S.B. 31 Enrolled

1

SALES AND USE TAX - MANUFACTURING AND
2 INDUSTRY EXEMPTIONS AMENDMENTS
3 2006 GENERAL SESSION
4 STATE OF UTAH
5 Chief Sponsor: Howard A. Stephenson
6 House Sponsor: Wayne A. Harper
7
8 LONG TITLE
9 General Description:
10 This bill amends the Sales and Use Tax Act to modify exemptions relating to
11 manufacturing and industry.
12 Highlighted Provisions:
13 This bill:
14 . expands the definition of "industrial use" so that the use of natural gas, electricity,
15 heat, coal, fuel oil, or other fuels are exempt from sales and use taxation if used in
16 producing certain forms of energy or steam by a cogeneration facility as defined in
17 the Public Utilities title;
18 . expands the definition of "manufacturing facility" to include a cogeneration facility
19 as defined under the Public Utilities title;
20 . addresses the requirements for a scrap recycler to be eligible for exemption from
21 sales and use taxes;
22 . deletes a requirement that machinery and equipment be used in new or expanding
23 operations in a manufacturing facility in the state to be eligible for exemption from
24 sales and use taxes;
25 . provides that certain repair parts are exempt from sales and use taxes;
26 . deletes a requirement that parts be used to replace or adapt an existing machine to
27 extend the normal estimated useful life of the machine to be eligible for exemption
28 from sales and use taxes;
29 . provides that the exemption for a manufacturing facility that is a cogeneration

30 facility applies to amounts paid on or after July 1, 2005, for a purchase or lease of certain items
31 by a cogeneration facility that is placed in service on or after May 1, 2006;
32 . grants rulemaking authority to the State Tax Commission;
33 . modifies State Tax Commission rulemaking authority;
34 . repeals obsolete language; and
35 . makes technical changes.
36 Monies Appropriated in this Bill:
37 None
38 Other Special Clauses:
39 This bill provides an effective date.
40 Utah Code Sections Affected:
41 AMENDS:
42 59-12-102, as last amended by Chapters 158 and 246, Laws of Utah 2005
43 59-12-104, as last amended by Chapters 158, 203, 209, 240 and 246, Laws of Utah
44 2005
45
46 Be it enacted by the Legislature of the state of Utah:
47 Section 1. Section 59-12-102 is amended to read:
48 59-12-102. Definitions.
49 As used in this chapter:
50 (1) (a) "Admission or user fees" includes season passes.
51 (b) "Admission or user fees" does not include annual membership dues to private
52 organizations.
53 (2) "Agreement" means the Streamlined Sales and Use Tax Agreement described in
54 Section 59-12-102.1 .
55 (3) "Agreement combined tax rate" means the sum of the tax rates:
56 (a) listed under Subsection (4); and
57 (b) that are imposed within a local taxing jurisdiction.

58 (4) "Agreement sales and use tax" means a tax imposed under:
59 (a) Subsection 59-12-103 (2)(a)(i);
60 (b) Section 59-12-204 ;
61 (c) Section 59-12-401 ;
62 (d) Section 59-12-402 ;
63 (e) Section 59-12-501 ;
64 (f) Section 59-12-502 ;
65 (g) Section 59-12-703 ;
66 (h) Section 59-12-802 ;
67 (i) Section 59-12-804 ;
68 (j) Section 59-12-1001 ;
69 (k) Section 59-12-1102 ;
70 (l) Section 59-12-1302 ;
71 (m) Section 59-12-1402 ; or
72 (n) Section 59-12-1503 .
73 (5) "Aircraft" is as defined in Section 72-10-102 .
74 (6) "Alcoholic beverage" means a beverage that:
75 (a) is suitable for human consumption; and
76 (b) contains .5% or more alcohol by volume.
77 (7) "Area agency on aging" is as defined in Section 62A-3-101 .
78 (8) "Authorized carrier" means:
79 (a) in the case of vehicles operated over public highways, the holder of credentials
80 indicating that the vehicle is or will be operated pursuant to both the International Registration
81 Plan and the International Fuel Tax Agreement;
82 (b) in the case of aircraft, the holder of a Federal Aviation Administration operating
83 certificate or air carrier's operating certificate; or
84 (c) in the case of locomotives, freight cars, railroad work equipment, or other rolling
85 stock, the holder of a certificate issued by the United States Surface Transportation Board.

86 (9) (a) Except as provided in Subsection (9)(b), "biomass energy" means any of the
87 following that is used as the primary source of energy to produce fuel or electricity:
88 (i) material from a plant or tree; or
89 (ii) other organic matter that is available on a renewable basis, including:
90 (A) slash and brush from forests and woodlands;
91 (B) animal waste;
92 (C) methane produced:
93 (I) at landfills; or
94 (II) as a byproduct of the treatment of wastewater residuals;
95 (D) aquatic plants; and
96 (E) agricultural products.
97 (b) "Biomass energy" does not include:
98 (i) black liquor;
99 (ii) treated woods; or
100 (iii) biomass from municipal solid waste other than methane produced:
101 (A) at landfills; or
102 (B) as a byproduct of the treatment of wastewater residuals.
103 (10) "Certified automated system" means software certified by the governing board of
104 the agreement in accordance with Section 59-12-102.1 that:
105 (a) calculates the agreement sales and use tax imposed within a local taxing
106 jurisdiction:
107 (i) on a transaction; and
108 (ii) in the states that are members of the agreement;
109 (b) determines the amount of agreement sales and use tax to remit to a state that is a
110 member of the agreement; and
111 (c) maintains a record of the transaction described in Subsection (10)(a)(i).
112 (11) "Certified service provider" means an agent certified:
113 (a) by the governing board of the agreement in accordance with Section 59-12-102.1 ;

114 and
115 (b) to perform all of a seller's sales and use tax functions for an agreement sales and
116 use tax other than the seller's obligation under Section 59-12-107.4 to remit a tax on the seller's
117 own purchases.
118 (12) (a) Subject to Subsection (12)(b), "clothing" means all human wearing apparel
119 suitable for general use.
120 (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
121 commission shall make rules:
122 (i) listing the items that constitute "clothing"; and
123 (ii) that are consistent with the list of items that constitute "clothing" under the
124 agreement.
125 (13) (a) For purposes of Subsection 59-12-104 (42), "coin-operated amusement device"
126 means:
127 (i) a coin-operated amusement, skill, or ride device;
128 (ii) that is not controlled through seller-assisted, over-the-counter, sales of tokens; and
129 (iii) includes a music machine, pinball machine, billiard machine, video game machine,
130 arcade machine, and a mechanical or electronic skill game or ride.
131 (b) For purposes of Subsection 59-12-104 (42), "coin-operated amusement device" does
132 not mean a coin-operated amusement device possessing a coinage mechanism that:
133 (i) accepts and registers multiple denominations of coins; and
134 (ii) allows the seller to collect the sales and use tax at the time an amusement device is
135 activated and operated by a person inserting coins into the device.
136 (14) "Commercial use" means the use of gas, electricity, heat, coal, fuel oil, or other
137 fuels that does not constitute industrial use under Subsection (34) or residential use under
138 Subsection (68).
139 (15) (a) "Common carrier" means a person engaged in or transacting the business of
140 transporting passengers, freight, merchandise, or other property for hire within this state.
141 (b) (i) "Common carrier" does not include a person who, at the time the person is

142 traveling to or from that person's place of employment, transports a passenger to or from the
143 passenger's place of employment.
144 (ii) For purposes of Subsection (15)(b)(i), in accordance with Title 63, Chapter 46a,
145 Utah Administrative Rulemaking Act, the commission may make rules defining what
146 constitutes a person's place of employment.
147 (16) "Component part" includes:
148 (a) poultry, dairy, and other livestock feed, and their components;
149 (b) baling ties and twine used in the baling of hay and straw;
150 (c) fuel used for providing temperature control of orchards and commercial
151 greenhouses doing a majority of their business in wholesale sales, and for providing power for
152 off-highway type farm machinery; and
153 (d) feed, seeds, and seedlings.
154 (17) "Computer" means an electronic device that accepts information:
155 (a) (i) in digital form; or
156 (ii) in a form similar to digital form; and
157 (b) manipulates that information for a result based on a sequence of instructions.
158 (18) "Computer software" means a set of coded instructions designed to cause:
159 (a) a computer to perform a task; or
160 (b) automatic data processing equipment to perform a task.
161 (19) "Construction materials" means any tangible personal property that will be
162 converted into real property.
163 (20) "Delivered electronically" means delivered to a purchaser by means other than
164 tangible storage media.
165 (21) (a) "Delivery charge" means a charge:
166 (i) by a seller of:
167 (A) tangible personal property; or
168 (B) services; and
169 (ii) for preparation and delivery of the tangible personal property or services described

