsection (14)(a)(ii) are as follows:
                      (i) beginning July 1, 1996, through June 30, 1997, 30% of the sale or lease described in
                  Subsection (14)(a)(ii) is exempt;
                      (ii) beginning July 1, 1997, through June 30, 1998, 60% of the sale or lease described in
                  Subsection (14)(a)(ii) is exempt; and
                      (iii) beginning July 1, 1998, 100% of the sale or lease described in Subsection (14)(a)(ii) is
                  exempt;
                      (c) for purposes of this Subsection (14), the commission shall by rule define the terms "new
                  or expanding operations" and "establishment"; and
                      (d) on or before October 1, 1991, and every five years after October 1, 1991, the commission
                  shall:
                      (i) review the exemptions described in Subsection (14)(a) and make recommendations to the
                  Revenue and Taxation Interim Committee concerning whether the exemptions should be continued,
                  modified, or repealed; and
                      (ii) include in its report:
                      (A) the cost of the exemptions;

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                      (B) the purpose and effectiveness of the exemptions; and
                      (C) the benefits of the exemptions to the state;
                      (15) sales of tooling, special tooling, support equipment, and special test equipment used or
                  consumed exclusively in the performance of any aerospace or electronics industry contract with the
                  United States government or any subcontract under that contract, but only if, under the terms of that
                  contract or subcontract, title to the tooling and equipment is vested in the United States government
                  as evidenced by a government identification tag placed on the tooling and equipment or by listing
                  on a government-approved property record if a tag is impractical;
                      (16) intrastate movements of:
                      (a) freight by common carriers; and
                      (b) passengers:
                      (i) by taxicabs as described in SIC Code 4121 of the 1987 Standard Industrial Classification
                  Manual of the federal Executive Office of the President, Office of Management and Budget; or
                      (ii) transported by an establishment described in SIC Code 4111 of the 1987 Standard
                  Industrial Classification Manual of the federal Executive Office of the President, Office of
                  Management and Budget, if the transportation originates and terminates within a county of the first,
                  second, or third class;
                      (17) sales of newspapers or newspaper subscriptions;
                      (18) tangible personal property, other than money, traded in as full or part payment of the
                  purchase price, except that for purposes of calculating sales or use tax upon vehicles not sold by a
                  vehicle dealer, trade-ins are limited to other vehicles only, and the tax is based upon:
                      (a) the bill of sale or other written evidence of value of the vehicle being sold and the vehicle
                  being traded in; or
                      (b) in the absence of a bill of sale or other written evidence of value, the then existing fair
                  market value of the vehicle being sold and the vehicle being traded in, as determined by the
                  commission;
                      (19) sprays and insecticides used to control insects, diseases, and weeds for commercial
                  production of fruits, vegetables, feeds, seeds, and animal products, but not those sprays and

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                  insecticides used in the processing of the products;
                      (20) (a) sales of tangible personal property used or consumed primarily and directly in
                  farming operations, including sales of irrigation equipment and supplies used for agricultural
                  production purposes, whether or not they become part of real estate and whether or not installed by
                  farmer, contractor, or subcontractor, but not sales of:
                      (i) machinery, equipment, materials, and supplies used in a manner that is incidental to
                  farming, such as hand tools with a unit purchase price not in excess of $250, and maintenance and
                  janitorial equipment and supplies;
                      (ii) tangible personal property used in any activities other than farming, such as office
                  equipment and supplies, equipment and supplies used in sales or distribution of farm products, in
                  research, or in transportation; or
                      (iii) any vehicle required to be registered by the laws of this state, without regard to the use
                  to which the vehicle is put;
                      (b) sales of hay;
                      (21) exclusive sale of locally grown seasonal crops, seedling plants, or garden, farm, or other
                  agricultural produce if sold by a producer during the harvest season;
                      (22) purchases of food as defined in 7 U.S.C. Sec. 2012(g) under the Food Stamp Program,
                  7 U.S.C. Sec. 2011 et seq.;
                      (23) sales of nonreturnable containers, nonreturnable labels, nonreturnable bags,
                  nonreturnable shipping cases, and nonreturnable casings to a manufacturer, processor, wholesaler,
                  or retailer for use in packaging tangible personal property to be sold by that manufacturer, processor,
                  wholesaler, or retailer;
                      (24) property stored in the state for resale;
                      (25) property brought into the state by a nonresident for his or her own personal use or
                  enjoyment while within the state, except property purchased for use in Utah by a nonresident living
                  and working in Utah at the time of purchase;
                      (26) property purchased for resale in this state, in the regular course of business, either in
                  its original form or as an ingredient or component part of a manufactured or compounded product;

