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S.B. 241 Enrolled

             1     

NATURAL RESOURCES DEVELOPMENT

             2     
2006 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Mike Dmitrich

             5     
House Sponsor: Brad King

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill addresses natural gas contracts and taxes on the development of coal-to-liquid,
             10      oil shale, and tar sands technology.
             11      Highlighted Provisions:
             12          This bill:
             13          .    defines terms;
             14          .    allows the Public Service Commission to approve long-term contracts for sales of
             15      natural gas derived from coal-to-liquid, oil shale, and tar sands technology;
             16          .    exempts sales of some property used in the research and development of
             17      coal-to-liquid, oil shale, and tar sands technology from sales and use tax;
             18          .    exempts from the oil and gas severance tax oil or gas that is produced, saved, sold,
             19      or transported and derived from:
             20              .    coal-to-liquids technology;
             21              .    oil shale; or
             22              .    tar sands; and
             23          .    makes technical changes.
             24      Monies Appropriated in this Bill:
             25          None
             26      Other Special Clauses:
             27          This bill provides retrospective operation.
             28      Utah Code Sections Affected:
             29      AMENDS:


             30          59-5-101, as last amended by Chapter 244, Laws of Utah 2004
             31          59-5-102, as last amended by Chapter 244, Laws of Utah 2004
             32          59-12-102, as last amended by Chapters 158 and 246, Laws of Utah 2005
             33          59-12-104, as last amended by Chapters 158, 203, 209, 240 and 246, Laws of Utah
             34      2005
             35          59-12-104.5, as last amended by Chapter 303, Laws of Utah 2001
             36      ENACTS:
             37          54-4-38, Utah Code Annotated 1953
             38          59-5-120, Utah Code Annotated 1953
             39     
             40      Be it enacted by the Legislature of the state of Utah:
             41          Section 1. Section 54-4-38 is enacted to read:
             42          54-4-38. Natural gas derived from new technologies -- Long-term contracts.
             43          (1) As used in this section:
             44          (a) "Coal-to-liquid" means the process of converting coal into a liquid synthetic fuel.
             45          (b) "Long-term contract" means a contract greater than five years in duration, but no
             46      greater than ten years in duration.
             47          (c) "Oil shale" means a group of fine black to dark brown shales containing bituminous
             48      material that yields petroleum upon distillation.
             49          (d) "Tar sands" means impregnated sands that yield mixtures of liquid hydrocarbon and
             50      require further processing other than mechanical blending before becoming finished petroleum
             51      products.
             52          (2) The commission shall approve a long-term contract for the sale of natural gas
             53      derived from coal-to-liquid, oil shale, or tar sands technology to a utility if the commission
             54      considers the contract prudent.
             55          Section 2. Section 59-5-101 is amended to read:
             56           59-5-101. Definitions.
             57          As used in this part:


             58          (1) "Board" means the Board of Oil, Gas and Mining created in Section 40-6-4 .
             59          (2) "Coal-to-liquid" means the process of converting coal into a liquid synthetic fuel.
             60          [(2)] (3) "Condensate" means those hydrocarbons, regardless of gravity, that occur
             61      naturally in the gaseous phase in the reservoir that are separated from the natural gas as liquids
             62      through the process of condensation either in the reservoir, in the wellbore, or at the surface in
             63      field separators.
             64          [(3)] (4) "Crude oil" means those hydrocarbons, regardless of gravity, that occur
             65      naturally in the liquid phase in the reservoir and are produced and recovered at the wellhead in
             66      liquid form.
             67          [(4)] (5) "Development well" means any oil and gas producing well other than a
             68      wildcat well.
             69          [(5)] (6) "Division" means the Division of Oil, Gas and Mining established under Title
             70      40, Chapter 6.
             71          [(6)] (7) "Enhanced recovery project" means:
             72          (a) the injection of liquids or hydrocarbon or nonhydrocarbon gases directly into a
             73      reservoir for the purpose of:
             74          (i) augmenting reservoir energy;
             75          (ii) modifying the properties of the fluids or gases in a reservoir; or
             76          (iii) changing the reservoir conditions to increase the recoverable oil, gas, or oil and
             77      gas through the joint use of two or more well bores; and
             78          (b) a project initially approved by the board as a new or expanded enhanced recovery
             79      project on or after January 1, 1996.
             80          [(7)] (8) (a) "Gas" means:
             81          (i) natural gas;
             82          (ii) natural gas liquids; or
             83          (iii) any mixture of natural gas and natural gas liquids.
             84          (b) "Gas" does not include solid hydrocarbons.
             85          [(8)] (9) "Incremental production" means that part of production, certified by the


             86      Division of Oil, Gas and Mining, which is achieved from an enhanced recovery project that
             87      would not have economically occurred under the reservoir conditions existing before the
             88      project and that has been approved by the division as incremental production.
             89          [(9)] (10) "Natural gas" means those hydrocarbons, other than oil and other than
             90      natural gas liquids separated from natural gas, that occur naturally in the gaseous phase in the
             91      reservoir and are produced and recovered at the wellhead in gaseous form.
             92          [(10)] (11) "Natural gas liquids" means those hydrocarbons initially in reservoir natural
             93      gas, regardless of gravity, that are separated in gas processing plants from the natural gas as
             94      liquids at the surface through the process of condensation, absorption, adsorption, or other
             95      methods.
             96          [(11)] (12) (a) "Oil" means:
             97          (i) crude oil;
             98          (ii) condensate; or
             99          (iii) any mixture of crude oil and condensate.
             100          (b) "Oil" does not include solid hydrocarbons.
             101          [(12)] (13) "Oil or gas field" means a geographical area overlying oil or gas structures.
             102      The boundaries of oil or gas fields shall conform with the boundaries as fixed by the Board and
             103      Division of Oil, Gas and Mining under Title 40, Chapter 6, Board and Division of Oil, Gas and
             104      Mining.
             105          (14) "Oil shale" means a group of fine black to dark brown shales containing
             106      bituminous material that yields petroleum upon distillation.
             107          [(13)] (15) "Operator" means any person engaged in the business of operating an oil or
             108      gas well, regardless of whether the person is:
             109          (a) a working interest owner;
             110          (b) an independent contractor; or
             111          (c) acting in a capacity similar to Subsection [(13)] (15)(a) or (b) as determined by the
             112      commission by rule made in accordance with Title 63, Chapter 46a, Utah Administrative
             113      Rulemaking Act.


