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Third Substitute H.B. 89

Representative James R. Gowans proposes the following substitute bill:


             1     
RENEWABLE ENERGY AMENDMENTS

             2     
2003 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Sponsor: James R. Gowans

             5      This act modifies the Sales and Use Tax Act to create an exemption related to renewable
             6      energy production facilities. This act makes technical changes. This act has an effective
             7      date.
             8      This act affects sections of Utah Code Annotated 1953 as follows:
             9      AMENDS:
             10          59-12-102, as last amended by Chapters 77, 117, 192 and 320, Laws of Utah 2002
             11          59-12-104, as last amended by Chapters 117, 138, 217 and 286, Laws of Utah 2002
             12          59-12-105, as last amended by Chapter 262, Laws of Utah 2001
             13      Be it enacted by the Legislature of the state of Utah:
             14          Section 1. Section 59-12-102 is amended to read:
             15           59-12-102. Definitions.
             16          As used in this chapter:
             17          (1) (a) "Admission or user fees" includes season passes.
             18          (b) "Admission or user fees" does not include annual membership dues to private
             19      organizations.
             20          (2) "Area agency on aging" is as defined in Section 62A-3-101 .
             21          (3) "Authorized carrier" means:
             22          (a) in the case of vehicles operated over public highways, the holder of credentials
             23      indicating that the vehicle is or will be operated pursuant to both the International Registration
             24      Plan and the International Fuel Tax Agreement;
             25          (b) in the case of aircraft, the holder of a Federal Aviation Administration operating



             26      certificate or air carrier's operating certificate; or
             27          (c) in the case of locomotives, freight cars, railroad work equipment, or other rolling
             28      stock, the holder of a certificate issued by the United States Surface Transportation Board.
             29          (4) (a) Except as provided in Subsection (4)(b), "biomass" means:
             30          (i) material from a plant or tree; or
             31          (ii) other organic matter that is available on a renewable basis, including:
             32          (A) slash and brush from forests and woodlands;
             33          (B) animal waste;
             34          (C) methane produced:
             35          (I) at landfills; or
             36          (II) as a byproduct of the treatment of wastewater residuals; and
             37          (D) aquatic plants.
             38          (b) "Biomass" does not include:
             39          (i) black liquor;
             40          (ii) treated woods; or
             41          (iii) biomass from municipal solid waste other than methane produced:
             42          (A) at landfills; or
             43          (B) as a byproduct of the treatment of wastewater residuals.
             44          [(4)] (5) (a) For purposes of Subsection 59-12-104 (43), "coin-operated amusement
             45      device" means:
             46          (i) a coin-operated amusement, skill, or ride device;
             47          (ii) that is not controlled through vendor-assisted, over-the-counter, sales of tokens;
             48      and
             49          (iii) includes a music machine, pinball machine, billiard machine, video game machine,
             50      arcade machine, and a mechanical or electronic skill game or ride.
             51          (b) For purposes of Subsection 59-12-104 (43), "coin-operated amusement device" does
             52      not mean a coin-operated amusement device possessing a coinage mechanism that:
             53          (i) accepts and registers multiple denominations of coins; and
             54          (ii) allows the vendor to collect the sales and use tax at the time an amusement device
             55      is activated and operated by a person inserting coins into the device.
             56          [(5)] (6) "Commercial use" means the use of gas, electricity, heat, coal, fuel oil, or


             57      other fuels that does not constitute industrial use under Subsection [(13)] (15) or residential use
             58      under Subsection [(23)] (27).
             59          [(6)] (7) (a) "Common carrier" means a person engaged in or transacting the business
             60      of transporting passengers, freight, merchandise, or other property for hire within this state.
             61          (b) (i) "Common carrier" does not include a person who, at the time the person is
             62      traveling to or from that person's place of employment, transports a passenger to or from the
             63      passenger's place of employment.
             64          (ii) For purposes of Subsection [(6)] (7)(b)(i), in accordance with Title 63, Chapter
             65      46a, Utah Administrative Rulemaking Act, the commission may make rules defining what
             66      constitutes a person's place of employment.
             67          [(7)] (8) "Component part" includes:
             68          (a) poultry, dairy, and other livestock feed, and their components;
             69          (b) baling ties and twine used in the baling of hay and straw;
             70          (c) fuel used for providing temperature control of orchards and commercial
             71      greenhouses doing a majority of their business in wholesale sales, and for providing power for
             72      off-highway type farm machinery; and
             73          (d) feed, seeds, and seedlings.
             74          [(8)] (9) "Construction materials" means any tangible personal property that will be
             75      converted into real property.
             76          [(9)] (10) (a) "Fundraising sales" means sales:
             77          (i) (A) made by a school; or
             78          (B) made by a school student;
             79          (ii) that are for the purpose of raising funds for the school to purchase equipment,
             80      materials, or provide transportation; and
             81          (iii) that are part of an officially sanctioned school activity.
             82          (b) For purposes of Subsection [(9)] (10)(a)(iii), "officially sanctioned school activity"
             83      means a school activity:
             84          (i) that is conducted in accordance with a formal policy adopted by the school or school
             85      district governing the authorization and supervision of fundraising activities;
             86          (ii) that does not directly or indirectly compensate an individual teacher or other
             87      educational personnel by direct payment, commissions, or payment in kind; and