170 in Subsection (21)(a)(i) to a location designated by the purchaser.
171 (b) "Delivery charge" includes a charge for the following:
172 (i) transportation;
173 (ii) shipping;
174 (iii) postage;
175 (iv) handling;
176 (v) crating; or
177 (vi) packing.
178 (22) "Dietary supplement" means a product, other than tobacco, that:
179 (a) is intended to supplement the diet;
180 (b) contains one or more of the following dietary ingredients:
181 (i) a vitamin;
182 (ii) a mineral;
183 (iii) an herb or other botanical;
184 (iv) an amino acid;
185 (v) a dietary substance for use by humans to supplement the diet by increasing the total
186 dietary intake; or
187 (vi) a concentrate, metabolite, constituent, extract, or combination of any ingredient
188 described in Subsections (22)(b)(i) through (v);
189 (c) (i) except as provided in Subsection (22)(c)(ii), is intended for ingestion in:
190 (A) tablet form;
191 (B) capsule form;
192 (C) powder form;
193 (D) softgel form;
194 (E) gelcap form; or
195 (F) liquid form; or
196 (ii) notwithstanding Subsection (22)(c)(i), if the product is not intended for ingestion in
197 a form described in Subsections (22)(c)(i)(A) through (F), is not represented:

198 (A) as conventional food; and
199 (B) for use as a sole item of:
200 (I) a meal; or
201 (II) the diet; and
202 (d) is required to be labeled as a dietary supplement:
203 (i) identifiable by the "Supplemental Facts" box found on the label; and
204 (ii) as required by 21 C.F.R. Sec. 101.36.
205 (23) (a) "Direct mail" means printed material delivered or distributed by United States
206 mail or other delivery service:
207 (i) to:
208 (A) a mass audience; or
209 (B) addressees on a mailing list provided by a purchaser of the mailing list; and
210 (ii) if the cost of the printed material is not billed directly to the recipients.
211 (b) "Direct mail" includes tangible personal property supplied directly or indirectly by a
212 purchaser to a seller of direct mail for inclusion in a package containing the printed material.
213 (c) "Direct mail" does not include multiple items of printed material delivered to a
214 single address.
215 (24) (a) "Drug" means a compound, substance, or preparation, or a component of a
216 compound, substance, or preparation that is:
217 (i) recognized in:
218 (A) the official United States Pharmacopoeia;
219 (B) the official Homeopathic Pharmacopoeia of the United States;
220 (C) the official National Formulary; or
221 (D) a supplement to a publication listed in Subsections (24)(a)(i)(A) through (C);
222 (ii) intended for use in the:
223 (A) diagnosis of disease;
224 (B) cure of disease;
225 (C) mitigation of disease;

226 (D) treatment of disease; or
227 (E) prevention of disease; or
228 (iii) intended to affect:
229 (A) the structure of the body; or
230 (B) any function of the body.
231 (b) "Drug" does not include:
232 (i) food and food ingredients;
233 (ii) a dietary supplement;
234 (iii) an alcoholic beverage; or
235 (iv) a prosthetic device.
236 (25) (a) Except as provided in Subsection (25)(c), "durable medical equipment" means
237 equipment that:
238 (i) can withstand repeated use;
239 (ii) is primarily and customarily used to serve a medical purpose;
240 (iii) generally is not useful to a person in the absence of illness or injury; and
241 (iv) is not worn in or on the body.
242 (b) "Durable medical equipment" includes parts used in the repair or replacement of the
243 equipment described in Subsection (25)(a).
244 (c) Notwithstanding Subsection (25)(a), "durable medical equipment" does not include
245 mobility enhancing equipment.
246 (26) "Electronic" means:
247 (a) relating to technology; and
248 (b) having:
249 (i) electrical capabilities;
250 (ii) digital capabilities;
251 (iii) magnetic capabilities;
252 (iv) wireless capabilities;
253 (v) optical capabilities;

254 (vi) electromagnetic capabilities; or
255 (vii) capabilities similar to Subsections (26)(b)(i) through (vi).
256 (27) (a) "Food and food ingredients" means substances:
257 (i) regardless of whether the substances are in:
258 (A) liquid form;
259 (B) concentrated form;
260 (C) solid form;
261 (D) frozen form;
262 (E) dried form; or
263 (F) dehydrated form; and
264 (ii) that are:
265 (A) sold for:
266 (I) ingestion by humans; or
267 (II) chewing by humans; and
268 (B) consumed for the substance's:
269 (I) taste; or
270 (II) nutritional value.
271 (b) "Food and food ingredients" does not include:
272 (i) an alcoholic beverage;
273 (ii) tobacco; or
274 (iii) prepared food.
275 (28) (a) "Fundraising sales" means sales:
276 (i) (A) made by a school; or
277 (B) made by a school student;
278 (ii) that are for the purpose of raising funds for the school to purchase equipment,
279 materials, or provide transportation; and
280 (iii) that are part of an officially sanctioned school activity.
281 (b) For purposes of Subsection (28)(a)(iii), "officially sanctioned school activity"

282 means a school activity:
283 (i) that is conducted in accordance with a formal policy adopted by the school or school
284 district governing the authorization and supervision of fundraising activities;
285 (ii) that does not directly or indirectly compensate an individual teacher or other
286 educational personnel by direct payment, commissions, or payment in kind; and
287 (iii) the net or gross revenues from which are deposited in a dedicated account
288 controlled by the school or school district.
289 (29) "Geothermal energy" means energy contained in heat that continuously flows
290 outward from the earth that is used as the sole source of energy to produce electricity.
291 (30) "Governing board of the agreement" means the governing board of the agreement
292 that is:
293 (a) authorized to administer the agreement; and
294 (b) established in accordance with the agreement.
295 (31) (a) "Hearing aid" means:
296 (i) an instrument or device having an electronic component that is designed to:
297 (A) (I) improve impaired human hearing; or
298 (II) correct impaired human hearing; and
299 (B) (I) be worn in the human ear; or
300 (II) affixed behind the human ear;
301 (ii) an instrument or device that is surgically implanted into the cochlea; or
302 (iii) a telephone amplifying device.
303 (b) "Hearing aid" does not include:
304 (i) except as provided in Subsection (31)(a)(i)(B) or (31)(a)(ii), an instrument or device
305 having an electronic component that is designed to be worn on the body;
306 (ii) except as provided in Subsection (31)(a)(iii), an assistive listening device or system
307 designed to be used by one individual, including:
308 (A) a personal amplifying system;
309 (B) a personal FM system;

310 (C) a television listening system; or
311 (D) a device or system similar to a device or system described in Subsections
312 (31)(b)(ii)(A) through (C); or
313 (iii) an assistive listening device or system designed to be used by more than one
314 individual, including:
315 (A) a device or system installed in:
316 (I) an auditorium;
317 (II) a church;
318 (III) a conference room;
319 (IV) a synagogue; or
320 (V) a theater; or
321 (B) a device or system similar to a device or system described in Subsections
322 (31)(b)(iii)(A)(I) through (V).
323 (32) (a) "Hearing aid accessory" means a hearing aid:
324 (i) component;
325 (ii) attachment; or
326 (iii) accessory.
327 (b) "Hearing aid accessory" includes:
328 (i) a hearing aid neck loop;
329 (ii) a hearing aid cord;
330 (iii) a hearing aid ear mold;
331 (iv) hearing aid tubing;
332 (v) a hearing aid ear hook; or
333 (vi) a hearing aid remote control.
334 (c) "Hearing aid accessory" does not include:
335 (i) a component, attachment, or accessory designed to be used only with an:
336 (A) instrument or device described in Subsection (31)(b)(i); or
337 (B) assistive listening device or system described in Subsection (31)(b)(ii) or (iii); or

338 (ii) a hearing aid battery.
339 (33) "Hydroelectric energy" means water used as the sole source of energy to produce
340 electricity.
341 (34) "Industrial use" means the use of natural gas, electricity, heat, coal, fuel oil, or
342 other fuels:
343 (a) in mining or extraction of minerals;
344 (b) in agricultural operations to produce an agricultural product up to the time of
345 harvest or placing the agricultural product into a storage facility, including:
346 (i) commercial greenhouses;
347 (ii) irrigation pumps;
348 (iii) farm machinery;
349 (iv) implements of husbandry as defined in Subsection 41-1a-102 (23) that are not
350 registered under Title 41, Chapter 1a, Part 2, Registration; and
351 (v) other farming activities;
352 (c) in manufacturing tangible personal property at an establishment described in SIC
353 Codes 2000 to 3999 of the 1987 Standard Industrial Classification Manual of the federal
354 Executive Office of the President, Office of Management and Budget; [or]
355 (d) by a scrap recycler if:
356 (i) from a fixed location, the scrap recycler utilizes machinery or equipment to process
357 one or more of the following items into prepared grades of processed materials for use in new
358 products:
359 (A) iron;
360 (B) steel;
361 (C) nonferrous metal;
362 (D) paper;
363 (E) glass;
364 (F) plastic;
365 (G) textile; or

366 (H) rubber; and
367 (ii) the new products under Subsection (34)(d)(i) would otherwise be made with
368 nonrecycled materials[.]; or
369 (e) in producing a form of energy or steam described in Subsection 54-2-1 (2)(a) by a
370 cogeneration facility as defined in Section 54-2-1 .
371 (35) (a) Except as provided in Subsection (35)(b), "installation charge" means a charge
372 for installing tangible personal property.
373 (b) Notwithstanding Subsection (35)(a), "installation charge" does not include a charge
374 for repairs or renovations of tangible personal property.
375 (36) (a) "Lease" or "rental" means a transfer of possession or control of tangible
376 personal property for:
377 (i) (A) a fixed term; or
378 (B) an indeterminate term; and
379 (ii) consideration.
380 (b) "Lease" or "rental" includes an agreement covering a motor vehicle and trailer if the
381 amount of consideration may be increased or decreased by reference to the amount realized
382 upon sale or disposition of the property as defined in Section 7701(h)(1), Internal Revenue
383 Code.
384 (c) "Lease" or "rental" does not include:
385 (i) a transfer of possession or control of property under a security agreement or
386 deferred payment plan that requires the transfer of title upon completion of the required
387 payments;
388 (ii) a transfer of possession or control of property under an agreement that requires the
389 transfer of title:
390 (A) upon completion of required payments; and
391 (B) if the payment of an option price does not exceed the greater of:
392 (I) $100; or
393 (II) 1% of the total required payments; or