             114          [(14)] (16) "Owner" means any person having a working interest, royalty interest,
             115      payment out of production, or any other interest in the oil or gas produced or extracted from an
             116      oil or gas well in the state, or in the proceeds of this production.
             117          [(15)] (17) (a) Subject to Subsections [(15)] (17)(b) and (c), "processing costs" means
             118      the reasonable actual costs of processing oil or gas to remove:
             119          (i) natural gas liquids; or
             120          (ii) contaminants.
             121          (b) If processing costs are determined on the basis of an arm's-length contract,
             122      processing costs are the actual costs.
             123          (c) (i) If processing costs are determined on a basis other than an arm's-length contract,
             124      processing costs are those reasonable costs associated with:
             125          (A) actual operating and maintenance expenses, including oil or gas used or consumed
             126      in processing;
             127          (B) overhead directly attributable and allocable to the operation and maintenance; and
             128          (C) (I) depreciation and a return on undepreciated capital investment; or
             129          (II) a cost equal to a return on the investment in the processing facilities as determined
             130      by the commission.
             131          (ii) Subsection [(15)] (17)(c)(i) includes situations where the producer performs the
             132      processing for the producer's product.
             133          [(16)] (18) "Producer" means any working interest owner in any lands in any oil or gas
             134      field from which gas or oil is produced.
             135          [(17)] (19) "Recompletion" means any downhole operation that is:
             136          (a) conducted to reestablish the producibility or serviceability of a well in any geologic
             137      interval; and
             138          (b) approved by the division as a recompletion.
             139          (20) "Research and development" means the process of inquiry or experimentation
             140      aimed at the discovery of facts, devices, technologies, or applications and the process of
             141      preparing those devices, technologies, or applications for marketing.


             142          [(18)] (21) "Royalty interest owner" means the owner of an interest in oil or gas, or in
             143      the proceeds of production from the oil or gas who does not have the obligation to share in the
             144      expenses of developing and operating the property.
             145          [(19)] (22) "Solid hydrocarbons" means:
             146          (a) coal;
             147          (b) gilsonite;
             148          (c) ozocerite;
             149          (d) elaterite;
             150          (e) oil shale;
             151          (f) tar sands; and
             152          (g) all other hydrocarbon substances that occur naturally in solid form.
             153          [(20)] (23) "Stripper well" means:
             154          (a) an oil well whose average daily production for the days the well has produced has
             155      been 20 barrels or less of crude oil a day during any consecutive 12-month period; or
             156          (b) a gas well whose average daily production for the days the well has produced has
             157      been 60 MCF or less of natural gas a day during any consecutive 90-day period.
             158          (24) "Tar sands" means impregnated sands that yield mixtures of liquid hydrocarbon
             159      and require further processing other than mechanical blending before becoming finished
             160      petroleum products.
             161          [(21)] (25) (a) Subject to Subsections [(21)] (25)(b) and (c), "transportation costs"
             162      means the reasonable actual costs of transporting oil or gas products from the well to the point
             163      of sale.
             164          (b) If transportation costs are determined on the basis of an arm's-length contract,
             165      transportation costs are the actual costs.
             166          (c) (i) If transportation costs are determined on a basis other than an arm's-length
             167      contract, transportation costs are those reasonable costs associated with:
             168          (A) actual operating and maintenance expenses, including fuel used or consumed in
             169      transporting the oil or gas;


             170          (B) overhead costs directly attributable and allocable to the operation and maintenance;
             171      and
             172          (C) depreciation and a return on undepreciated capital investment.
             173          (ii) Subsection [(21)] (25)(c)(i) includes situations where the producer performs the
             174      transportation for the producer's product.
             175          (d) Regardless of whether transportation costs are determined on the basis of an
             176      arm's-length contract or a basis other than an arm's-length contract, transportation costs
             177      include:
             178          (i) carbon dioxide removal;
             179          (ii) compression;
             180          (iii) dehydration;
             181          (iv) gathering;
             182          (v) separating;
             183          (vi) treating; or
             184          (vii) a process similar to Subsections [(21)] (25)(d)(i) through (vi), as determined by
             185      the commission by rule made in accordance with Title 63, Chapter 46a, Utah Administrative
             186      Rulemaking Act.
             187          [(22)] (26) "Tribe" means the Ute Indian Tribe of the Uintah and Ouray Reservation.
             188          [(23)] (27) "Well or wells" means any extractive means from which oil or gas is
             189      produced or extracted, located within an oil or gas field, and operated by one person.
             190          [(24)] (28) "Wildcat well" means an oil and gas producing well which is drilled and
             191      completed in a pool, as defined under Section 40-6-2 , in which a well has not been previously
             192      completed as a well capable of producing in commercial quantities.
             193          [(25)] (29) "Working interest owner" means the owner of an interest in oil or gas
             194      burdened with a share of the expenses of developing and operating the property.
             195          [(26)] (30) (a) "Workover" means any downhole operation that is:
             196          (i) conducted to sustain, restore, or increase the producibility or serviceability of a well
             197      in the geologic intervals in which the well is currently completed; and