             88          (iii) the net or gross revenues from which are deposited in a dedicated account
             89      controlled by the school or school district.
             90          [(10)] (11) (a) "Hearing aid" means:
             91          (i) an instrument or device having an electronic component that is designed to:
             92          (A) (I) improve impaired human hearing; or
             93          (II) correct impaired human hearing; and
             94          (B) (I) be worn in the human ear; or
             95          (II) affixed behind the human ear;
             96          (ii) an instrument or device that is surgically implanted into the cochlea; or
             97          (iii) a telephone amplifying device.
             98          (b) "Hearing aid" does not include:
             99          (i) except as provided in Subsection [(10)] (11)(a)(i)(B) or [(10)] (11)(a)(ii), an
             100      instrument or device having an electronic component that is designed to be worn on the body;
             101          (ii) except as provided in Subsection [(10)] (11)(a)(iii), an assistive listening device or
             102      system designed to be used by one individual, including:
             103          (A) a personal amplifying system;
             104          (B) a personal FM system;
             105          (C) a television listening system; or
             106          (D) a device or system similar to a device or system described in Subsections [(10)]
             107      (11)(b)(ii)(A) through (C); or
             108          (iii) an assistive listening device or system designed to be used by more than one
             109      individual, including:
             110          (A) a device or system installed in:
             111          (I) an auditorium;
             112          (II) a church;
             113          (III) a conference room;
             114          (IV) a synagogue; or
             115          (V) a theater; or
             116          (B) a device or system similar to a device or system described in Subsections [(10)]
             117      (11)(b)(iii)(A)(I) through (V).
             118          [(11)] (12) (a) "Hearing aid accessory" means a hearing aid:


             119          (i) component;
             120          (ii) attachment; or
             121          (iii) accessory.
             122          (b) "Hearing aid accessory" includes:
             123          (i) a hearing aid neck loop;
             124          (ii) a hearing aid cord;
             125          (iii) a hearing aid ear mold;
             126          (iv) hearing aid tubing;
             127          (v) a hearing aid ear hook; or
             128          (vi) a hearing aid remote control.
             129          (c) "Hearing aid accessory" does not include:
             130          (i) a component, attachment, or accessory designed to be used only with an:
             131          (A) instrument or device described in Subsection [(10)] (11)(b)(i); or
             132          (B) assistive listening device or system described in Subsection [(10)] (11)(b)(ii) or
             133      (iii); or
             134          (ii) a hearing aid battery.
             135          [(12)] (13) (a) Except as provided in Subsection [(12)] (13)(c), "home medical
             136      equipment or supplies" means equipment or supplies that:
             137          (i) a licensed physician prescribes or authorizes in writing as necessary:
             138          (A) for the treatment of a medical illness or injury; or
             139          (B) to mitigate an impairment resulting from illness or injury;
             140          (ii) are used exclusively by the person for whom they are prescribed to serve a medical
             141      purpose; and
             142          (iii) are listed as eligible for payment under:
             143          (A) Title XVIII of the federal Social Security Act; or
             144          (B) the state plan for medical assistance under Title XIX of the federal Social Security
             145      Act.
             146          (b) "Home medical equipment or supplies" includes parts used in the repairs or
             147      renovations of equipment or supplies described in Subsection [(12)] (13)(a).
             148          (c) Notwithstanding Subsection [(12)] (13)(a), "home medical equipment or supplies"
             149      does not include:


             150          (i) equipment or supplies purchased by, for, or on behalf of any:
             151          (A) health care facility, as defined in Subsection [(12)] (13)(d); or
             152          (B) one or more of the following for use in a professional practice:
             153          (I) a doctor;
             154          (II) a nurse; or
             155          (III) another health care provider;
             156          (ii) eyeglasses, contact lenses, or equipment to correct impaired vision; or
             157          (iii) hearing aids or hearing aid accessories.
             158          (d) For purposes of Subsection [(12)] (13)(c)(i)(A), "health care facility" includes:
             159          (i) a clinic;
             160          (ii) a doctor's office; or
             161          (iii) a health care facility as defined in Section 26-21-2 .
             162          (14) "Hydroelectric facility" means a facility that produces electricity with water as the
             163      sole source of energy.
             164          [(13)] (15) "Industrial use" means the use of natural gas, electricity, heat, coal, fuel oil,
             165      or other fuels:
             166          (a) in mining or extraction of minerals;
             167          (b) in agricultural operations to produce an agricultural product up to the time of
             168      harvest or placing the agricultural product into a storage facility, including:
             169          (i) commercial greenhouses;
             170          (ii) irrigation pumps;
             171          (iii) farm machinery;
             172          (iv) implements of husbandry as defined in Subsection 41-1a-102 (23) that are not
             173      registered under Title 41, Chapter 1a, Part 2, Registration; and
             174          (v) other farming activities;
             175          (c) in manufacturing tangible personal property at an establishment described in SIC
             176      Codes 2000 to 3999 of the 1987 Standard Industrial Classification Manual of the federal
             177      Executive Office of the President, Office of Management and Budget; or
             178          (d) by a scrap recycler if:
             179          (i) from a fixed location, the scrap recycler utilizes machinery or equipment to process
             180      one or more of the following items into prepared grades of processed materials for use in new


             181      products:
             182          (A) iron;
             183          (B) steel;
             184          (C) nonferrous metal;
             185          (D) paper;
             186          (E) glass;
             187          (F) plastic;
             188          (G) textile; or
             189          (H) rubber; and
             190          (ii) the new products under Subsection [(13)] (15)(d)(i) would otherwise be made with
             191      nonrecycled materials.
             192          [(14)] (16) "Manufactured home" means any manufactured home or mobile home as
             193      defined in Title 58, Chapter 56, Utah Uniform Building Standards Act.
             194          [(15)] (17) For purposes of Subsection 59-12-104 (14), "manufacturing facility" means:
             195          (a) an establishment described in SIC Codes 2000 to 3999 of the 1987 Standard
             196      Industrial Classification Manual of the federal Executive Office of the President, Office of
             197      Management and Budget; or
             198          (b) a scrap recycler if:
             199          (i) from a fixed location, the scrap recycler utilizes machinery or equipment to process
             200      one or more of the following items into prepared grades of processed materials for use in new
             201      products:
             202          (A) iron;
             203          (B) steel;
             204          (C) nonferrous metal;
             205          (D) paper;
             206          (E) glass;
             207          (F) plastic;
             208          (G) textile; or
             209          (H) rubber; and
             210          (ii) the new products under Subsection [(15)] (17)(b)(i) would otherwise be made with
             211      nonrecycled materials.