394 (iii) providing tangible personal property along with an operator for a fixed period of
395 time or an indeterminate period of time if the operator is necessary for equipment to perform as
396 designed.
397 (d) For purposes of Subsection (36)(c)(iii), an operator is necessary for equipment to
398 perform as designed if the operator's duties exceed the:
399 (i) set-up of tangible personal property;
400 (ii) maintenance of tangible personal property; or
401 (iii) inspection of tangible personal property.
402 (37) "Load and leave" means delivery to a purchaser by use of a tangible storage media
403 if the tangible storage media is not physically transferred to the purchaser.
404 (38) "Local taxing jurisdiction" means a:
405 (a) county that is authorized to impose an agreement sales and use tax;
406 (b) city that is authorized to impose an agreement sales and use tax; or
407 (c) town that is authorized to impose an agreement sales and use tax.
408 (39) "Manufactured home" is as defined in Section 58-56-3 .
409 (40) For purposes of Subsection 59-12-104 (14), "manufacturing facility" means:
410 (a) an establishment described in SIC Codes 2000 to 3999 of the 1987 Standard
411 Industrial Classification Manual of the federal Executive Office of the President, Office of
412 Management and Budget; [or]
413 (b) a scrap recycler if:
414 (i) from a fixed location, the scrap recycler utilizes machinery or equipment to process
415 one or more of the following items into prepared grades of processed materials for use in new
416 products:
417 (A) iron;
418 (B) steel;
419 (C) nonferrous metal;
420 (D) paper;
421 (E) glass;

422 (F) plastic;
423 (G) textile; or
424 (H) rubber; and
425 (ii) the new products under Subsection (40)(b)(i) would otherwise be made with
426 nonrecycled materials[.]; or
427 (c) a cogeneration facility as defined in Section 54-2-1 .
428 (41) "Mobile home" is as defined in Section 58-56-3 .
429 (42) "Mobile telecommunications service" is as defined in the Mobile
430 Telecommunications Sourcing Act, 4 U.S.C. Sec. 124.
431 (43) (a) Except as provided in Subsection (43)(c), "mobility enhancing equipment"
432 means equipment that is:
433 (i) primarily and customarily used to provide or increase the ability to move from one
434 place to another;
435 (ii) appropriate for use in a:
436 (A) home; or
437 (B) motor vehicle; and
438 (iii) not generally used by persons with normal mobility.
439 (b) "Mobility enhancing equipment" includes parts used in the repair or replacement of
440 the equipment described in Subsection (43)(a).
441 (c) Notwithstanding Subsection (43)(a), "mobility enhancing equipment" does not
442 include:
443 (i) a motor vehicle;
444 (ii) equipment on a motor vehicle if that equipment is normally provided by the motor
445 vehicle manufacturer;
446 (iii) durable medical equipment; or
447 (iv) a prosthetic device.
448 (44) "Model 1 seller" means a seller that has selected a certified service provider as the
449 seller's agent to perform all of the seller's sales and use tax functions for agreement sales and

450 use taxes other than the seller's obligation under Section 59-12-107.4 to remit a tax on the
451 seller's own purchases.
452 (45) "Model 2 seller" means a seller that:
453 (a) except as provided in Subsection (45)(b), has selected a certified automated system
454 to perform the seller's sales tax functions for agreement sales and use taxes; and
455 (b) notwithstanding Subsection (45)(a), retains responsibility for remitting all of the
456 sales tax:
457 (i) collected by the seller; and
458 (ii) to the appropriate local taxing jurisdiction.
459 (46) (a) Subject to Subsection (46)(b), "model 3 seller" means a seller that has:
460 (i) sales in at least five states that are members of the agreement;
461 (ii) total annual sales revenues of at least $500,000,000;
462 (iii) a proprietary system that calculates the amount of tax:
463 (A) for an agreement sales and use tax; and
464 (B) due to each local taxing jurisdiction; and
465 (iv) entered into a performance agreement with the governing board of the agreement.
466 (b) For purposes of Subsection (46)(a), "model 3 seller" includes an affiliated group of
467 sellers using the same proprietary system.
468 (47) "Modular home" means a modular unit as defined in Section 58-56-3 .
469 (48) "Motor vehicle" is as defined in Section 41-1a-102 .
470 (49) (a) "Other fuels" means products that burn independently to produce heat or
471 energy.
472 (b) "Other fuels" includes oxygen when it is used in the manufacturing of tangible
473 personal property.
474 (50) "Pawnbroker" is as defined in Section 13-32a-102 .
475 (51) "Pawn transaction" is as defined in Section 13-32a-102 .
476 (52) (a) "Permanently attached to real property" means that for tangible personal
477 property attached to real property:

478 (i) the attachment of the tangible personal property to the real property:
479 (A) is essential to the use of the tangible personal property; and
480 (B) suggests that the tangible personal property will remain attached to the real
481 property in the same place over the useful life of the tangible personal property; or
482 (ii) if the tangible personal property is detached from the real property, the detachment
483 would:
484 (A) cause substantial damage to the tangible personal property; or
485 (B) require substantial alteration or repair of the real property to which the tangible
486 personal property is attached.
487 (b) "Permanently attached to real property" includes:
488 (i) the attachment of an accessory to the tangible personal property if the accessory is:
489 (A) essential to the operation of the tangible personal property; and
490 (B) attached only to facilitate the operation of the tangible personal property; or
491 (ii) a temporary detachment of tangible personal property from real property for a
492 repair or renovation if the repair or renovation is performed where the tangible personal
493 property and real property are located.
494 (c) "Permanently attached to real property" does not include:
495 (i) the attachment of portable or movable tangible personal property to real property if
496 that portable or movable tangible personal property is attached to real property only for:
497 (A) convenience;
498 (B) stability; or
499 (C) for an obvious temporary purpose; or
500 (ii) the detachment of tangible personal property from real property other than the
501 detachment described in Subsection (52)(b)(ii).
502 (53) "Person" includes any individual, firm, partnership, joint venture, association,
503 corporation, estate, trust, business trust, receiver, syndicate, this state, any county, city,
504 municipality, district, or other local governmental entity of the state, or any group or
505 combination acting as a unit.

506 (54) "Place of primary use":
507 (a) for telephone service other than mobile telecommunications service, means the
508 street address representative of where the purchaser's use of the telephone service primarily
509 occurs, which shall be:
510 (i) the residential street address of the purchaser; or
511 (ii) the primary business street address of the purchaser; or
512 (b) for mobile telecommunications service, is as defined in the Mobile
513 Telecommunications Sourcing Act, 4 U.S.C. Sec. 124.
514 (55) "Postproduction" means an activity related to the finishing or duplication of a
515 medium described in Subsection 59-12-104 (60)(a).
516 (56) (a) "Prepared food" means:
517 (i) food:
518 (A) sold in a heated state; or
519 (B) heated by a seller;
520 (ii) two or more food ingredients mixed or combined by the seller for sale as a single
521 item; or
522 (iii) except as provided in Subsection (56)(c), food sold with an eating utensil provided
523 by the seller, including a:
524 (A) plate;
525 (B) knife;
526 (C) fork;
527 (D) spoon;
528 (E) glass;
529 (F) cup;
530 (G) napkin; or
531 (H) straw.
532 (b) "Prepared food" does not include:
533 (i) food that a seller only:

534 (A) cuts;
535 (B) repackages; or
536 (C) pasteurizes; or
537 (ii) (A) the following:
538 (I) raw egg;
539 (II) raw fish;
540 (III) raw meat;
541 (IV) raw poultry; or
542 (V) a food containing an item described in Subsections (56)(b)(ii)(A)(I) through (IV);
543 and
544 (B) if the Food and Drug Administration recommends in Chapter 3, Part 401.11 of the
545 Food and Drug Administration's Food Code that a consumer cook the items described in
546 Subsection (56)(b)(ii)(A) to prevent food borne illness.
547 (c) Notwithstanding Subsection (56)(a)(iii), an eating utensil provided by the seller
548 does not include the following used to transport the food:
549 (i) a container; or
550 (ii) packaging.
551 (57) "Prescription" means an order, formula, or recipe that is issued:
552 (a) (i) orally;
553 (ii) in writing;
554 (iii) electronically; or
555 (iv) by any other manner of transmission; and
556 (b) by a licensed practitioner authorized by the laws of a state.
557 (58) (a) Except as provided in Subsection (58)(b)(ii) or (iii), "prewritten computer
558 software" means computer software that is not designed and developed:
559 (i) by the author or other creator of the computer software; and
560 (ii) to the specifications of a specific purchaser.
561 (b) "Prewritten computer software" includes:

562 (i) a prewritten upgrade to computer software if the prewritten upgrade to the computer
563 software is not designed and developed:
564 (A) by the author or other creator of the computer software; and
565 (B) to the specifications of a specific purchaser;
566 (ii) notwithstanding Subsection (58)(a), computer software designed and developed by
567 the author or other creator of the computer software to the specifications of a specific purchaser
568 if the computer software is sold to a person other than the purchaser; or
569 (iii) notwithstanding Subsection (58)(a) and except as provided in Subsection (58)(c),
570 prewritten computer software or a prewritten portion of prewritten computer software:
571 (A) that is modified or enhanced to any degree; and
572 (B) if the modification or enhancement described in Subsection (58)(b)(iii)(A) is
573 designed and developed to the specifications of a specific purchaser.
574 (c) Notwithstanding Subsection (58)(b)(iii), "prewritten computer software" does not
575 include a modification or enhancement described in Subsection (58)(b)(iii) if the charges for
576 the modification or enhancement are:
577 (i) reasonable; and
578 (ii) separately stated on the invoice or other statement of price provided to the
579 purchaser.
580 (59) (a) "Prosthetic device" means a device that is worn on or in the body to:
581 (i) artificially replace a missing portion of the body;
582 (ii) prevent or correct a physical deformity or physical malfunction; or
583 (iii) support a weak or deformed portion of the body.
584 (b) "Prosthetic device" includes:
585 (i) parts used in the repairs or renovation of a prosthetic device; or
586 (ii) replacement parts for a prosthetic device.
587 (c) "Prosthetic device" does not include:
588 (i) corrective eyeglasses;
589 (ii) contact lenses;

590 (iii) hearing aids; or
591 (iv) dental prostheses.
592 (60) (a) "Protective equipment" means an item:
593 (i) for human wear; and
594 (ii) that is:
595 (A) designed as protection:
596 (I) to the wearer against injury or disease; or
597 (II) against damage or injury of other persons or property; and
598 (B) not suitable for general use.
599 (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
600 commission shall make rules:
601 (i) listing the items that constitute "protective equipment"; and
602 (ii) that are consistent with the list of items that constitute "protective equipment"
603 under the agreement.
604 (61) (a) "Purchase price" and "sales price" mean the total amount of consideration:
605 (i) valued in money; and
606 (ii) for which tangible personal property or services are:
607 (A) sold;
608 (B) leased; or
609 (C) rented.
610 (b) "Purchase price" and "sales price" include:
611 (i) the seller's cost of the tangible personal property or services sold;
612 (ii) expenses of the seller, including:
613 (A) the cost of materials used;
614 (B) a labor cost;
615 (C) a service cost;
616 (D) interest;
617 (E) a loss;

618 (F) the cost of transportation to the seller; or
619 (G) a tax imposed on the seller; or
620 (iii) a charge by the seller for any service necessary to complete the sale.
621 (c) "Purchase price" and "sales price" do not include:
622 (i) a discount:
623 (A) in a form including:
624 (I) cash;
625 (II) term; or
626 (III) coupon;
627 (B) that is allowed by a seller;
628 (C) taken by a purchaser on a sale; and
629 (D) that is not reimbursed by a third party; or
630 (ii) the following if separately stated on an invoice, bill of sale, or similar document
631 provided to the purchaser:
632 (A) the amount of a trade-in;
633 (B) the following from credit extended on the sale of tangible personal property or
634 services:
635 (I) interest charges;
636 (II) financing charges; or
637 (III) carrying charges;
638 (C) a tax or fee legally imposed directly on the consumer;
639 (D) a delivery charge; or
640 (E) an installation charge.
641 (62) "Purchaser" means a person to whom:
642 (a) a sale of tangible personal property is made; or
643 (b) a service is furnished.
644 (63) "Regularly rented" means:
645 (a) rented to a guest for value three or more times during a calendar year; or

646 (b) advertised or held out to the public as a place that is regularly rented to guests for
647 value.
648 (64) "Renewable energy" means:
649 (a) biomass energy;
650 (b) hydroelectric energy;
651 (c) geothermal energy;
652 (d) solar energy; or
653 (e) wind energy.
654 (65) (a) "Renewable energy production facility" means a facility that:
655 (i) uses renewable energy to produce electricity; and
656 (ii) has a production capacity of 20 kilowatts or greater.
657 (b) A facility is a renewable energy production facility regardless of whether the
658 facility is:
659 (i) connected to an electric grid; or
660 (ii) located on the premises of an electricity consumer.
661 (66) "Rental" is as defined in Subsection (36).
662 (67) "Repairs or renovations of tangible personal property" means:
663 (a) a repair or renovation of tangible personal property that is not permanently attached
664 to real property; or
665 (b) attaching tangible personal property to other tangible personal property if the other
666 tangible personal property to which the tangible personal property is attached is not
667 permanently attached to real property.
668 (68) "Residential use" means the use in or around a home, apartment building, sleeping
669 quarters, and similar facilities or accommodations.
670 (69) "Retail sale" or "sale at retail" means a sale, lease, or rental for a purpose other
671 than:
672 (a) resale;
673 (b) sublease; or

674 (c) subrent.
675 (70) (a) "Retailer" means any person engaged in a regularly organized business in
676 tangible personal property or any other taxable transaction under Subsection 59-12-103 (1), and
677 who is selling to the user or consumer and not for resale.
678 (b) "Retailer" includes commission merchants, auctioneers, and any person regularly
679 engaged in the business of selling to users or consumers within the state.
680 (71) (a) "Sale" means any transfer of title, exchange, or barter, conditional or
681 otherwise, in any manner, of tangible personal property or any other taxable transaction under
682 Subsection 59-12-103 (1), for consideration.
683 (b) "Sale" includes:
684 (i) installment and credit sales;
685 (ii) any closed transaction constituting a sale;
686 (iii) any sale of electrical energy, gas, services, or entertainment taxable under this
687 chapter;
688 (iv) any transaction if the possession of property is transferred but the seller retains the
689 title as security for the payment of the price; and
690 (v) any transaction under which right to possession, operation, or use of any article of
691 tangible personal property is granted under a lease or contract and the transfer of possession
692 would be taxable if an outright sale were made.
693 (72) "Sale at retail" is as defined in Subsection (69).
694 (73) "Sale-leaseback transaction" means a transaction by which title to tangible
695 personal property that is subject to a tax under this chapter is transferred:
696 (a) by a purchaser-lessee;
697 (b) to a lessor;
698 (c) for consideration; and
699 (d) if:
700 (i) the purchaser-lessee paid sales and use tax on the purchaser-lessee's initial purchase
701 of the tangible personal property;

702 (ii) the sale of the tangible personal property to the lessor is intended as a form of
703 financing:
704 (A) for the property; and
705 (B) to the purchaser-lessee; and
706 (iii) in accordance with generally accepted accounting principles, the purchaser-lessee
707 is required to:
708 (A) capitalize the property for financial reporting purposes; and
709 (B) account for the lease payments as payments made under a financing arrangement.
710 (74) "Sales price" is as defined in Subsection (61).
711 (75) (a) "Sales relating to schools" means the following sales by, amounts paid to, or
712 amounts charged by a school:
713 (i) sales that are directly related to the school's educational functions or activities
714 including:
715 (A) the sale of:
716 (I) textbooks;
717 (II) textbook fees;
718 (III) laboratory fees;
719 (IV) laboratory supplies; or
720 (V) safety equipment;
721 (B) the sale of a uniform, protective equipment, or sports or recreational equipment
722 that:
723 (I) a student is specifically required to wear as a condition of participation in a
724 school-related event or school-related activity; and
725 (II) is not readily adaptable to general or continued usage to the extent that it takes the
726 place of ordinary clothing;
727 (C) sales of the following if the net or gross revenues generated by the sales are
728 deposited into a school district fund or school fund dedicated to school meals:
729 (I) food and food ingredients; or

730 (II) prepared food; or
731 (D) transportation charges for official school activities; or
732 (ii) amounts paid to or amounts charged by a school for admission to a school-related
733 event or school-related activity.
734 (b) "Sales relating to schools" does not include:
735 (i) bookstore sales of items that are not educational materials or supplies;
736 (ii) except as provided in Subsection (75)(a)(i)(B):
737 (A) clothing;
738 (B) clothing accessories or equipment;
739 (C) protective equipment; or
740 (D) sports or recreational equipment; or
741 (iii) amounts paid to or amounts charged by a school for admission to a school-related
742 event or school-related activity if the amounts paid or charged are passed through to a person:
743 (A) other than a:
744 (I) school;
745 (II) nonprofit organization authorized by a school board or a governing body of a
746 private school to organize and direct a competitive secondary school activity; or
747 (III) nonprofit association authorized by a school board or a governing body of a
748 private school to organize and direct a competitive secondary school activity; and
749 (B) that is required to collect sales and use taxes under this chapter.
750 (c) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
751 commission may make rules defining the term "passed through."
752 (76) For purposes of this section and Section 59-12-104 , "school" means:
753 (a) an elementary school or a secondary school that:
754 (i) is a:
755 (A) public school; or
756 (B) private school; and
757 (ii) provides instruction for one or more grades kindergarten through 12; or

758 (b) a public school district.
759 (77) "Seller" means a person that makes a sale, lease, or rental of:
760 (a) tangible personal property; or
761 (b) a service.
762 (78) (a) "Semiconductor fabricating or processing materials" means tangible personal
763 property:
764 (i) used primarily in the process of:
765 (A) (I) manufacturing a semiconductor; or
766 (II) fabricating a semiconductor; or
767 (B) maintaining an environment suitable for a semiconductor; or
768 (ii) consumed primarily in the process of:
769 (A) (I) manufacturing a semiconductor; or
770 (II) fabricating a semiconductor; or
771 (B) maintaining an environment suitable for a semiconductor.
772 (b) "Semiconductor fabricating or processing materials" includes:
773 (i) parts used in the repairs or renovations of tangible personal property described in
774 Subsection (78)(a); or
775 (ii) a chemical, catalyst, or other material used to:
776 (A) produce or induce in a semiconductor a:
777 (I) chemical change; or
778 (II) physical change;
779 (B) remove impurities from a semiconductor; or
780 (C) improve the marketable condition of a semiconductor.
781 (79) "Senior citizen center" means a facility having the primary purpose of providing
782 services to the aged as defined in Section 62A-3-101 .
783 (80) "Simplified electronic return" means the electronic return:
784 (a) described in Section 318(C) of the agreement; and
785 (b) approved by the governing board of the agreement.