             198          (ii) approved by the division as a workover.
             199          (b) "Workover" does not include operations that are conducted primarily as routine
             200      maintenance or to replace worn or damaged equipment.
             201          Section 3. Section 59-5-102 is amended to read:
             202           59-5-102. Severance tax -- Rate -- Computation -- Annual exemption -- Tax credit
             203      -- Tax rate reduction -- Study by Tax Review Commission -- Study by commission.
             204          (1) Each person owning an interest, working interest, royalty interest, payments out of
             205      production, or any other interest, in oil or gas produced from a well in the state, or in the
             206      proceeds of the production, shall pay to the state a severance tax on the basis of the value
             207      determined under Section 59-5-103.1 of the oil or gas:
             208          (a) produced; and
             209          (b) (i) saved;
             210          (ii) sold; or
             211          (iii) transported from the field where the substance was produced.
             212          (2) (a) Subject to Subsection (2)(d), the severance tax rate for oil is as follows:
             213          (i) 3% of the value of the oil up to and including the first $13 per barrel for oil; and
             214          (ii) 5% of the value of the oil from $13.01 and above per barrel for oil.
             215          (b) Subject to Subsection (2)(d), the severance tax rate for natural gas is as follows:
             216          (i) 3% of the value of the natural gas up to and including the first $1.50 per MCF for
             217      gas; and
             218          (ii) 5% of the value of the natural gas from $1.51 and above per MCF for gas.
             219          (c) Subject to Subsection (2)(d), the severance tax rate for natural gas liquids is 4% of
             220      the value of the natural gas liquids.
             221          (d) (i) On or before December 15, 2004, the Office of the Legislative Fiscal Analyst
             222      and the Governor's Office of Planning and Budget shall prepare a revenue forecast estimating
             223      the amount of revenues that:
             224          (A) would be generated by the taxes imposed by this part for the calendar year
             225      beginning on January 1, 2004 had 2004 General Session S.B. 191 not taken effect; and


             226          (B) will be generated by the taxes imposed by this part for the calendar year beginning
             227      on January 1, 2004.
             228          (ii) Effective on January 1, 2005, the tax rates described in Subsections (2)(a) through
             229      (c) shall be:
             230          (A) increased as provided in Subsection (2)(d)(iii) if the amount of revenues estimated
             231      under Subsection (2)(d)(i)(B) is less than the amount of revenues estimated under Subsection
             232      (2)(d)(i)(A); or
             233          (B) decreased as provided in Subsection (2)(d)(iii) if the amount of revenues estimated
             234      under Subsection (2)(d)(i)(B) is greater than the amount of revenues estimated under
             235      Subsection (2)(d)(i)(A).
             236          (iii) For purposes of Subsection (2)(d)(ii):
             237          (A) subject to Subsection (2)(d)(iv)(B):
             238          (I) if an increase is required under Subsection (2)(d)(ii)(A), the total increase in the tax
             239      rates shall be by the amount necessary to generate for the calendar year beginning on January 1,
             240      2005 revenues equal to the amount by which the revenues estimated under Subsection
             241      (2)(d)(i)(A) exceed the revenues estimated under Subsection (2)(d)(i)(B); or
             242          (II) if a decrease is required under Subsection (2)(d)(ii)(B), the total decrease in the tax
             243      rates shall be by the amount necessary to reduce for the calendar year beginning on January 1,
             244      2005 revenues equal to the amount by which the revenues estimated under Subsection
             245      (2)(d)(i)(B) exceed the revenues estimated under Subsection (2)(d)(i)(A); and
             246          (B) an increase or decrease in each tax rate under Subsection (2)(d)(ii) shall be in
             247      proportion to the amount of revenues generated by each tax rate under this part for the calendar
             248      year beginning on January 1, 2003.
             249          (iv) (A) The commission shall calculate any tax rate increase or decrease required by
             250      Subsection (2)(d)(ii) using the best information available to the commission.
             251          (B) If the tax rates described in Subsections (2)(a) through (c) are increased or
             252      decreased as provided in this Subsection (2)(d), the commission shall mail a notice to each
             253      person required to file a return under this part stating the tax rate in effect on January 1, 2005


             254      as a result of the increase or decrease.
             255          (v) The Office of the Legislative Fiscal Analyst and the Governor's Office of Planning
             256      and Budget shall report the estimates prepared in the revenue forecast required by Subsection
             257      (2)(d)(i) to the:
             258          (A) commission on or before December 15, 2004; and
             259          (B) Executive Appropriations Committee on or before January 31, 2005.
             260          (3) If oil or gas is shipped outside the state:
             261          (a) the shipment constitutes a sale; and
             262          (b) the oil or gas is subject to the tax imposed by this section.
             263          (4) (a) Except as provided in Subsection (4)(b), if the oil or gas is stockpiled, the tax is
             264      not imposed until the oil or gas is:
             265          (i) sold;
             266          (ii) transported; or
             267          (iii) delivered.
             268          (b) Notwithstanding Subsection (4)(a), if oil or gas is stockpiled for more than two
             269      years, the oil or gas is subject to the tax imposed by this section.
             270          (5) A tax is not imposed under this section upon:
             271          (a) the first $50,000 annually in gross value of each well or wells as defined in this
             272      part, to be prorated among the owners in proportion to their respective interests in the
             273      production or in the proceeds of the production;
             274          (b) stripper wells, unless the exemption prevents the severance tax from being treated
             275      as a deduction for federal tax purposes;
             276          (c) the first 12 months of production for wildcat wells started after January 1, 1990; or
             277          (d) the first six months of production for development wells started after January 1,
             278      1990.
             279          (6) (a) Subject to Subsections (6)(b) and (c), a working interest owner who pays for all
             280      or part of the expenses of a recompletion or workover may claim a nonrefundable tax credit
             281      equal to 20% of the amount paid.