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                      (27) property upon which a sales or use tax was paid to some other state, or one of its
                  subdivisions, except that the state shall be paid any difference between the tax paid and the tax
                  imposed by this part and Part 2, Local Sales and Use Tax Act, and no adjustment is allowed if the
                  tax paid was greater than the tax imposed by this part and Part 2, Local Sales and Use Tax Act;
                      (28) any sale of a service described in Subsections 59-12-103 (1)(b), (c), and (d) to a person
                  for use in compounding a service taxable under the subsections;
                      (29) purchases of supplemental foods as defined in 42 U.S.C. Sec. 1786(b)(14) under the
                  special supplemental nutrition program for women, infants, and children established in 42 U.S.C.
                  Sec. 1786;
                      (30) beginning on July 1, 1999, through June 30, 2004, sales or leases of rolls, rollers,
                  refractory brick, electric motors, or other replacement parts used in the furnaces, mills, or ovens of
                  a steel mill described in SIC Code 3312 of the 1987 Standard Industrial Classification Manual of the
                  federal Executive Office of the President, Office of Management and Budget;
                      (31) sales of boats of a type required to be registered under Title 73, Chapter 18, State
                  Boating Act, boat trailers, and outboard motors which are made to bona fide nonresidents of this
                  state and are not thereafter registered or used in this state except as necessary to transport them to
                  the borders of this state;
                      (32) sales of tangible personal property to persons within this state that is subsequently
                  shipped outside the state and incorporated pursuant to contract into and becomes a part of real
                  property located outside of this state, except to the extent that the other state or political entity
                  imposes a sales, use, gross receipts, or other similar transaction excise tax on it against which the
                  other state or political entity allows a credit for taxes imposed by this chapter;
                      (33) sales of aircraft manufactured in Utah if sold for delivery and use outside Utah where
                  a sales or use tax is not imposed, even if the title is passed in Utah;
                      (34) amounts paid for the purchase of telephone service for purposes of providing telephone
                  service;
                      (35) fares charged to persons transported directly by a public transit district created under
                  the authority of Title 17A, Chapter 2, Part 10, Utah Public Transit District Act;

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                      (36) sales or leases of vehicles to, or use of vehicles by an authorized carrier;
                      (37) (a) 45% of the sales price of any new manufactured home; and
                      (b) 100% of the sales price of any used manufactured home;
                      (38) sales relating to schools and fundraising sales;
                      (39) sales or rentals of home medical equipment and supplies;
                      (40) (a) sales to a ski resort of electricity to operate a passenger ropeway as defined in
                  Section 72-11-102 ; and
                      (b) the commission shall by rule determine the method for calculating sales exempt under
                  Subsection (40)(a) that are not separately metered and accounted for in utility billings;
                      (41) sales to a ski resort of:
                      (a) snowmaking equipment;
                      (b) ski slope grooming equipment; and
                      (c) passenger ropeways as defined in Section 72-11-102 ;
                      (42) sales of natural gas, electricity, heat, coal, fuel oil, or other fuels for industrial use;
                      (43) sales or rentals of the right to use or operate for amusement, entertainment, or recreation
                  a coin-operated amusement device as defined in Section 59-12-102 ;
                      (44) sales of cleaning or washing of tangible personal property by a coin-operated car wash
                  machine;
                      (45) sales by the state or a political subdivision of the state, except state institutions of higher
                  education as defined in Section 53B-3-102 , of:
                      (a) photocopies; or
                      (b) other copies of records held or maintained by the state or a political subdivision of the
                  state; and
                      (46) (a) amounts paid:
                      (i) to a person providing intrastate transportation to an employer's employee to or from the
                  employee's primary place of employment;
                      (ii) by an:
                      (A) employee; or