             212          [(16)] (18) (a) "Medicine" means:
             213          (i) insulin, syringes, and any medicine prescribed for the treatment of human ailments
             214      by a person authorized to prescribe treatments and dispensed on prescription filled by a
             215      registered pharmacist, or supplied to patients by a physician, surgeon, or podiatric physician;
             216          (ii) any medicine dispensed to patients in a county or other licensed hospital if
             217      prescribed for that patient and dispensed by a registered pharmacist or administered under the
             218      direction of a physician; and
             219          (iii) any oxygen or stoma supplies prescribed by a physician or administered under the
             220      direction of a physician or paramedic.
             221          (b) "Medicine" does not include:
             222          (i) any auditory, prosthetic, ophthalmic, or ocular device or appliance; or
             223          (ii) any alcoholic beverage.
             224          [(17)] (19) "Mobile telecommunications service" is as defined in the Mobile
             225      Telecommunications Sourcing Act, 4 U.S.C. Sec. 124.
             226          [(18)] (20) "Olympic merchandise" means tangible personal property bearing an
             227      Olympic designation, emblem, insignia, mark, logo, service mark, symbol, terminology,
             228      trademark, or other copyrighted or protected material, including:
             229          (a) one or more of the following terms:
             230          (i) "Olympic";
             231          (ii) "Olympiad"; or
             232          (iii) "Citius Altius Fortius";
             233          (b) the symbol of the International Olympic Committee, consisting of five interlocking
             234      rings;
             235          (c) the emblem of the International Olympic Committee Corporation;
             236          (d) a United States Olympic Committee designation, emblem, insignia, mark, logo,
             237      service mark, symbol, terminology, trademark, or other copyrighted or protected material;
             238          (e) any emblem of the Olympic Winter Games of 2002 that is officially designated by
             239      the Salt Lake Organizing Committee of the Olympic Winter Games of 2002; or
             240          (f) the mascot of the Olympic Winter Games of 2002.
             241          [(19)] (21) (a) "Other fuels" means products that burn independently to produce heat or
             242      energy.


             243          (b) "Other fuels" includes oxygen when it is used in the manufacturing of tangible
             244      personal property.
             245          [(20)] (22) "Person" includes any individual, firm, partnership, joint venture,
             246      association, corporation, estate, trust, business trust, receiver, syndicate, this state, any county,
             247      city, municipality, district, or other local governmental entity of the state, or any group or
             248      combination acting as a unit.
             249          [(21)] (23) "Purchase price" means the amount paid or charged for tangible personal
             250      property or any other taxable transaction under Subsection 59-12-103 (1), excluding only cash
             251      discounts taken or any excise tax imposed on the purchase price by the federal government.
             252          [(22)] (24) "Regularly rented" means:
             253          (a) rented to a guest for value three or more times during a calendar year; or
             254          (b) advertised or held out to the public as a place that is regularly rented to guests for
             255      value.
             256          (25) (a) "Renewable energy" means:
             257          (i) biomass;
             258          (ii) geothermal energy;
             259          (iii) solar energy; or
             260          (iv) wind energy.
             261          (b) "Renewable energy" does not include energy produced from or by:
             262          (i) any fossil fuel including:
             263          (A) natural gas;
             264          (B) oil; or
             265          (C) propane;
             266          (ii) a hydroelectric facility; or
             267          (iii) a nuclear generation facility.
             268          (26) (a) "Renewable energy production facility" means a facility that:
             269          (i) is not a hydroelectric facility; and
             270          (ii) uses renewable energy to produce electricity.
             271          (b) A facility is a renewable energy production facility regardless of whether the
             272      facility is:
             273          (i) connected to an electric grid; or


             274          (ii) located on the premises of an electricity consumer.
             275          [(23)] (27) "Residential use" means the use in or around a home, apartment building,
             276      sleeping quarters, and similar facilities or accommodations.
             277          [(24)] (28) (a) "Retail sale" means any sale within the state of tangible personal
             278      property or any other taxable transaction under Subsection 59-12-103 (1), other than resale of
             279      such property, item, or service by a retailer or wholesaler to a user or consumer.
             280          (b) "Retail sale" includes sales by any farmer or other agricultural producer of poultry,
             281      eggs, or dairy products to consumers if the sales have an average monthly sales value of $125
             282      or more.
             283          (c) "Retail sale" does not include, and no additional sales or use tax shall be assessed
             284      against, those transactions where a purchaser of tangible personal property pays applicable
             285      sales or use taxes on its initial nonexempt purchases of property and then enters into a
             286      sale-leaseback transaction by which title to such property is transferred by the purchaser-lessee
             287      to a lessor for consideration, provided:
             288          (i) the transaction is intended as a form of financing for the property to the
             289      purchaser-lessee; and
             290          (ii) pursuant to generally accepted accounting principles, the purchaser-lessee is
             291      required to capitalize the subject property for financial reporting purposes, and account for the
             292      lease payments as payments made under a financing arrangement.
             293          [(25)] (29) (a) "Retailer" means any person engaged in a regularly organized retail
             294      business in tangible personal property or any other taxable transaction under Subsection
             295      59-12-103 (1), and who is selling to the user or consumer and not for resale.
             296          (b) "Retailer" includes commission merchants, auctioneers, and any person regularly
             297      engaged in the business of selling to users or consumers within the state.
             298          (c) "Retailer" does not include farmers, gardeners, stockmen, poultrymen, or other
             299      growers or agricultural producers producing and doing business on their own premises, except
             300      those who are regularly engaged in the business of buying or selling for a profit.
             301          (d) For purposes of this chapter the commission may regard as retailers the following if
             302      they determine it is necessary for the efficient administration of this chapter: salesmen,
             303      representatives, peddlers, or canvassers as the agents of the dealers, distributors, supervisors, or
             304      employers under whom they operate or from whom they obtain the tangible personal property