             282          (b) The tax credit under Subsection (6)(a) for each recompletion or workover may not
             283      exceed $30,000 per well during each calendar year.
             284          (c) If any amount of tax credit a taxpayer is allowed under this Subsection (6) exceeds
             285      the taxpayer's tax liability under this part for the calendar year for which the taxpayer claims
             286      the tax credit, the amount of tax credit exceeding the taxpayer's tax liability for the calendar
             287      year may be carried forward for the next three calendar years.
             288          (7) A 50% reduction in the tax rate is imposed upon the incremental production
             289      achieved from an enhanced recovery project.
             290          (8) The taxes imposed by this section are:
             291          (a) in addition to all other taxes provided by law; and
             292          (b) delinquent, unless otherwise deferred, on June 1 next succeeding the calendar year
             293      when the oil or gas is:
             294          (i) produced; and
             295          (ii) (A) saved;
             296          (B) sold; or
             297          (C) transported from the field.
             298          (9) With respect to the tax imposed by this section on each owner of oil or gas or in the
             299      proceeds of the production of those substances produced in the state, each owner is liable for
             300      the tax in proportion to the owner's interest in the production or in the proceeds of the
             301      production.
             302          (10) The tax imposed by this section shall be reported and paid by each producer that
             303      takes oil or gas in kind pursuant to agreement on behalf of the producer and on behalf of each
             304      owner entitled to participate in the oil or gas sold by the producer or transported by the
             305      producer from the field where the oil or gas is produced.
             306          (11) Each producer shall deduct the tax imposed by this section from the amounts due
             307      to other owners for the production or the proceeds of the production.
             308          (12) (a) The Tax Review Commission shall review the tax provided for in this part on
             309      or before the October 2008 interim meeting.


             310          (b) The Tax Review Commission shall address in its review the following statutory
             311      provisions:
             312          (i) the severance tax rate structure provided for in this section;
             313          (ii) the exemptions provided for in Subsection (5);
             314          (iii) the tax credit provided for in Subsection (6), including:
             315          (A) the cost of the tax credit;
             316          (B) the purpose and effectiveness of the tax credit; and
             317          (C) whether the tax credit benefits the state;
             318          (iv) the tax rate reduction provided for in Subsection (7);
             319          (v) other statutory provisions or issues as determined by the Tax Review Commission;
             320      and
             321          (vi) whether the statutory provisions the Tax Review Commission reviews under this
             322      Subsection (12) should be:
             323          (A) continued;
             324          (B) modified; or
             325          (C) repealed.
             326          (c) The Tax Review Commission shall report its findings and recommendations
             327      regarding the tax provided for in this part to the Revenue and Taxation Interim Committee on
             328      or before the November 2008 interim meeting.
             329          (d) (i) The Tax Review Commission shall review the applicability of the tax provided
             330      for in this chapter to coal-to-liquids, oil shale, and tar sands technology on or before the
             331      October 2011 interim meeting.
             332          (ii) The Tax Review Commission shall address in its review the cost and benefit of not
             333      applying the tax provided for in this chapter to coal-to-liquids, oil shale, and tar sands
             334      technology.
             335          (iii) The Tax Review Commission shall report its findings and recommendations under
             336      Subsections (12)(d)(i) and (ii) to the Revenue and Taxation Interim Committee on or before the
             337      November 2011interim meeting.


             338          (13) (a) The commission shall during the 2004 interim:
             339          (i) subject to Subsection (13)(b), conduct a study of the effective tax burden for the
             340      taxes imposed by this part per barrel of oil or MCF of gas for the time period beginning on
             341      January 1, 1984 and ending on September 30, 2004;
             342          (ii) study whether the effective tax burden studied under Subsection (13)(a)(i) has
             343      increased or decreased;
             344          (iii) receive input from the oil and gas industry in conducting the study required by
             345      Subsections (13)(a)(i) and (ii);
             346          (iv) make findings and recommendations regarding whether any provision of this part
             347      should be amended, including:
             348          (A) whether any tax rate under this part should be amended;
             349          (B) whether a minimum value of oil or gas should be established by statute;
             350          (C) whether a limit should be established by statute on the amount of processing costs
             351      that may be deducted under Section 59-5-103.1 ; and
             352          (D) whether a limit other than the limit established in Section 59-5-103.1 should be
             353      established by statute on the amount of transportation costs that may be deducted under Section
             354      59-5-103.1 ; and
             355          (v) report the findings and recommendations required by Subsection (13)(a)(iv) on or
             356      before the October 2004 interim meeting to:
             357          (A) the Revenue and Taxation Interim Committee; and
             358          (B) the Utah Tax Review Commission.
             359          (b) In conducting the study required by Subsections (13)(a)(i) and (ii), the commission
             360      shall take into account factors including:
             361          (i) the production volume of oil and gas;
             362          (ii) the sales price of oil and gas; and
             363          (iii) the revenues raised by the taxes imposed by this part for the time period described
             364      in Subsection (13)(a)(i).
             365          Section 4. Section 59-5-120 is enacted to read:


             366          59-5-120. Exemption.
             367          Beginning on January 1, 2006 and ending on June 30, 2016, no severance tax required
             368      by this chapter is imposed on oil and gas produced, saved, sold, or transported if the oil or gas
             369      produced, saved, sold, or transported is derived from:
             370          (1) coal-to-liquids technology;
             371          (2) oil shale; or
             372          (3) tar sands.
             373          Section 5. Section 59-12-102 is amended to read:
             374           59-12-102. Definitions.
             375          As used in this chapter:
             376          (1) (a) "Admission or user fees" includes season passes.
             377          (b) "Admission or user fees" does not include annual membership dues to private
             378      organizations.
             379          (2) "Agreement" means the Streamlined Sales and Use Tax Agreement described in
             380      Section 59-12-102.1 .
             381          (3) "Agreement combined tax rate" means the sum of the tax rates:
             382          (a) listed under Subsection (4); and
             383          (b) that are imposed within a local taxing jurisdiction.
             384          (4) "Agreement sales and use tax" means a tax imposed under:
             385          (a) Subsection 59-12-103 (2)(a)(i);
             386          (b) Section 59-12-204 ;
             387          (c) Section 59-12-401 ;
             388          (d) Section 59-12-402 ;
             389          (e) Section 59-12-501 ;
             390          (f) Section 59-12-502 ;
             391          (g) Section 59-12-703 ;
             392          (h) Section 59-12-802 ;
             393          (i) Section 59-12-804 ;