786 (81) "Solar energy" means the sun used as the sole source of energy for producing
787 electricity.
788 (82) (a) "Sports or recreational equipment" means an item:
789 (i) designed for human use; and
790 (ii) that is:
791 (A) worn in conjunction with:
792 (I) an athletic activity; or
793 (II) a recreational activity; and
794 (B) not suitable for general use.
795 (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
796 commission shall make rules:
797 (i) listing the items that constitute "sports or recreational equipment"; and
798 (ii) that are consistent with the list of items that constitute "sports or recreational
799 equipment" under the agreement.
800 (83) "State" means the state of Utah, its departments, and agencies.
801 (84) "Storage" means any keeping or retention of tangible personal property or any
802 other taxable transaction under Subsection 59-12-103 (1), in this state for any purpose except
803 sale in the regular course of business.
804 (85) (a) "Tangible personal property" means personal property that:
805 (i) may be:
806 (A) seen;
807 (B) weighed;
808 (C) measured;
809 (D) felt; or
810 (E) touched; or
811 (ii) is in any manner perceptible to the senses.
812 (b) "Tangible personal property" includes:
813 (i) electricity;

814 (ii) water;
815 (iii) gas;
816 (iv) steam; or
817 (v) prewritten computer software.
818 (86) (a) "Telephone service" means a two-way transmission:
819 (i) by:
820 (A) wire;
821 (B) radio;
822 (C) lightwave; or
823 (D) other electromagnetic means; and
824 (ii) of one or more of the following:
825 (A) a sign;
826 (B) a signal;
827 (C) writing;
828 (D) an image;
829 (E) sound;
830 (F) a message;
831 (G) data; or
832 (H) other information of any nature.
833 (b) "Telephone service" includes:
834 (i) mobile telecommunications service;
835 (ii) private communications service; or
836 (iii) automated digital telephone answering service.
837 (c) "Telephone service" does not include a service or a transaction that a state or a
838 political subdivision of a state is prohibited from taxing as of July 1, 2001, under the Internet
839 Tax Freedom Act, Pub. L. No. 105-277.
840 (87) Notwithstanding where a call is billed or paid, "telephone service address" means:
841 (a) if the location described in this Subsection (87)(a) is known, the location of the

842 telephone service equipment:
843 (i) to which a call is charged; and
844 (ii) from which the call originates or terminates;
845 (b) if the location described in Subsection (87)(a) is not known but the location
846 described in this Subsection (87)(b) is known, the location of the origination point of the signal
847 of the telephone service first identified by:
848 (i) the telecommunications system of the seller; or
849 (ii) if the system used to transport the signal is not that of the seller, information
850 received by the seller from its service provider; or
851 (c) if the locations described in Subsection (87)(a) or (b) are not known, the location of
852 a purchaser's primary place of use.
853 (88) (a) "Telephone service provider" means a person that:
854 (i) owns, controls, operates, or manages a telephone service; and
855 (ii) engages in an activity described in Subsection (88)(a)(i) for the shared use with or
856 resale to any person of the telephone service.
857 (b) A person described in Subsection (88)(a) is a telephone service provider whether or
858 not the Public Service Commission of Utah regulates:
859 (i) that person; or
860 (ii) the telephone service that the person owns, controls, operates, or manages.
861 (89) "Tobacco" means:
862 (a) a cigarette;
863 (b) a cigar;
864 (c) chewing tobacco;
865 (d) pipe tobacco; or
866 (e) any other item that contains tobacco.
867 (90) (a) "Use" means the exercise of any right or power over tangible personal property
868 under Subsection 59-12-103 (1), incident to the ownership or the leasing of that property, item,
869 or service.

870 (b) "Use" does not include the sale, display, demonstration, or trial of that property in
871 the regular course of business and held for resale.
872 (91) (a) Subject to Subsection (91)(b), "vehicle" means the following that are required
873 to be titled, registered, or titled and registered:
874 (i) an aircraft as defined in Section 72-10-102 ;
875 (ii) a vehicle as defined in Section 41-1a-102 ;
876 (iii) an off-highway vehicle as defined in Section 41-22-2 ; or
877 (iv) a vessel as defined in Section 41-1a-102 .
878 (b) For purposes of Subsection 59-12-104 (35) only, "vehicle" includes:
879 (i) a vehicle described in Subsection (91)(a); or
880 (ii) (A) a locomotive;
881 (B) a freight car;
882 (C) railroad work equipment; or
883 (D) other railroad rolling stock.
884 (92) "Vehicle dealer" means a person engaged in the business of buying, selling, or
885 exchanging a vehicle as defined in Subsection (91).
886 (93) (a) Except as provided in Subsection (93)(b), "waste energy facility" means a
887 facility that generates electricity:
888 (i) using as the primary source of energy waste materials that would be placed in a
889 landfill or refuse pit if it were not used to generate electricity, including:
890 (A) tires;
891 (B) waste coal; or
892 (C) oil shale; and
893 (ii) in amounts greater than actually required for the operation of the facility.
894 (b) "Waste energy facility" does not include a facility that incinerates:
895 (i) municipal solid waste;
896 (ii) hospital waste as defined in 40 C.F.R. 60.51c; or
897 (iii) medical/infectious waste as defined in 40 C.F.R. 60.51c.

898 (94) "Watercraft" means a vessel as defined in Section 73-18-2 .
899 (95) "Wind energy" means wind used as the sole source of energy to produce
900 electricity.
901 (96) "ZIP Code" means a Zoning Improvement Plan Code assigned to a geographic
902 location by the United States Postal Service.
903 Section 2. Section 59-12-104 is amended to read:
904 59-12-104. Exemptions.
905 The following sales and uses are exempt from the taxes imposed by this chapter:
906 (1) sales of aviation fuel, motor fuel, and special fuel subject to a Utah state excise tax
907 under Chapter 13, Motor and Special Fuel Tax Act;
908 (2) sales to the state, its institutions, and its political subdivisions; however, this
909 exemption does not apply to sales of:
910 (a) construction materials except:
911 (i) construction materials purchased by or on behalf of institutions of the public
912 education system as defined in Utah Constitution Article X, Section 2, provided the
913 construction materials are clearly identified and segregated and installed or converted to real
914 property which is owned by institutions of the public education system; and
915 (ii) construction materials purchased by the state, its institutions, or its political
916 subdivisions which are installed or converted to real property by employees of the state, its
917 institutions, or its political subdivisions; or
918 (b) tangible personal property in connection with the construction, operation,
919 maintenance, repair, or replacement of a project, as defined in Section 11-13-103 , or facilities
920 providing additional project capacity, as defined in Section 11-13-103 ;
921 (3) (a) sales of an item described in Subsection (3)(b) from a vending machine if:
922 (i) the proceeds of each sale do not exceed $1; and
923 (ii) the seller or operator of the vending machine reports an amount equal to 150% of
924 the cost of the item described in Subsection (3)(b) as goods consumed; and
925 (b) Subsection (3)(a) applies to:

926 (i) food and food ingredients; or
927 (ii) prepared food;
928 (4) sales of the following to a commercial airline carrier for in-flight consumption:
929 (a) food and food ingredients;
930 (b) prepared food; or
931 (c) services related to Subsection (4)(a) or (b);
932 (5) sales of parts and equipment for installation in aircraft operated by common carriers
933 in interstate or foreign commerce;
934 (6) sales of commercials, motion picture films, prerecorded audio program tapes or
935 records, and prerecorded video tapes by a producer, distributor, or studio to a motion picture
936 exhibitor, distributor, or commercial television or radio broadcaster;
937 (7) sales of cleaning or washing of tangible personal property by a coin-operated
938 laundry or dry cleaning machine;
939 (8) sales made to or by religious or charitable institutions in the conduct of their regular
940 religious or charitable functions and activities, if the requirements of Section 59-12-104.1 are
941 fulfilled;
942 (9) sales of vehicles of a type required to be registered under the motor vehicle laws of
943 this state which are made to bona fide nonresidents of this state and are not afterwards
944 registered or used in this state except as necessary to transport them to the borders of this state;
945 (10) (a) amounts paid for an item described in Subsection (10)(b) if:
946 (i) the item is intended for human use; and
947 (ii) (A) a prescription was issued for the item; or
948 (B) the item was purchased by a hospital or other medical facility; and
949 (b) (i) Subsection (10)(a) applies to:
950 (A) a drug;
951 (B) a syringe; or
952 (C) a stoma supply; and
953 (ii) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the