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                      (B) employer; and
                      (iii) pursuant to a written contract between:
                      (A) the employer; and
                      (B) (I) the employee; or
                      (II) a person providing transportation to the employer's employee; and
                      (b) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
                  commission may for purposes of Subsection (46)(a) make rules defining what constitutes an
                  employee's primary place of employment;
                      (47) amounts paid for admission to an athletic event at an institution of higher education that
                  is subject to the provisions of Title IX of the Education Amendments of 1972, 20 U.S.C. Sec. 1681
                  et seq.;
                      (48) sales of telephone service charged to a prepaid telephone calling card;
                      (49) (a) sales of hearing aids; and
                      (b) sales of hearing aid accessories;
                      (50) (a) sales made to or by:
                      (i) an area agency on aging; or
                      (ii) a senior citizen center owned by a county, city, or town; or
                      (b) sales made by a senior citizen center that contracts with an area agency on aging; [and]
                      (51) (a) beginning on July 1, 2000, through June 30, 2002, amounts paid or charged as
                  admission or user fees described in Subsection 59-12-103 (1)(f) relating to the Olympic Winter
                  Games of 2002 if the amounts paid or charged are established by the Salt Lake Organizing
                  Committee for the Olympic Winter Games of 2002 in accordance with requirements of the
                  International Olympic Committee; and
                      (b) the State Olympic Officer and the Salt Lake Organizing Committee for the Olympic
                  Winter Games of 2002 shall make at least two reports during the 2000 interim:
                      (i) to the:
                      (A) Olympic Coordination Committee; and
                      (B) Revenue and Taxation Interim Committee; and

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                      (ii) regarding the status of:
                      (A) agreements relating to the funding of public safety services for the Olympic Winter
                  Games of 2002;
                      (B) agreements relating to the funding of services, other than public safety services, for the
                  Olympic Winter Games of 2002;
                      (C) other agreements relating to the Olympic Winter Games of 2002 as requested by the
                  Olympic Coordination Committee or the Revenue and Taxation Interim Committee;
                      (D) other issues as requested by the Olympic Coordination Committee or the Revenue and
                  Taxation Interim Committee; or
                      (E) a combination of Subsections (51)(b)(ii)(A) through (D)[.]; or
                      (52) (a) beginning on July 1, 2001, through June 30, 2004, and subject to Subsection (52)(b),
                  a sale or lease of semiconductor fabricating or processing materials regardless of whether the
                  semiconductor fabricating or processing materials:
                      (i) actually come into contact with a semiconductor; or
                      (ii) ultimately become incorporated into real property;
                      (b) (i) beginning on July 1, 2001, through June 30, 2002, 10% of the sale or lease described
                  in Subsection (52)(a) is exempt;
                      (ii) beginning on July 1, 2002, through June 30, 2003, 50% of the sale or lease described in
                  Subsection (52)(a) is exempt; and
                      (iii) beginning on July 1, 2003, through June 30, 2004, the entire amount of the sale or lease
                  described in Subsection (52)(a) is exempt; and
                      (c) each year on or before the November interim meeting, the Revenue and Taxation Interim
                  Committee shall:
                      (i) review the exemption described in this Subsection (52) and make recommendations
                  concerning whether the exemption should be continued, modified, or repealed; and
                      (ii) include in the review under this Subsection (52)(c):
                      (A) the cost of the exemption;
                      (B) the purpose and effectiveness of the exemption; and

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                      (C) the benefits of the exemption to the state.
                      Section 4. Section 59-12-105 is amended to read:
                       59-12-105. Certain exempt sales to be reported -- Penalties.
                      (1) An owner, vendor, or purchaser shall report to the commission the amount of sales or
                  uses exempt under Subsection 59-12-104 (14), (20), (40), [or] (41), or (52).
                      (2) Except as provided in Subsections (3) and (4), if the owner, vendor, or purchaser fails
                  to report the full amount of the exemptions granted under Subsection 59-12-104 (14), (20), (40), [or]
                  (41), or (52) on the owner's, vendor's, or purchaser's original filed return, the commission shall
                  impose a penalty equal to the lesser of:
                      (a) 10% of the sales and use tax that would have been imposed if the exemption had not
                  applied; or
                      (b) $1,000.
                      (3) Notwithstanding Subsection (2), the commission may not impose a penalty under
                  Subsection (2) if the owner, vendor, or purchaser files an amended return containing the amount of
                  the exemption prior to the owner, vendor, or purchaser receiving a notice of audit from the
                  commission.
                      (4) (a) Notwithstanding Subsection (2), the commission may waive, reduce, or compromise
                  a penalty imposed under this section if the commission finds there are reasonable grounds for the
                  waiver, reduction, or compromise.
                      (b) If the commission waives, reduces, or compromises a penalty under Subsection (4)(a),
                  the commission shall make a record of the grounds for waiving, reducing, or compromising the
                  penalty.
                      Section 5. Effective date.
                      This act takes effect on July 1, 2001.

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