             394          (j) Section 59-12-1001 ;
             395          (k) Section 59-12-1102 ;
             396          (l) Section 59-12-1302 ;
             397          (m) Section 59-12-1402 ; or
             398          (n) Section 59-12-1503 .
             399          (5) "Aircraft" is as defined in Section 72-10-102 .
             400          (6) "Alcoholic beverage" means a beverage that:
             401          (a) is suitable for human consumption; and
             402          (b) contains .5% or more alcohol by volume.
             403          (7) "Area agency on aging" is as defined in Section 62A-3-101 .
             404          (8) "Authorized carrier" means:
             405          (a) in the case of vehicles operated over public highways, the holder of credentials
             406      indicating that the vehicle is or will be operated pursuant to both the International Registration
             407      Plan and the International Fuel Tax Agreement;
             408          (b) in the case of aircraft, the holder of a Federal Aviation Administration operating
             409      certificate or air carrier's operating certificate; or
             410          (c) in the case of locomotives, freight cars, railroad work equipment, or other rolling
             411      stock, the holder of a certificate issued by the United States Surface Transportation Board.
             412          (9) (a) Except as provided in Subsection (9)(b), "biomass energy" means any of the
             413      following that is used as the primary source of energy to produce fuel or electricity:
             414          (i) material from a plant or tree; or
             415          (ii) other organic matter that is available on a renewable basis, including:
             416          (A) slash and brush from forests and woodlands;
             417          (B) animal waste;
             418          (C) methane produced:
             419          (I) at landfills; or
             420          (II) as a byproduct of the treatment of wastewater residuals;
             421          (D) aquatic plants; and


             422          (E) agricultural products.
             423          (b) "Biomass energy" does not include:
             424          (i) black liquor;
             425          (ii) treated woods; or
             426          (iii) biomass from municipal solid waste other than methane produced:
             427          (A) at landfills; or
             428          (B) as a byproduct of the treatment of wastewater residuals.
             429          (10) "Certified automated system" means software certified by the governing board of
             430      the agreement in accordance with Section 59-12-102.1 that:
             431          (a) calculates the agreement sales and use tax imposed within a local taxing
             432      jurisdiction:
             433          (i) on a transaction; and
             434          (ii) in the states that are members of the agreement;
             435          (b) determines the amount of agreement sales and use tax to remit to a state that is a
             436      member of the agreement; and
             437          (c) maintains a record of the transaction described in Subsection (10)(a)(i).
             438          (11) "Certified service provider" means an agent certified:
             439          (a) by the governing board of the agreement in accordance with Section 59-12-102.1 ;
             440      and
             441          (b) to perform all of a seller's sales and use tax functions for an agreement sales and
             442      use tax other than the seller's obligation under Section 59-12-107.4 to remit a tax on the seller's
             443      own purchases.
             444          (12) (a) Subject to Subsection (12)(b), "clothing" means all human wearing apparel
             445      suitable for general use.
             446          (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             447      commission shall make rules:
             448          (i) listing the items that constitute "clothing"; and
             449          (ii) that are consistent with the list of items that constitute "clothing" under the


             450      agreement.
             451          (13) "Coal-to-liquid" means the process of converting coal into a liquid synthetic fuel.
             452          [(13)] (14) (a) For purposes of Subsection 59-12-104 (42), "coin-operated amusement
             453      device" means:
             454          (i) a coin-operated amusement, skill, or ride device;
             455          (ii) that is not controlled through seller-assisted, over-the-counter, sales of tokens; and
             456          (iii) includes a music machine, pinball machine, billiard machine, video game machine,
             457      arcade machine, and a mechanical or electronic skill game or ride.
             458          (b) For purposes of Subsection 59-12-104 (42), "coin-operated amusement device" does
             459      not mean a coin-operated amusement device possessing a coinage mechanism that:
             460          (i) accepts and registers multiple denominations of coins; and
             461          (ii) allows the seller to collect the sales and use tax at the time an amusement device is
             462      activated and operated by a person inserting coins into the device.
             463          [(14)] (15) "Commercial use" means the use of gas, electricity, heat, coal, fuel oil, or
             464      other fuels that does not constitute industrial use under Subsection [(34)] (35) or residential use
             465      under Subsection [(68)] (71).
             466          [(15)] (16) (a) "Common carrier" means a person engaged in or transacting the
             467      business of transporting passengers, freight, merchandise, or other property for hire within this
             468      state.
             469          (b) (i) "Common carrier" does not include a person who, at the time the person is
             470      traveling to or from that person's place of employment, transports a passenger to or from the
             471      passenger's place of employment.
             472          (ii) For purposes of Subsection [(15)] (16)(b)(i), in accordance with Title 63, Chapter
             473      46a, Utah Administrative Rulemaking Act, the commission may make rules defining what
             474      constitutes a person's place of employment.
             475          [(16)] (17) "Component part" includes:
             476          (a) poultry, dairy, and other livestock feed, and their components;
             477          (b) baling ties and twine used in the baling of hay and straw;


             478          (c) fuel used for providing temperature control of orchards and commercial
             479      greenhouses doing a majority of their business in wholesale sales, and for providing power for
             480      off-highway type farm machinery; and
             481          (d) feed, seeds, and seedlings.
             482          [(17)] (18) "Computer" means an electronic device that accepts information:
             483          (a) (i) in digital form; or
             484          (ii) in a form similar to digital form; and
             485          (b) manipulates that information for a result based on a sequence of instructions.
             486          [(18)] (19) "Computer software" means a set of coded instructions designed to cause:
             487          (a) a computer to perform a task; or
             488          (b) automatic data processing equipment to perform a task.
             489          [(19)] (20) "Construction materials" means any tangible personal property that will be
             490      converted into real property.
             491          [(20)] (21) "Delivered electronically" means delivered to a purchaser by means other
             492      than tangible storage media.
             493          [(21)] (22) (a) "Delivery charge" means a charge:
             494          (i) by a seller of:
             495          (A) tangible personal property; or
             496          (B) services; and
             497          (ii) for preparation and delivery of the tangible personal property or services described
             498      in Subsection [(21)] (22)(a)(i) to a location designated by the purchaser.
             499          (b) "Delivery charge" includes a charge for the following:
             500          (i) transportation;
             501          (ii) shipping;
             502          (iii) postage;
             503          (iv) handling;
             504          (v) crating; or
             505          (vi) packing.