954 commission may by rule define the terms:
955 (A) "syringe"; or
956 (B) "stoma supply";
957 (11) sales or use of property, materials, or services used in the construction of or
958 incorporated in pollution control facilities allowed by Sections 19-2-123 through 19-2-127 ;
959 (12) (a) sales of an item described in Subsection (12)(c) served by:
960 (i) the following if the item described in Subsection (12)(c) is not available to the
961 general public:
962 (A) a church; or
963 (B) a charitable institution;
964 (ii) an institution of higher education if:
965 (A) the item described in Subsection (12)(c) is not available to the general public; or
966 (B) the item described in Subsection (12)(c) is prepaid as part of a student meal plan
967 offered by the institution of higher education; or
968 (b) sales of an item described in Subsection (12)(c) provided for a patient by:
969 (i) a medical facility; or
970 (ii) a nursing facility; and
971 (c) Subsections (12)(a) and (b) apply to:
972 (i) food and food ingredients;
973 (ii) prepared food; or
974 (iii) alcoholic beverages;
975 (13) isolated or occasional sales by persons not regularly engaged in business, except
976 the sale of vehicles or vessels required to be titled or registered under the laws of this state in
977 which case the tax is based upon:
978 (a) the bill of sale or other written evidence of value of the vehicle or vessel being sold;
979 or
980 (b) in the absence of a bill of sale or other written evidence of value, the then existing
981 fair market value of the vehicle or vessel being sold as determined by the commission;

982 (14) (a) [the following purchases or leases by a manufacturer on or after July 1, 1995 :]
983 except as provided in Subsection (14)(b), amounts paid or charged on or after July 1, 2006, for
984 a purchase or lease by a manufacturing facility other than a cogeneration facility, for the
985 following:
986 (i) machinery and equipment that:
987 (A) is used:
988 (I) for a manufacturing facility other than a manufacturing facility that is a scrap
989 recycler described in Subsection 59-12-102 (40)(b):
990 (Aa) in the manufacturing process; and
991 (Bb) to manufacture an item sold as tangible personal property; or
992 (II) for a manufacturing facility that is a scrap recycler described in Subsection
993 59-12-102 (40)(b), to process an item sold as tangible personal property; and
994 (B) [having] has an economic life of three or more years; and
995 [(C) used:]
996 [(I) to manufacture an item sold as tangible personal property; and]
997 [(II) in new or expanding operations in a manufacturing facility in the state; and]
998 (ii) [subject to the provisions of Subsection (14)(b),] normal operating [replacements]
999 repair or replacement parts that:
1000 (A) have an economic life of three or more years; and
1001 (B) are used:
1002 (I) for a manufacturing facility in the state other than a manufacturing facility that is a
1003 scrap recycler described in Subsection 59-12-102 (40)(b), in the manufacturing process [in]; or
1004 (II) for a manufacturing facility in the state[;] that is a scrap recycler described in
1005 Subsection 59-12-102 (40)(b), to process an item sold as tangible personal property;
1006 [(C) are used to replace or adapt an existing machine to extend the normal estimated
1007 useful life of the machine; and]
1008 [(D) do not include repairs and maintenance;]
1009 [(b) the rates for the exemption under Subsection (14)(a)(ii) are as follows:]

1010 [(i) beginning July 1, 1996, through June 30, 1997, 30% of the sale or lease described
1011 in Subsection (14)(a)(ii) is exempt;]
1012 [(ii) beginning July 1, 1997, through June 30, 1998, 60% of the sale or lease described
1013 in Subsection (14)(a)(ii) is exempt; and]
1014 [(iii) beginning July 1, 1998, 100% of the sale or lease described in Subsection
1015 (14)(a)(ii) is exempt;]
1016 (b) (i) amounts paid or charged on or after July 1, 2005, for a purchase or lease by a
1017 manufacturing facility that is a cogeneration facility placed in service on or after May 1, 2006,
1018 for the following:
1019 (A) machinery and equipment that:
1020 (I) is used:
1021 (Aa) in the manufacturing process; and
1022 (Bb) to manufacture an item sold as tangible personal property; and
1023 (II) has an economic life of three or more years; and
1024 (B) normal operating repair or replacement parts that:
1025 (I) are used in the manufacturing process in a manufacturing facility in the state; and
1026 (II) have an economic life of three or more years; and
1027 (ii) for amounts paid or charged on or after July 1, 2005, but on or before June 30,
1028 2006, for a purchase or lease described in Subsection (14)(b)(i), a cogeneration facility may
1029 claim the exemption allowed by Subsection (14)(b)(i) by filing for a refund:
1030 (A) for sales and use taxes paid under this chapter on the purchase or lease payment;
1031 and
1032 (B) in accordance with Section 59-12-110 ;
1033 (c) for purposes of this Subsection (14) and in accordance with Title 63, Chapter 46a,
1034 Utah Administrative Rulemaking Act, the commission:
1035 (i) shall by rule define the [terms "new or expanding operations" and] term
1036 "establishment"; and
1037 (ii) may by rule define what constitutes processing an item sold as tangible personal

1038 property; and
1039 (d) on or before October 1, 1991, and every five years after October 1, 1991, the
1040 commission shall:
1041 (i) review the exemptions described in this Subsection (14)[(a)] and make
1042 recommendations to the Revenue and Taxation Interim Committee concerning whether the
1043 exemptions should be continued, modified, or repealed; and
1044 (ii) include in its report:
1045 (A) the cost of the exemptions;
1046 (B) the purpose and effectiveness of the exemptions; and
1047 (C) the benefits of the exemptions to the state;
1048 (15) (a) sales of the following if the requirements of Subsection (15)(b) are met:
1049 (i) tooling;
1050 (ii) special tooling;
1051 (iii) support equipment;
1052 (iv) special test equipment; or
1053 (v) parts used in the repairs or renovations of tooling or equipment described in
1054 Subsections (15)(a)(i) through (iv); and
1055 (b) sales of tooling, equipment, or parts described in Subsection (15)(a) are exempt if:
1056 (i) the tooling, equipment, or parts are used or consumed exclusively in the
1057 performance of any aerospace or electronics industry contract with the United States
1058 government or any subcontract under that contract; and
1059 (ii) under the terms of the contract or subcontract described in Subsection (15)(b)(i),
1060 title to the tooling, equipment, or parts is vested in the United States government as evidenced
1061 by:
1062 (A) a government identification tag placed on the tooling, equipment, or parts; or
1063 (B) listing on a government-approved property record if placing a government
1064 identification tag on the tooling, equipment, or parts is impractical;
1065 (16) intrastate movements of:

1066 (a) freight by common carriers; or
1067 (b) passengers:
1068 (i) by taxicabs as described in SIC Code 4121 of the 1987 Standard Industrial
1069 Classification Manual of the federal Executive Office of the President, Office of Management
1070 and Budget;
1071 (ii) transported by an establishment described in SIC Code 4111 of the 1987 Standard
1072 Industrial Classification Manual of the federal Executive Office of the President, Office of
1073 Management and Budget, if the transportation originates and terminates within a county of the
1074 first, second, or third class; or
1075 (iii) transported by the following described in SIC Code 4789 of the 1987 Standard
1076 Industrial Classification Manual of the federal Executive Office of the President, Office of
1077 Management and Budget:
1078 (A) a horse-drawn cab; or
1079 (B) a horse-drawn carriage;
1080 (17) sales of newspapers or newspaper subscriptions;
1081 (18) (a) except as provided in Subsection (18)(b), tangible personal property traded in
1082 as full or part payment of the purchase price, except that for purposes of calculating sales or use
1083 tax upon vehicles not sold by a vehicle dealer, trade-ins are limited to other vehicles only, and
1084 the tax is based upon:
1085 (i) the bill of sale or other written evidence of value of the vehicle being sold and the
1086 vehicle being traded in; or
1087 (ii) in the absence of a bill of sale or other written evidence of value, the then existing
1088 fair market value of the vehicle being sold and the vehicle being traded in, as determined by the
1089 commission; and
1090 (b) notwithstanding Subsection (18)(a), Subsection (18)(a) does not apply to the
1091 following items of tangible personal property traded in as full or part payment of the purchase
1092 price:
1093 (i) money;

1094 (ii) electricity;
1095 (iii) water;
1096 (iv) gas; or
1097 (v) steam;
1098 (19) (a) (i) except as provided in Subsection (19)(b), sales of tangible personal property
1099 used or consumed primarily and directly in farming operations, regardless of whether the
1100 tangible personal property:
1101 (A) becomes part of real estate; or
1102 (B) is installed by a:
1103 (I) farmer;
1104 (II) contractor; or
1105 (III) subcontractor; or
1106 (ii) sales of parts used in the repairs or renovations of tangible personal property if the
1107 tangible personal property is exempt under Subsection (19)(a)(i); and
1108 (b) notwithstanding Subsection (19)(a), amounts paid or charged for the following
1109 tangible personal property are subject to the taxes imposed by this chapter:
1110 (i) (A) subject to Subsection (19)(b)(i)(B), the following tangible personal property if
1111 the tangible personal property is used in a manner that is incidental to farming:
1112 (I) machinery;
1113 (II) equipment;
1114 (III) materials; or
1115 (IV) supplies; and
1116 (B) tangible personal property that is considered to be used in a manner that is
1117 incidental to farming includes:
1118 (I) hand tools; or
1119 (II) maintenance and janitorial equipment and supplies;
1120 (ii) (A) subject to Subsection (19)(b)(ii)(B), tangible personal property if the tangible
1121 personal property is used in an activity other than farming; and