             305      sold by them, irrespective of whether they are making sales on their own behalf or on behalf of
             306      these dealers, distributors, supervisors, or employers, except that:
             307          (i) a printer's facility with which a retailer has contracted for printing shall not be
             308      considered to be a salesman, representative, peddler, canvasser, or agent of the retailer; and
             309          (ii) the ownership of property that is located at the premises of a printer's facility with
             310      which the retailer has contracted for printing and that consists of the final printed product,
             311      property that becomes a part of the final printed product, or copy from which the printed
             312      product is produced, shall not result in the retailer being deemed to have or maintain an office,
             313      distribution house, sales house, warehouse, service enterprise, or other place of business, or to
             314      maintain a stock of goods, within this state.
             315          [(26)] (30) "Sale" means any transfer of title, exchange, or barter, conditional or
             316      otherwise, in any manner, of tangible personal property or any other taxable transaction under
             317      Subsection 59-12-103 (1), for consideration. It includes:
             318          (a) installment and credit sales;
             319          (b) any closed transaction constituting a sale;
             320          (c) any sale of electrical energy, gas, services, or entertainment taxable under this
             321      chapter;
             322          (d) any transaction if the possession of property is transferred but the seller retains the
             323      title as security for the payment of the price; and
             324          (e) any transaction under which right to possession, operation, or use of any article of
             325      tangible personal property is granted under a lease or contract and the transfer of possession
             326      would be taxable if an outright sale were made.
             327          [(27)] (31) (a) "Sales relating to schools" means the following sales by, amounts paid
             328      to, or amounts charged by a school:
             329          (i) sales that are directly related to the school's educational functions or activities
             330      including:
             331          (A) the sale of:
             332          (I) textbooks;
             333          (II) textbook fees;
             334          (III) laboratory fees;
             335          (IV) laboratory supplies; or


             336          (V) safety equipment;
             337          (B) the sale of clothing that:
             338          (I) a student is specifically required to wear as a condition of participation in a
             339      school-related event or school-related activity; and
             340          (II) is not readily adaptable to general or continued usage to the extent that it takes the
             341      place of ordinary clothing;
             342          (C) sales of food if the net or gross revenues generated by the food sales are deposited
             343      into a school district fund or school fund dedicated to school meals; or
             344          (D) transportation charges for official school activities; or
             345          (ii) amounts paid to or amounts charged by a school for admission to a school-related
             346      event or school-related activity.
             347          (b) "Sales relating to schools" does not include:
             348          (i) bookstore sales of items that are not educational materials or supplies;
             349          (ii) except as provided in Subsection [(27)] (31)(a)(i)(B), clothing; or
             350          (iii) amounts paid to or amounts charged by a school for admission to a school-related
             351      event or school-related activity if the amounts paid or charged are passed through to a person:
             352          (A) other than a:
             353          (I) school;
             354          (II) nonprofit organization authorized by a school board or a governing body of a
             355      private school to organize and direct a competitive secondary school activity; or
             356          (III) nonprofit association authorized by a school board or a governing body of a
             357      private school to organize and direct a competitive secondary school activity; and
             358          (B) that is required to collect sales and use taxes under this chapter.
             359          (c) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             360      commission may make rules defining the term "passed through."
             361          [(28)] (32) For purposes of this section and Section 59-12-104 , "school" means:
             362          (a) an elementary school or a secondary school that:
             363          (i) is a:
             364          (A) public school; or
             365          (B) private school; and
             366          (ii) provides instruction for one or more grades kindergarten through 12; or


             367          (b) a public school district.
             368          [(29)] (33) (a) "Semiconductor fabricating or processing materials" means tangible
             369      personal property:
             370          (i) used primarily in the process of:
             371          (A) (I) manufacturing a semiconductor; or
             372          (II) fabricating a semiconductor; or
             373          (B) maintaining an environment suitable for a semiconductor; or
             374          (ii) consumed primarily in the process of:
             375          (A) (I) manufacturing a semiconductor; or
             376          (II) fabricating a semiconductor; or
             377          (B) maintaining an environment suitable for a semiconductor.
             378          (b) "Semiconductor fabricating or processing materials" includes:
             379          (i) parts used in the repairs or renovations of tangible personal property described in
             380      Subsection [(29)] (33)(a); or
             381          (ii) a chemical, catalyst, or other material used to:
             382          (A) produce or induce in a semiconductor a:
             383          (I) chemical change; or
             384          (II) physical change;
             385          (B) remove impurities from a semiconductor; or
             386          (C) improve the marketable condition of a semiconductor.
             387          [(30)] (34) "Senior citizen center" means a facility having the primary purpose of
             388      providing services to the aged as defined in Section 62A-3-101 .
             389          [(31)] (35) "State" means the state of Utah, its departments, and agencies.
             390          [(32)] (36) "Storage" means any keeping or retention of tangible personal property or
             391      any other taxable transaction under Subsection 59-12-103 (1), in this state for any purpose
             392      except sale in the regular course of business.
             393          [(33)] (37) (a) "Tangible personal property" means:
             394          (i) all goods, wares, merchandise, produce, and commodities;
             395          (ii) all tangible or corporeal things and substances which are dealt in or capable of
             396      being possessed or exchanged;
             397          (iii) water in bottles, tanks, or other containers; and


             398          (iv) all other physically existing articles or things, including property severed from real
             399      estate.
             400          (b) "Tangible personal property" does not include:
             401          (i) real estate or any interest or improvements in real estate;
             402          (ii) bank accounts, stocks, bonds, mortgages, notes, and other evidence of debt;
             403          (iii) insurance certificates or policies;
             404          (iv) personal or governmental licenses;
             405          (v) water in pipes, conduits, ditches, or reservoirs;
             406          (vi) currency and coinage constituting legal tender of the United States or of a foreign
             407      nation; and
             408          (vii) all gold, silver, or platinum ingots, bars, medallions, or decorative coins, not
             409      constituting legal tender of any nation, with a gold, silver, or platinum content of not less than
             410      80%.
             411          [(34)] (38) (a) For purposes of Subsection [(35)] (39) and Section 59-12-103 ,
             412      "telephone service" means a two-way transmission:
             413          (i) by:
             414          (A) wire;
             415          (B) radio;
             416          (C) lightwave; or
             417          (D) other electromagnetic means; and
             418          (ii) of one or more of the following:
             419          (A) a sign;
             420          (B) a signal;
             421          (C) writing;
             422          (D) an image;
             423          (E) sound;
             424          (F) a message;
             425          (G) data; or
             426          (H) other information of any nature.
             427          (b) "Telephone service" includes:
             428          (i) cellular telephone service;