             506          [(22)] (23) "Dietary supplement" means a product, other than tobacco, that:
             507          (a) is intended to supplement the diet;
             508          (b) contains one or more of the following dietary ingredients:
             509          (i) a vitamin;
             510          (ii) a mineral;
             511          (iii) an herb or other botanical;
             512          (iv) an amino acid;
             513          (v) a dietary substance for use by humans to supplement the diet by increasing the total
             514      dietary intake; or
             515          (vi) a concentrate, metabolite, constituent, extract, or combination of any ingredient
             516      described in Subsections [(22)] (23)(b)(i) through (v);
             517          (c) (i) except as provided in Subsection [(22)] (23)(c)(ii), is intended for ingestion in:
             518          (A) tablet form;
             519          (B) capsule form;
             520          (C) powder form;
             521          (D) softgel form;
             522          (E) gelcap form; or
             523          (F) liquid form; or
             524          (ii) notwithstanding Subsection [(22)] (23)(c)(i), if the product is not intended for
             525      ingestion in a form described in Subsections [(22)] (23)(c)(i)(A) through (F), is not
             526      represented:
             527          (A) as conventional food; and
             528          (B) for use as a sole item of:
             529          (I) a meal; or
             530          (II) the diet; and
             531          (d) is required to be labeled as a dietary supplement:
             532          (i) identifiable by the "Supplemental Facts" box found on the label; and
             533          (ii) as required by 21 C.F.R. Sec. 101.36.


             534          [(23)] (24) (a) "Direct mail" means printed material delivered or distributed by United
             535      States mail or other delivery service:
             536          (i) to:
             537          (A) a mass audience; or
             538          (B) addressees on a mailing list provided by a purchaser of the mailing list; and
             539          (ii) if the cost of the printed material is not billed directly to the recipients.
             540          (b) "Direct mail" includes tangible personal property supplied directly or indirectly by a
             541      purchaser to a seller of direct mail for inclusion in a package containing the printed material.
             542          (c) "Direct mail" does not include multiple items of printed material delivered to a
             543      single address.
             544          [(24)] (25) (a) "Drug" means a compound, substance, or preparation, or a component of
             545      a compound, substance, or preparation that is:
             546          (i) recognized in:
             547          (A) the official United States Pharmacopoeia;
             548          (B) the official Homeopathic Pharmacopoeia of the United States;
             549          (C) the official National Formulary; or
             550          (D) a supplement to a publication listed in Subsections [(24)] (25)(a)(i)(A) through
             551      (C);
             552          (ii) intended for use in the:
             553          (A) diagnosis of disease;
             554          (B) cure of disease;
             555          (C) mitigation of disease;
             556          (D) treatment of disease; or
             557          (E) prevention of disease; or
             558          (iii) intended to affect:
             559          (A) the structure of the body; or
             560          (B) any function of the body.
             561          (b) "Drug" does not include:


             562          (i) food and food ingredients;
             563          (ii) a dietary supplement;
             564          (iii) an alcoholic beverage; or
             565          (iv) a prosthetic device.
             566          [(25)] (26) (a) Except as provided in Subsection [(25)] (26)(c), "durable medical
             567      equipment" means equipment that:
             568          (i) can withstand repeated use;
             569          (ii) is primarily and customarily used to serve a medical purpose;
             570          (iii) generally is not useful to a person in the absence of illness or injury; and
             571          (iv) is not worn in or on the body.
             572          (b) "Durable medical equipment" includes parts used in the repair or replacement of the
             573      equipment described in Subsection [(25)] (26)(a).
             574          (c) Notwithstanding Subsection [(25)] (26)(a), "durable medical equipment" does not
             575      include mobility enhancing equipment.
             576          [(26)] (27) "Electronic" means:
             577          (a) relating to technology; and
             578          (b) having:
             579          (i) electrical capabilities;
             580          (ii) digital capabilities;
             581          (iii) magnetic capabilities;
             582          (iv) wireless capabilities;
             583          (v) optical capabilities;
             584          (vi) electromagnetic capabilities; or
             585          (vii) capabilities similar to Subsections [(26)] (27)(b)(i) through (vi).
             586          [(27)] (28) (a) "Food and food ingredients" means substances:
             587          (i) regardless of whether the substances are in:
             588          (A) liquid form;
             589          (B) concentrated form;


             590          (C) solid form;
             591          (D) frozen form;
             592          (E) dried form; or
             593          (F) dehydrated form; and
             594          (ii) that are:
             595          (A) sold for:
             596          (I) ingestion by humans; or
             597          (II) chewing by humans; and
             598          (B) consumed for the substance's:
             599          (I) taste; or
             600          (II) nutritional value.
             601          (b) "Food and food ingredients" does not include:
             602          (i) an alcoholic beverage;
             603          (ii) tobacco; or
             604          (iii) prepared food.
             605          [(28)] (29) (a) "Fundraising sales" means sales:
             606          (i) (A) made by a school; or
             607          (B) made by a school student;
             608          (ii) that are for the purpose of raising funds for the school to purchase equipment,
             609      materials, or provide transportation; and
             610          (iii) that are part of an officially sanctioned school activity.
             611          (b) For purposes of Subsection [(28)] (29)(a)(iii), "officially sanctioned school activity"
             612      means a school activity:
             613          (i) that is conducted in accordance with a formal policy adopted by the school or school
             614      district governing the authorization and supervision of fundraising activities;
             615          (ii) that does not directly or indirectly compensate an individual teacher or other
             616      educational personnel by direct payment, commissions, or payment in kind; and
             617          (iii) the net or gross revenues from which are deposited in a dedicated account