1122 (B) tangible personal property that is considered to be used in an activity other than
1123 farming includes:
1124 (I) office equipment and supplies; or
1125 (II) equipment and supplies used in:
1126 (Aa) the sale or distribution of farm products;
1127 (Bb) research; or
1128 (Cc) transportation; or
1129 (iii) a vehicle required to be registered by the laws of this state during the period ending
1130 two years after the date of the vehicle's purchase;
1131 (20) sales of hay;
1132 (21) exclusive sale of locally grown seasonal crops, seedling plants, or garden, farm, or
1133 other agricultural produce if sold by a producer during the harvest season;
1134 (22) purchases made using a coupon as defined in 7 U.S.C. Sec. 2012 that is issued
1135 under the Food Stamp Program, 7 U.S.C. Sec. 2011 et seq.;
1136 (23) sales of nonreturnable containers, nonreturnable labels, nonreturnable bags,
1137 nonreturnable shipping cases, and nonreturnable casings to a manufacturer, processor,
1138 wholesaler, or retailer for use in packaging tangible personal property to be sold by that
1139 manufacturer, processor, wholesaler, or retailer;
1140 (24) property stored in the state for resale;
1141 (25) property brought into the state by a nonresident for his or her own personal use or
1142 enjoyment while within the state, except property purchased for use in Utah by a nonresident
1143 living and working in Utah at the time of purchase;
1144 (26) property purchased for resale in this state, in the regular course of business, either
1145 in its original form or as an ingredient or component part of a manufactured or compounded
1146 product;
1147 (27) property upon which a sales or use tax was paid to some other state, or one of its
1148 subdivisions, except that the state shall be paid any difference between the tax paid and the tax
1149 imposed by this part and Part 2, Local Sales and Use Tax Act, and no adjustment is allowed if

1150 the tax paid was greater than the tax imposed by this part and Part 2, Local Sales and Use Tax
1151 Act;
1152 (28) any sale of a service described in Subsections 59-12-103 (1)(b), (c), and (d) to a
1153 person for use in compounding a service taxable under the subsections;
1154 (29) purchases made in accordance with the special supplemental nutrition program for
1155 women, infants, and children established in 42 U.S.C. Sec. 1786;
1156 (30) beginning on July 1, 1999, through June 30, 2014, sales or leases of rolls, rollers,
1157 refractory brick, electric motors, or other replacement parts used in the furnaces, mills, or ovens
1158 of a steel mill described in SIC Code 3312 of the 1987 Standard Industrial Classification
1159 Manual of the federal Executive Office of the President, Office of Management and Budget;
1160 (31) sales of boats of a type required to be registered under Title 73, Chapter 18, State
1161 Boating Act, boat trailers, and outboard motors which are made to bona fide nonresidents of
1162 this state and are not thereafter registered or used in this state except as necessary to transport
1163 them to the borders of this state;
1164 (32) sales of aircraft manufactured in Utah if sold for delivery and use outside Utah
1165 where a sales or use tax is not imposed, even if the title is passed in Utah;
1166 (33) amounts paid for the purchase of telephone service for purposes of providing
1167 telephone service;
1168 (34) fares charged to persons transported directly by a public transit district created
1169 under the authority of Title 17A, Chapter 2, Part 10, Utah Public Transit District Act;
1170 (35) sales or leases of vehicles to, or use of vehicles by an authorized carrier;
1171 (36) (a) 45% of the sales price of any new manufactured home; and
1172 (b) 100% of the sales price of any used manufactured home;
1173 (37) sales relating to schools and fundraising sales;
1174 (38) sales or rentals of durable medical equipment if:
1175 (a) a person presents a prescription for the durable medical equipment; and
1176 (b) the durable medical equipment is used for home use only;
1177 (39) (a) sales to a ski resort of electricity to operate a passenger ropeway as defined in

1178 Section 72-11-102 ; and
1179 (b) the commission shall by rule determine the method for calculating sales exempt
1180 under Subsection (39)(a) that are not separately metered and accounted for in utility billings;
1181 (40) sales to a ski resort of:
1182 (a) snowmaking equipment;
1183 (b) ski slope grooming equipment;
1184 (c) passenger ropeways as defined in Section 72-11-102 ; or
1185 (d) parts used in the repairs or renovations of equipment or passenger ropeways
1186 described in Subsections (40)(a) through (c);
1187 (41) sales of natural gas, electricity, heat, coal, fuel oil, or other fuels for industrial use;
1188 (42) sales or rentals of the right to use or operate for amusement, entertainment, or
1189 recreation a coin-operated amusement device as defined in Section 59-12-102 ;
1190 (43) sales of cleaning or washing of tangible personal property by a coin-operated car
1191 wash machine;
1192 (44) sales by the state or a political subdivision of the state, except state institutions of
1193 higher education as defined in Section 53B-3-102 , of:
1194 (a) photocopies; or
1195 (b) other copies of records held or maintained by the state or a political subdivision of
1196 the state;
1197 (45) (a) amounts paid:
1198 (i) to a person providing intrastate transportation to an employer's employee to or from
1199 the employee's primary place of employment;
1200 (ii) by an:
1201 (A) employee; or
1202 (B) employer; and
1203 (iii) pursuant to a written contract between:
1204 (A) the employer; and
1205 (B) (I) the employee; or

1206 (II) a person providing transportation to the employer's employee; and
1207 (b) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
1208 commission may for purposes of Subsection (45)(a) make rules defining what constitutes an
1209 employee's primary place of employment;
1210 (46) amounts paid for admission to an athletic event at an institution of higher
1211 education that is subject to the provisions of Title IX of the Education Amendments of 1972,
1212 20 U.S.C. Sec. 1681 et seq.;
1213 (47) sales of telephone service charged to a prepaid telephone calling card;
1214 (48) (a) sales of:
1215 (i) hearing aids;
1216 (ii) hearing aid accessories; or
1217 (iii) except as provided in Subsection (48)(b), parts used in the repairs or renovations
1218 of hearing aids or hearing aid accessories; and
1219 (b) for purposes of this Subsection (48), notwithstanding Subsection (48)(a)(iii),
1220 "parts" does not include batteries;
1221 (49) (a) sales made to or by:
1222 (i) an area agency on aging; or
1223 (ii) a senior citizen center owned by a county, city, or town; or
1224 (b) sales made by a senior citizen center that contracts with an area agency on aging;
1225 (50) (a) beginning on July 1, 2001, through June 30, 2007, and subject to Subsection
1226 (50)(b), a sale or lease of semiconductor fabricating or processing materials regardless of
1227 whether the semiconductor fabricating or processing materials:
1228 (i) actually come into contact with a semiconductor; or
1229 (ii) ultimately become incorporated into real property;
1230 (b) (i) beginning on July 1, 2001, through June 30, 2002, 10% of the sale or lease
1231 described in Subsection (50)(a) is exempt;
1232 (ii) beginning on July 1, 2002, through June 30, 2003, 50% of the sale or lease
1233 described in Subsection (50)(a) is exempt; and

1234 (iii) beginning on July 1, 2003, through June 30, 2007, the entire amount of the sale or
1235 lease described in Subsection (50)(a) is exempt; and
1236 (c) each year on or before the November interim meeting, the Revenue and Taxation
1237 Interim Committee shall:
1238 (i) review the exemption described in this Subsection (50) and make recommendations
1239 concerning whether the exemption should be continued, modified, or repealed; and
1240 (ii) include in the review under this Subsection (50)(c):
1241 (A) the cost of the exemption;
1242 (B) the purpose and effectiveness of the exemption; and
1243 (C) the benefits of the exemption to the state;
1244 (51) an amount paid by or charged to a purchaser for accommodations and services
1245 described in Subsection 59-12-103 (1)(i) to the extent the amount is exempt under Section
1246 59-12-104.2 ;
1247 (52) beginning on September 1, 2001, the lease or use of a vehicle issued a temporary
1248 sports event registration certificate in accordance with Section 41-3-306 for the event period
1249 specified on the temporary sports event registration certificate;
1250 (53) sales or uses of electricity, if the sales or uses are:
1251 (a) made under a tariff adopted by the Public Service Commission of Utah only for
1252 purchase of electricity produced from a new wind, geothermal, biomass, or solar power energy
1253 source, as designated in the tariff by the Public Service Commission of Utah; and
1254 (b) for an amount of electricity that is:
1255 (i) unrelated to the amount of electricity used by the person purchasing the electricity
1256 under the tariff described in Subsection (53)(a); and
1257 (ii) equivalent to the number of kilowatthours specified in the tariff described in
1258 Subsection (53)(a) that may be purchased under the tariff described in Subsection (53)(a);
1259 (54) sales or rentals of mobility enhancing equipment if a person presents a
1260 prescription for the mobility enhancing equipment;
1261 (55) sales of water in a:

1262 (a) pipe;
1263 (b) conduit;
1264 (c) ditch; or
1265 (d) reservoir;
1266 (56) sales of currency or coinage that constitute legal tender of the United States or of a
1267 foreign nation;
1268 (57) (a) sales of an item described in Subsection (57)(b) if the item:
1269 (i) does not constitute legal tender of any nation; and
1270 (ii) has a gold, silver, or platinum content of 80% or more; and
1271 (b) Subsection (57)(a) applies to a gold, silver, or platinum:
1272 (i) ingot;
1273 (ii) bar;
1274 (iii) medallion; or
1275 (iv) decorative coin;
1276 (58) amounts paid on a sale-leaseback transaction;
1277 (59) sales of a prosthetic device:
1278 (a) for use on or in a human;
1279 (b) for which a prescription is issued; and
1280 (c) to a person that presents a prescription for the prosthetic device;
1281 (60) (a) except as provided in Subsection (60)(b), purchases, leases, or rentals of
1282 machinery or equipment by an establishment described in Subsection (60)(c) if the machinery
1283 or equipment is primarily used in the production or postproduction of the following media for
1284 commercial distribution:
1285 (i) a motion picture;
1286 (ii) a television program;
1287 (iii) a movie made for television;
1288 (iv) a music video;
1289 (v) a commercial;

1290 (vi) a documentary; or
1291 (vii) a medium similar to Subsections (60)(a)(i) through (vi) as determined by the
1292 commission by administrative rule made in accordance with Subsection (60)(d); or
1293 (b) notwithstanding Subsection (60)(a), purchases, leases, or rentals of machinery or
1294 equipment by an establishment described in Subsection (60)(c) that is used for the production
1295 or postproduction of the following are subject to the taxes imposed by this chapter:
1296 (i) a live musical performance;
1297 (ii) a live news program; or
1298 (iii) a live sporting event;
1299 (c) the following establishments listed in the 1997 North American Industry
1300 Classification System of the federal Executive Office of the President, Office of Management
1301 and Budget, apply to Subsections (60)(a) and (b):
1302 (i) NAICS Code 512110; or
1303 (ii) NAICS Code 51219; and
1304 (d) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
1305 commission may by rule:
1306 (i) prescribe what constitutes a medium similar to Subsections (60)(a)(i) through (vi);
1307 or
1308 (ii) define:
1309 (A) "commercial distribution";
1310 (B) "live musical performance";
1311 (C) "live news program"; or
1312 (D) "live sporting event";
1313 (61) (a) leases of seven or more years or purchases made on or after July 1, 2004 but on
1314 or before June 30, 2009, of machinery or equipment that:
1315 (i) is leased or purchased for or by a facility that:
1316 (A) is a renewable energy production facility;
1317 (B) is located in the state; and

1318 (C) (I) becomes operational on or after July 1, 2004; or
1319 (II) has its generation capacity increased by one or more megawatts on or after July 1,
1320 2004 as a result of the use of the machinery or equipment;
1321 (ii) has an economic life of five or more years; and
1322 (iii) is used to make the facility or the increase in capacity of the facility described in
1323 Subsection (61)(a)(i) operational up to the point of interconnection with an existing
1324 transmission grid including:
1325 (A) a wind turbine;
1326 (B) generating equipment;
1327 (C) a control and monitoring system;
1328 (D) a power line;
1329 (E) substation equipment;
1330 (F) lighting;
1331 (G) fencing;
1332 (H) pipes; or
1333 (I) other equipment used for locating a power line or pole; and
1334 (b) this Subsection (61) does not apply to:
1335 (i) machinery or equipment used in construction of:
1336 (A) a new renewable energy production facility; or
1337 (B) the increase in the capacity of a renewable energy production facility;
1338 (ii) contracted services required for construction and routine maintenance activities;
1339 and
1340 (iii) unless the machinery or equipment is used or acquired for an increase in capacity
1341 of the facility described in Subsection (61)(a)(i)(C)(II), machinery or equipment used or
1342 acquired after:
1343 (A) the renewable energy production facility described in Subsection (61)(a)(i) is
1344 operational as described in Subsection (61)(a)(iii); or
1345 (B) the increased capacity described in Subsection (61)(a)(i) is operational as described

1346 in Subsection (61)(a)(iii);
1347 (62) (a) leases of seven or more years or purchases made on or after July 1, 2004 but on
1348 or before June 30, 2009, of machinery or equipment that:
1349 (i) is leased or purchased for or by a facility that:
1350 (A) is a waste energy production facility;
1351 (B) is located in the state; and
1352 (C) (I) becomes operational on or after July 1, 2004; or
1353 (II) has its generation capacity increased by one or more megawatts on or after July 1,
1354 2004 as a result of the use of the machinery or equipment;
1355 (ii) has an economic life of five or more years; and
1356 (iii) is used to make the facility or the increase in capacity of the facility described in
1357 Subsection (62)(a)(i) operational up to the point of interconnection with an existing
1358 transmission grid including:
1359 (A) generating equipment;
1360 (B) a control and monitoring system;
1361 (C) a power line;
1362 (D) substation equipment;
1363 (E) lighting;
1364 (F) fencing;
1365 (G) pipes; or
1366 (H) other equipment used for locating a power line or pole; and
1367 (b) this Subsection (62) does not apply to:
1368 (i) machinery or equipment used in construction of:
1369 (A) a new waste energy facility; or
1370 (B) the increase in the capacity of a waste energy facility;
1371 (ii) contracted services required for construction and routine maintenance activities;
1372 and
1373 (iii) unless the machinery or equipment is used or acquired for an increase in capacity

1374 described in Subsection (62)(a)(i)(C)(II), machinery or equipment used or acquired after:
1375 (A) the waste energy facility described in Subsection (62)(a)(i) is operational as
1376 described in Subsection (62)(a)(iii); or
1377 (B) the increased capacity described in Subsection (62)(a)(i) is operational as described
1378 in Subsection (62)(a)(iii);
1379 (63) (a) leases of five or more years or purchases made on or after July 1, 2004 but on
1380 or before June 30, 2009, of machinery or equipment that:
1381 (i) is leased or purchased for or by a facility that:
1382 (A) is located in the state;
1383 (B) produces fuel from biomass energy including:
1384 (I) methanol; or
1385 (II) ethanol; and
1386 (C) (I) becomes operational on or after July 1, 2004; or
1387 (II) has its capacity to produce fuel increase by 25% or more on or after July 1, 2004 as
1388 a result of the installation of the machinery or equipment;
1389 (ii) has an economic life of five or more years; and
1390 (iii) is installed on the facility described in Subsection (63)(a)(i);
1391 (b) this Subsection (63) does not apply to:
1392 (i) machinery or equipment used in construction of:
1393 (A) a new facility described in Subsection (63)(a)(i); or
1394 (B) the increase in capacity of the facility described in Subsection (63)(a)(i); or
1395 (ii) contracted services required for construction and routine maintenance activities;
1396 and
1397 (iii) unless the machinery or equipment is used or acquired for an increase in capacity
1398 described in Subsection (63)(a)(i)(C)(II), machinery or equipment used or acquired after:
1399 (A) the facility described in Subsection (63)(a)(i) is operational; or
1400 (B) the increased capacity described in Subsection (63)(a)(i) is operational;
1401 (64) amounts paid to a purchaser as a rebate from the manufacturer of a new vehicle

1402 for purchasing the new vehicle;
1403 (65) (a) subject to Subsection (65)(b), sales of tangible personal property to persons
1404 within this state that is subsequently shipped outside the state and incorporated pursuant to
1405 contract into and becomes a part of real property located outside of this state, except to the
1406 extent that the other state or political entity imposes a sales, use, gross receipts, or other similar
1407 transaction excise tax on it against which the other state or political entity allows a credit for
1408 taxes imposed by this chapter; and
1409 (b) the exemption provided for in Subsection (65)(a):
1410 (i) is allowed only if the exemption is applied:
1411 (A) in calculating the purchase price of the tangible personal property; and
1412 (B) to a written contract that is in effect on July 1, 2004; and
1413 (ii) (A) does not apply beginning on the day on which the contract described in
1414 Subsection (65)(b)(i):
1415 (I) is substantially modified; or
1416 (II) terminates; and
1417 (B) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
1418 the commission may by rule prescribe the circumstances under which a contract is substantially
1419 modified;
1420 (66) purchases:
1421 (a) of one or more of the following items in printed or electronic format:
1422 (i) a list containing information that includes one or more:
1423 (A) names; or
1424 (B) addresses; or
1425 (ii) a database containing information that includes one or more:
1426 (A) names; or
1427 (B) addresses; and
1428 (b) used to send direct mail; and
1429 (67) redemptions or repurchases of property by a person if that property was:

1430 (a) delivered to a pawnbroker as part of a pawn transaction; and
1431 (b) redeemed or repurchased within the time period established in a written agreement
1432 between the person and the pawnbroker for redeeming or repurchasing the property.
1433 Section 3. Effective date.
1434 (1) Except as provided in Subsection (2), this bill takes effect on July 1, 2006.
1435 (2) The amendments in this bill to the following take effect on May 1, 2006:
1436 (a) Subsection 59-12-102 (40); and
1437 (b) Subsection 59-12-104 (14)(b).