             429          (ii) private communications service; or
             430          (iii) automated digital telephone answering service.
             431          (c) "Telephone service" does not include a service or a transaction that a state or a
             432      political subdivision of a state is prohibited from taxing as of July 1, 2001, under the Internet
             433      Tax Freedom Act, Pub. L. No. 105-277.
             434          [(35)] (39) (a) "Telephone service provider" means a person that:
             435          (i) owns, controls, operates, or manages a telephone service; and
             436          (ii) engages in an activity described in Subsection [(35)] (39)(a)(i) for the shared use
             437      with or resale to any person of the telephone service.
             438          (b) A person described in Subsection [(35)] (39)(a) is a telephone service provider
             439      whether or not the Public Service Commission of Utah regulates:
             440          (i) that person; or
             441          (ii) the telephone service that the person owns, controls, operates, or manages.
             442          [(36)] (40) (a) "Use" means the exercise of any right or power over tangible personal
             443      property under Subsection 59-12-103 (1), incident to the ownership or the leasing of that
             444      property, item, or service.
             445          (b) "Use" does not include the sale, display, demonstration, or trial of that property in
             446      the regular course of business and held for resale.
             447          [(37)] (41) "Vehicle" means any aircraft, as defined in Section 72-10-102 ; any vehicle,
             448      as defined in Section 41-1a-102 ; any off-highway vehicle, as defined in Section 41-22-2 ; and
             449      any vessel, as defined in Section 41-1a-102 ; that is required to be titled, registered, or both.
             450      "Vehicle," for purposes of Subsection 59-12-104 (36) only, also includes any locomotive,
             451      freight car, railroad work equipment, or other railroad rolling stock.
             452          [(38)] (42) "Vehicle dealer" means a person engaged in the business of buying, selling,
             453      or exchanging vehicles as defined in Subsection [(37)] (41).
             454          [(39)] (43) (a) "Vendor" means any person receiving any payment or consideration
             455      upon a sale of tangible personal property or any other taxable transaction under Subsection
             456      59-12-103 (1), or to whom the payment or consideration is payable.
             457          (b) "Vendor" does not mean a printer's facility described in Subsection [(25)] (29)(d).
             458          Section 2. Section 59-12-104 is amended to read:
             459           59-12-104. Exemptions.


             460          The following sales and uses are exempt from the taxes imposed by this chapter:
             461          (1) sales of aviation fuel, motor fuel, and special fuel subject to a Utah state excise tax
             462      under Chapter 13, Motor and Special Fuel Tax Act;
             463          (2) sales to the state, its institutions, and its political subdivisions; however, this
             464      exemption does not apply to sales of:
             465          (a) construction materials except:
             466          (i) construction materials purchased by or on behalf of institutions of the public
             467      education system as defined in Utah Constitution Article X, Section 2, provided the
             468      construction materials are clearly identified and segregated and installed or converted to real
             469      property which is owned by institutions of the public education system; and
             470          (ii) construction materials purchased by the state, its institutions, or its political
             471      subdivisions which are installed or converted to real property by employees of the state, its
             472      institutions, or its political subdivisions; or
             473          (b) tangible personal property in connection with the construction, operation,
             474      maintenance, repair, or replacement of a project, as defined in Section 11-13-103 , or facilities
             475      providing additional project capacity, as defined in Section 11-13-103 ;
             476          (3) sales of food, beverage, and dairy products from vending machines in which the
             477      proceeds of each sale do not exceed $1 if the vendor or operator of the vending machine reports
             478      an amount equal to 150% of the cost of items as goods consumed;
             479          (4) sales of food, beverage, dairy products, similar confections, and related services to
             480      commercial airline carriers for in-flight consumption;
             481          (5) sales of parts and equipment for installation in aircraft operated by common carriers
             482      in interstate or foreign commerce;
             483          (6) sales of commercials, motion picture films, prerecorded audio program tapes or
             484      records, and prerecorded video tapes by a producer, distributor, or studio to a motion picture
             485      exhibitor, distributor, or commercial television or radio broadcaster;
             486          (7) sales of cleaning or washing of tangible personal property by a coin-operated
             487      laundry or dry cleaning machine;
             488          (8) (a) except as provided in Subsection (8)(b), sales made to or by religious or
             489      charitable institutions in the conduct of their regular religious or charitable functions and
             490      activities, if the requirements of Section 59-12-104.1 are fulfilled;