             618      controlled by the school or school district.
             619          [(29)] (30) "Geothermal energy" means energy contained in heat that continuously
             620      flows outward from the earth that is used as the sole source of energy to produce electricity.
             621          [(30)] (31) "Governing board of the agreement" means the governing board of the
             622      agreement that is:
             623          (a) authorized to administer the agreement; and
             624          (b) established in accordance with the agreement.
             625          [(31)] (32) (a) "Hearing aid" means:
             626          (i) an instrument or device having an electronic component that is designed to:
             627          (A) (I) improve impaired human hearing; or
             628          (II) correct impaired human hearing; and
             629          (B) (I) be worn in the human ear; or
             630          (II) affixed behind the human ear;
             631          (ii) an instrument or device that is surgically implanted into the cochlea; or
             632          (iii) a telephone amplifying device.
             633          (b) "Hearing aid" does not include:
             634          (i) except as provided in Subsection [(31)] (32)(a)(i)(B) or [(31)] (32)(a)(ii), an
             635      instrument or device having an electronic component that is designed to be worn on the body;
             636          (ii) except as provided in Subsection [(31)] (32)(a)(iii), an assistive listening device or
             637      system designed to be used by one individual, including:
             638          (A) a personal amplifying system;
             639          (B) a personal FM system;
             640          (C) a television listening system; or
             641          (D) a device or system similar to a device or system described in Subsections [(31)]
             642      (32)(b)(ii)(A) through (C); or
             643          (iii) an assistive listening device or system designed to be used by more than one
             644      individual, including:
             645          (A) a device or system installed in:


             646          (I) an auditorium;
             647          (II) a church;
             648          (III) a conference room;
             649          (IV) a synagogue; or
             650          (V) a theater; or
             651          (B) a device or system similar to a device or system described in Subsections [(31)]
             652      (32)(b)(iii)(A)(I) through (V).
             653          [(32)] (33) (a) "Hearing aid accessory" means a hearing aid:
             654          (i) component;
             655          (ii) attachment; or
             656          (iii) accessory.
             657          (b) "Hearing aid accessory" includes:
             658          (i) a hearing aid neck loop;
             659          (ii) a hearing aid cord;
             660          (iii) a hearing aid ear mold;
             661          (iv) hearing aid tubing;
             662          (v) a hearing aid ear hook; or
             663          (vi) a hearing aid remote control.
             664          (c) "Hearing aid accessory" does not include:
             665          (i) a component, attachment, or accessory designed to be used only with an:
             666          (A) instrument or device described in Subsection [(31)] (32)(b)(i); or
             667          (B) assistive listening device or system described in Subsection [(31)] (32)(b)(ii) or
             668      (iii); or
             669          (ii) a hearing aid battery.
             670          [(33)] (34) "Hydroelectric energy" means water used as the sole source of energy to
             671      produce electricity.
             672          [(34)] (35) "Industrial use" means the use of natural gas, electricity, heat, coal, fuel oil,
             673      or other fuels:


             674          (a) in mining or extraction of minerals;
             675          (b) in agricultural operations to produce an agricultural product up to the time of
             676      harvest or placing the agricultural product into a storage facility, including:
             677          (i) commercial greenhouses;
             678          (ii) irrigation pumps;
             679          (iii) farm machinery;
             680          (iv) implements of husbandry as defined in Subsection 41-1a-102 (23) that are not
             681      registered under Title 41, Chapter 1a, Part 2, Registration; and
             682          (v) other farming activities;
             683          (c) in manufacturing tangible personal property at an establishment described in SIC
             684      Codes 2000 to 3999 of the 1987 Standard Industrial Classification Manual of the federal
             685      Executive Office of the President, Office of Management and Budget; or
             686          (d) by a scrap recycler if:
             687          (i) from a fixed location, the scrap recycler utilizes machinery or equipment to process
             688      one or more of the following items into prepared grades of processed materials for use in new
             689      products:
             690          (A) iron;
             691          (B) steel;
             692          (C) nonferrous metal;
             693          (D) paper;
             694          (E) glass;
             695          (F) plastic;
             696          (G) textile; or
             697          (H) rubber; and
             698          (ii) the new products under Subsection [(34)] (35)(d)(i) would otherwise be made with
             699      nonrecycled materials.
             700          [(35)] (36) (a) Except as provided in Subsection [(35)] (36)(b), "installation charge"
             701      means a charge for installing tangible personal property.


             702          (b) Notwithstanding Subsection [(35)] (36)(a), "installation charge" does not include a
             703      charge for repairs or renovations of tangible personal property.
             704          [(36)] (37) (a) "Lease" or "rental" means a transfer of possession or control of tangible
             705      personal property for:
             706          (i) (A) a fixed term; or
             707          (B) an indeterminate term; and
             708          (ii) consideration.
             709          (b) "Lease" or "rental" includes an agreement covering a motor vehicle and trailer if the
             710      amount of consideration may be increased or decreased by reference to the amount realized
             711      upon sale or disposition of the property as defined in Section 7701(h)(1), Internal Revenue
             712      Code.
             713          (c) "Lease" or "rental" does not include:
             714          (i) a transfer of possession or control of property under a security agreement or
             715      deferred payment plan that requires the transfer of title upon completion of the required
             716      payments;
             717          (ii) a transfer of possession or control of property under an agreement that requires the
             718      transfer of title:
             719          (A) upon completion of required payments; and
             720          (B) if the payment of an option price does not exceed the greater of:
             721          (I) $100; or
             722          (II) 1% of the total required payments; or
             723          (iii) providing tangible personal property along with an operator for a fixed period of
             724      time or an indeterminate period of time if the operator is necessary for equipment to perform as
             725      designed.
             726          (d) For purposes of Subsection [(36)] (37)(c)(iii), an operator is necessary for
             727      equipment to perform as designed if the operator's duties exceed the:
             728          (i) set-up of tangible personal property;
             729          (ii) maintenance of tangible personal property; or