             491          (b) the exemption provided for in Subsection (8)(a) does not apply to the following
             492      sales, uses, leases, or rentals relating to the Olympic Winter Games of 2002 made to or by an
             493      organization exempt from federal income taxation under Section 501(c)(3), Internal Revenue
             494      Code:
             495          (i) retail sales of Olympic merchandise;
             496          (ii) except as provided in Subsection (51), admissions or user fees described in
             497      Subsection 59-12-103 (1)(f);
             498          (iii) sales of accommodations and services as provided in Subsection 59-12-103 (1)(i),
             499      except for accommodations and services:
             500          (A) paid for in full by the Salt Lake Organizing Committee for the Olympic Winter
             501      Games of 2002;
             502          (B) exclusively used by:
             503          (I) an officer, a trustee, or an employee of the Salt Lake Organizing Committee for the
             504      Olympic Winter Games of 2002; or
             505          (II) a volunteer supervised by the Salt Lake Organizing Committee for the Olympic
             506      Winter Games of 2002; and
             507          (C) for which the Salt Lake Organizing Committee for the Olympic Winter Games of
             508      2002 does not receive reimbursement; or
             509          (iv) a lease or rental of a vehicle as defined in Section 41-1a-102 , except for a lease or
             510      rental of a vehicle:
             511          (A) paid for in full by the Salt Lake Organizing Committee for the Olympic Winter
             512      Games of 2002;
             513          (B) exclusively used by:
             514          (I) an officer, a trustee, or an employee of the Salt Lake Organizing Committee for the
             515      Olympic Winter Games of 2002; or
             516          (II) a volunteer supervised by the Salt Lake Organizing Committee for the Olympic
             517      Winter Games of 2002; and
             518          (C) for which the Salt Lake Organizing Committee for the Olympic Winter Games of
             519      2002 does not receive reimbursement;
             520          (9) sales of vehicles of a type required to be registered under the motor vehicle laws of
             521      this state which are made to bona fide nonresidents of this state and are not afterwards


             522      registered or used in this state except as necessary to transport them to the borders of this state;
             523          (10) sales of medicine;
             524          (11) sales or use of property, materials, or services used in the construction of or
             525      incorporated in pollution control facilities allowed by Sections 19-2-123 through 19-2-127 ;
             526          (12) (a) sales of meals served by:
             527          (i) the following if the meals are not available to the general public:
             528          (A) a church; or
             529          (B) a charitable institution;
             530          (ii) an institution of higher education if:
             531          (A) the meals are not available to the general public; or
             532          (B) the meals are prepaid as part of a student meal plan offered by the institution of
             533      higher education; or
             534          (b) inpatient meals provided at:
             535          (i) a medical facility; or
             536          (ii) a nursing facility;
             537          (13) isolated or occasional sales by persons not regularly engaged in business, except
             538      the sale of vehicles or vessels required to be titled or registered under the laws of this state in
             539      which case the tax is based upon:
             540          (a) the bill of sale or other written evidence of value of the vehicle or vessel being sold;
             541      or
             542          (b) in the absence of a bill of sale or other written evidence of value, the then existing
             543      fair market value of the vehicle or vessel being sold as determined by the commission;
             544          (14) (a) the following purchases or leases by a manufacturer on or after July 1, 1995:
             545          (i) machinery and equipment:
             546          (A) used in the manufacturing process;
             547          (B) having an economic life of three or more years; and
             548          (C) used:
             549          (I) to manufacture an item sold as tangible personal property; and
             550          (II) in new or expanding operations in a manufacturing facility in the state; and
             551          (ii) subject to the provisions of Subsection (14)(b), normal operating replacements that:
             552          (A) have an economic life of three or more years;


             553          (B) are used in the manufacturing process in a manufacturing facility in the state;
             554          (C) are used to replace or adapt an existing machine to extend the normal estimated
             555      useful life of the machine; and
             556          (D) do not include repairs and maintenance;
             557          (b) the rates for the exemption under Subsection (14)(a)(ii) are as follows:
             558          (i) beginning July 1, 1996, through June 30, 1997, 30% of the sale or lease described in
             559      Subsection (14)(a)(ii) is exempt;
             560          (ii) beginning July 1, 1997, through June 30, 1998, 60% of the sale or lease described in
             561      Subsection (14)(a)(ii) is exempt; and
             562          (iii) beginning July 1, 1998, 100% of the sale or lease described in Subsection
             563      (14)(a)(ii) is exempt;
             564          (c) for purposes of this Subsection (14), the commission shall by rule define the terms
             565      "new or expanding operations" and "establishment"; and
             566          (d) on or before October 1, 1991, and every five years after October 1, 1991, the
             567      commission shall:
             568          (i) review the exemptions described in Subsection (14)(a) and make recommendations
             569      to the Revenue and Taxation Interim Committee concerning whether the exemptions should be
             570      continued, modified, or repealed; and
             571          (ii) include in its report:
             572          (A) the cost of the exemptions;
             573          (B) the purpose and effectiveness of the exemptions; and
             574          (C) the benefits of the exemptions to the state;
             575          (15) (a) sales of the following if the requirements of Subsection (15)(b) are met:
             576          (i) tooling;
             577          (ii) special tooling;
             578          (iii) support equipment;
             579          (iv) special test equipment; or
             580          (v) parts used in the repairs or renovations of tooling or equipment described in
             581      Subsections (15)(a)(i) through (iv); and
             582          (b) sales of tooling, equipment, or parts described in Subsection (15)(a) are exempt if:
             583          (i) the tooling, equipment, or parts are used or consumed exclusively in the


             584      performance of any aerospace or electronics industry contract with the United States
             585      government or any subcontract under that contract; and
             586          (ii) under the terms of the contract or subcontract described in Subsection (15)(b)(i),
             587      title to the tooling, equipment, or parts is vested in the United States government as evidenced
             588      by:
             589          (A) a government identification tag placed on the tooling, equipment, or parts; or
             590          (B) listing on a government-approved property record if placing a government
             591      identification tag on the tooling, equipment, or parts is impractical;
             592          (16) intrastate movements of:
             593          (a) freight by common carriers; or
             594          (b) passengers:
             595          (i) by taxicabs as described in SIC Code 4121 of the 1987 Standard Industrial
             596      Classification Manual of the federal Executive Office of the President, Office of Management
             597      and Budget;
             598          (ii) transported by an establishment described in SIC Code 4111 of the 1987 Standard
             599      Industrial Classification Manual of the federal Executive Office of the President, Office of
             600      Management and Budget, if the transportation originates and terminates within a county of the
             601      first, second, or third class; or
             602          (iii) transported by the following described in SIC Code 4789 of the 1987 Standard
             603      Industrial Classification Manual of the federal Executive Office of the President, Office of
             604      Management and Budget:
             605          (A) a horse-drawn cab; or
             606          (B) a horse-drawn carriage.
             607          (17) sales of newspapers or newspaper subscriptions;
             608          (18) tangible personal property, other than money, traded in as full or part payment of
             609      the purchase price, except that for purposes of calculating sales or use tax upon vehicles not
             610      sold by a vehicle dealer, trade-ins are limited to other vehicles only, and the tax is based upon:
             611          (a) the bill of sale or other written evidence of value of the vehicle being sold and the
             612      vehicle being traded in; or
             613          (b) in the absence of a bill of sale or other written evidence of value, the then existing
             614      fair market value of the vehicle being sold and the vehicle being traded in, as determined by the


             615      commission;
             616          (19) sprays and insecticides used to control insects, diseases, and weeds for
             617      commercial production of fruits, vegetables, feeds, seeds, and animal products, but not those
             618      sprays and insecticides used in the processing of the products;
             619          (20) (a) (i) sales of tangible personal property used or consumed primarily and directly
             620      in farming operations, including sales of irrigation equipment and supplies used for agricultural
             621      production purposes, whether or not they become part of real estate and whether or not
             622      installed by farmer, contractor, or subcontractor, but not sales of:
             623          (A) machinery, equipment, materials, and supplies used in a manner that is incidental
             624      to farming, such as hand tools with a unit purchase price not in excess of $250, and
             625      maintenance and janitorial equipment and supplies;
             626          (B) tangible personal property used in any activities other than farming, such as office
             627      equipment and supplies, equipment and supplies used in sales or distribution of farm products,
             628      in research, or in transportation; or
             629          (C) any vehicle required to be registered by the laws of this state, without regard to the
             630      use to which the vehicle is put; or
             631          (ii) sales of parts used in the repairs or renovations of tangible personal property if the
             632      tangible personal property is exempt under Subsection (20)(a); or
             633          (b) sales of hay;
             634          (21) exclusive sale of locally grown seasonal crops, seedling plants, or garden, farm, or
             635      other agricultural produce if sold by a producer during the harvest season;
             636          (22) purchases of food as defined in 7 U.S.C. Sec. 2012(g) under the Food Stamp
             637      Program, 7 U.S.C. Sec. 2011 et seq.;
             638          (23) sales of nonreturnable containers, nonreturnable labels, nonreturnable bags,
             639      nonreturnable shipping cases, and nonreturnable casings to a manufacturer, processor,
             640      wholesaler, or retailer for use in packaging tangible personal property to be sold by that
             641      manufacturer, processor, wholesaler, or retailer;
             642          (24) property stored in the state for resale;
             643          (25) property brought into the state by a nonresident for his or her own personal use or
             644      enjoyment while within the state, except property purchased for use in Utah by a nonresident
             645      living and working in Utah at the time of purchase;


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


             677      under the authority of Title 17A, Chapter 2, Part 10, Utah Public Transit District Act;
             678          (36) sales or leases of vehicles to, or use of vehicles by an authorized carrier;
             679          (37) (a) 45% of the sales price of any new manufactured home; and
             680          (b) 100% of the sales price of any used manufactured home;
             681          (38) sales relating to schools and fundraising sales;
             682          (39) sales or rentals of home medical equipment or supplies;
             683          (40) (a) sales to a ski resort of electricity to operate a passenger ropeway as defined in
             684      Section 72-11-102 ; and
             685          (b) the commission shall by rule determine the method for calculating sales exempt
             686      under Subsection (40)(a) that are not separately metered and accounted for in utility billings;
             687          (41) sales to a ski resort of:
             688          (a) snowmaking equipment;
             689          (b) ski slope grooming equipment;
             690          (c) passenger ropeways as defined in Section 72-11-102 ; or
             691          (d) parts used in the repairs or renovations of equipment or passenger ropeways
             692      described in Subsections (41)(a) through (c);
             693          (42) sales of natural gas, electricity, heat, coal, fuel oil, or other fuels for industrial use;
             694          (43) sales or rentals of the right to use or operate for amusement, entertainment, or
             695      recreation a coin-operated amusement device as defined in Section 59-12-102 ;
             696          (44) sales of cleaning or washing of tangible personal property by a coin-operated car
             697      wash machine;
             698          (45) sales by the state or a political subdivision of the state, except state institutions of
             699      higher education as defined in Section 53B-3-102 , of:
             700          (a) photocopies; or
             701          (b) other copies of records held or maintained by the state or a political subdivision of
             702      the state;
             703          (46) (a) amounts paid:
             704          (i) to a person providing intrastate transportation to an employer's employee to or from
             705      the employee's primary place of employment;
             706          (ii) by an:
             707          (A) employee; or


             708          (B) employer; and
             709          (iii) pursuant to a written contract between:
             710          (A) the employer; and
             711          (B) (I) the employee; or
             712          (II) a person providing transportation to the employer's employee; and
             713          (b) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             714      commission may for purposes of Subsection (46)(a) make rules defining what constitutes an
             715      employee's primary place of employment;
             716          (47) amounts paid for admission to an athletic event at an institution of higher
             717      education that is subject to the provisions of Title IX of the Education Amendments of 1972,
             718      20 U.S.C. Sec. 1681 et seq.;
             719          (48) sales of telephone service charged to a prepaid telephone calling card;
             720          (49) (a) sales of:
             721          (i) hearing aids;
             722          (ii) hearing aid accessories; or
             723          (iii) except as provided in Subsection (49)(b), parts used in the repairs or renovations
             724      of hearing aids or hearing aid accessories; and
             725          (b) for purposes of this Subsection (49), notwithstanding Subsection (49)(a)(iii),
             726      "parts" does not include batteries;
             727          (50) (a) sales made to or by:
             728          (i) an area agency on aging; or
             729          (ii) a senior citizen center owned by a county, city, or town; or
             730          (b) sales made by a senior citizen center that contracts with an area agency on aging;
             731          (51) (a) beginning on July 1, 2000, through June 30, 2002, amounts paid or charged as
             732      admission or user fees described in Subsection 59-12-103 (1)(f) relating to the Olympic Winter
             733      Games of 2002 if the amounts paid or charged are established by the Salt Lake Organizing
             734      Committee for the Olympic Winter Games of 2002 in accordance with requirements of the
             735      International Olympic Committee; and
             736          (b) the State Olympic Officer and the Salt Lake Organizing Committee for the Olympic
             737      Winter Games of 2002 shall make at least two reports during the 2000 interim:
             738          (i) to the:


             739          (A) Olympic Coordination Committee; and
             740          (B) Revenue and Taxation Interim Committee; and
             741          (ii) regarding the status of:
             742          (A) agreements relating to the funding of public safety services for the Olympic Winter
             743      Games of 2002;
             744          (B) agreements relating to the funding of services, other than public safety services, for
             745      the Olympic Winter Games of 2002;
             746          (C) other agreements relating to the Olympic Winter Games of 2002 as requested by
             747      the Olympic Coordination Committee or the Revenue and Taxation Interim Committee;
             748          (D) other issues as requested by the Olympic Coordination Committee or the Revenue
             749      and Taxation Interim Committee; or
             750          (E) a combination of Subsections (51)(b)(ii)(A) through (D);
             751          (52) (a) beginning on July 1, 2001, through June 30, 2004, and subject to Subsection
             752      (52)(b), a sale or lease of semiconductor fabricating or processing materials regardless of
             753      whether the semiconductor fabricating or processing materials:
             754          (i) actually come into contact with a semiconductor; or
             755          (ii) ultimately become incorporated into real property;
             756          (b) (i) beginning on July 1, 2001, through June 30, 2002, 10% of the sale or lease
             757      described in Subsection (52)(a) is exempt;
             758          (ii) beginning on July 1, 2002, through June 30, 2003, 50% of the sale or lease
             759      described in Subsection (52)(a) is exempt; and
             760          (iii) beginning on July 1, 2003, through June 30, 2004, the entire amount of the sale or
             761      lease described in Subsection (52)(a) is exempt; and
             762          (c) each year on or before the November interim meeting, the Revenue and Taxation
             763      Interim Committee shall:
             764          (i) review the exemption described in this Subsection (52) and make recommendations
             765      concerning whether the exemption should be continued, modified, or repealed; and
             766          (ii) include in the review under this Subsection (52)(c):
             767          (A) the cost of the exemption;
             768          (B) the purpose and effectiveness of the exemption; and
             769          (C) the benefits of the exemption to the state;


             770          (53) an amount paid by or charged to a purchaser for accommodations and services
             771      described in Subsection 59-12-103 (1)(i) to the extent the amount is exempt under Section
             772      59-12-104.2 ;
             773          (54) beginning on September 1, 2001, the lease or use of a vehicle issued a temporary
             774      sports event registration certificate in accordance with Section 41-3-306 for the event period
             775      specified on the temporary sports event registration certificate; or
             776          (55) sales or uses of electricity, if the sales or uses are:
             777          (a) made under a tariff adopted by the Public Service Commission of Utah only for
             778      purchase of electricity produced from a new wind, geothermal, biomass, or solar power energy
             779      source, as designated in the tariff by the Public Service Commission of Utah; and
             780          (b) for an amount of electricity that is:
             781          (i) unrelated to the amount of electricity used by the person purchasing the electricity
             782      under the tariff described in Subsection (55)(a); [and]
             783          (ii) equivalent to the number of kilowatthours specified in the tariff described in
             784      Subsection (55)(a) that may be purchased under the tariff described in Subsection (55)(a)[.];
             785      and
             786          (56) purchases or leases made on or after July 1, 2003, but on or before June 30, 2008,
             787      of machinery and equipment that:
             788          (a) have an economic life of ten or more years;
             789          (b) are purchased or leased for or by an establishment that is:
             790          (i) described in NAICS Code 221119 of the federal 1997 North American Industry
             791      Classifications System Manual, Executive Office of the President, Office of Management and
             792      Budget;
             793          (ii) a renewable energy production facility;
             794          (iii) located in this state; and
             795          (iv) (A) built on or after July 1, 2003; or
             796          (B) expanded on or after July 1, 2003; and
             797          (c) are installed as part of the renewable energy production facility described in
             798      Subsection (56)(b).
             799          Section 3. Section 59-12-105 is amended to read:
             800           59-12-105. Certain exempt sales to be reported -- Penalties.


             801          (1) An owner, vendor, or purchaser shall report to the commission the amount of sales
             802      or uses exempt under Subsection 59-12-104 (14), (20), (40), (41), [or] (52), or (56).
             803          (2) Except as provided in Subsections (3) and (4), if the owner, vendor, or purchaser
             804      fails to report the full amount of the exemptions granted under Subsection 59-12-104 (14), (20),
             805      (40), (41), [or] (52), (56) on the owner's, vendor's, or purchaser's original filed return, the
             806      commission shall impose a penalty equal to the lesser of:
             807          (a) 10% of the sales and use tax that would have been imposed if the exemption had not
             808      applied; or
             809          (b) $1,000.
             810          (3) Notwithstanding Subsection (2), the commission may not impose a penalty under
             811      Subsection (2) if the owner, vendor, or purchaser files an amended return containing the
             812      amount of the exemption prior to the owner, vendor, or purchaser receiving a notice of audit
             813      from the commission.
             814          (4) (a) Notwithstanding Subsection (2), the commission may waive, reduce, or
             815      compromise a penalty imposed under this section if the commission finds there are reasonable
             816      grounds for the waiver, reduction, or compromise.
             817          (b) If the commission waives, reduces, or compromises a penalty under Subsection
             818      (4)(a), the commission shall make a record of the grounds for waiving, reducing, or
             819      compromising the penalty.
             820          Section 4. Effective date.
             821          This act takes effect on July 1, 2003.


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