             730          (iii) inspection of tangible personal property.
             731          [(37)] (38) "Load and leave" means delivery to a purchaser by use of a tangible storage
             732      media if the tangible storage media is not physically transferred to the purchaser.
             733          [(38)] (39) "Local taxing jurisdiction" means a:
             734          (a) county that is authorized to impose an agreement sales and use tax;
             735          (b) city that is authorized to impose an agreement sales and use tax; or
             736          (c) town that is authorized to impose an agreement sales and use tax.
             737          [(39)] (40) "Manufactured home" is as defined in Section 58-56-3 .
             738          [(40)] (41) For purposes of Subsection 59-12-104 (14), "manufacturing facility" means:
             739          (a) an establishment described in SIC Codes 2000 to 3999 of the 1987 Standard
             740      Industrial Classification Manual of the federal Executive Office of the President, Office of
             741      Management and Budget; or
             742          (b) a scrap recycler if:
             743          (i) from a fixed location, the scrap recycler utilizes machinery or equipment to process
             744      one or more of the following items into prepared grades of processed materials for use in new
             745      products:
             746          (A) iron;
             747          (B) steel;
             748          (C) nonferrous metal;
             749          (D) paper;
             750          (E) glass;
             751          (F) plastic;
             752          (G) textile; or
             753          (H) rubber; and
             754          (ii) the new products under Subsection [(40)] (41)(b)(i) would otherwise be made with
             755      nonrecycled materials.
             756          [(41)] (42) "Mobile home" is as defined in Section 58-56-3 .
             757          [(42)] (43) "Mobile telecommunications service" is as defined in the Mobile


             758      Telecommunications Sourcing Act, 4 U.S.C. Sec. 124.
             759          [(43)] (44) (a) Except as provided in Subsection [(43)] (44)(c), "mobility enhancing
             760      equipment" means equipment that is:
             761          (i) primarily and customarily used to provide or increase the ability to move from one
             762      place to another;
             763          (ii) appropriate for use in a:
             764          (A) home; or
             765          (B) motor vehicle; and
             766          (iii) not generally used by persons with normal mobility.
             767          (b) "Mobility enhancing equipment" includes parts used in the repair or replacement of
             768      the equipment described in Subsection [(43)] (44)(a).
             769          (c) Notwithstanding Subsection [(43)] (44)(a), "mobility enhancing equipment" does
             770      not include:
             771          (i) a motor vehicle;
             772          (ii) equipment on a motor vehicle if that equipment is normally provided by the motor
             773      vehicle manufacturer;
             774          (iii) durable medical equipment; or
             775          (iv) a prosthetic device.
             776          [(44)] (45) "Model 1 seller" means a seller that has selected a certified service provider
             777      as the seller's agent to perform all of the seller's sales and use tax functions for agreement sales
             778      and use taxes other than the seller's obligation under Section 59-12-107.4 to remit a tax on the
             779      seller's own purchases.
             780          [(45)] (46) "Model 2 seller" means a seller that:
             781          (a) except as provided in Subsection [(45)] (46)(b), has selected a certified automated
             782      system to perform the seller's sales tax functions for agreement sales and use taxes; and
             783          (b) notwithstanding Subsection [(45)] (46)(a), retains responsibility for remitting all of
             784      the sales tax:
             785          (i) collected by the seller; and


             786          (ii) to the appropriate local taxing jurisdiction.
             787          [(46)] (47) (a) Subject to Subsection [(46)] (47)(b), "model 3 seller" means a seller that
             788      has:
             789          (i) sales in at least five states that are members of the agreement;
             790          (ii) total annual sales revenues of at least $500,000,000;
             791          (iii) a proprietary system that calculates the amount of tax:
             792          (A) for an agreement sales and use tax; and
             793          (B) due to each local taxing jurisdiction; and
             794          (iv) entered into a performance agreement with the governing board of the agreement.
             795          (b) For purposes of Subsection [(46)] (47)(a), "model 3 seller" includes an affiliated
             796      group of sellers using the same proprietary system.
             797          [(47)] (48) "Modular home" means a modular unit as defined in Section 58-56-3 .
             798          [(48)] (49) "Motor vehicle" is as defined in Section 41-1a-102 .
             799          (50) "Oil shale" means a group of fine black to dark brown shales containing
             800      bituminous material that yields petroleum upon distillation.
             801          [(49)] (51) (a) "Other fuels" means products that burn independently to produce heat or
             802      energy.
             803          (b) "Other fuels" includes oxygen when it is used in the manufacturing of tangible
             804      personal property.
             805          [(50)] (52) "Pawnbroker" is as defined in Section 13-32a-102 .
             806          [(51)] (53) "Pawn transaction" is as defined in Section 13-32a-102 .
             807          [(52)] (54) (a) "Permanently attached to real property" means that for tangible personal
             808      property attached to real property:
             809          (i) the attachment of the tangible personal property to the real property:
             810          (A) is essential to the use of the tangible personal property; and
             811          (B) suggests that the tangible personal property will remain attached to the real
             812      property in the same place over the useful life of the tangible personal property; or
             813          (ii) if the tangible personal property is detached from the real property, the detachment


             814      would:
             815          (A) cause substantial damage to the tangible personal property; or
             816          (B) require substantial alteration or repair of the real property to which the tangible
             817      personal property is attached.
             818          (b) "Permanently attached to real property" includes:
             819          (i) the attachment of an accessory to the tangible personal property if the accessory is:
             820          (A) essential to the operation of the tangible personal property; and
             821          (B) attached only to facilitate the operation of the tangible personal property; or
             822          (ii) a temporary detachment of tangible personal property from real property for a
             823      repair or renovation if the repair or renovation is performed where the tangible personal
             824      property and real property are located.
             825          (c) "Permanently attached to real property" does not include:
             826          (i) the attachment of portable or movable tangible personal property to real property if
             827      that portable or movable tangible personal property is attached to real property only for:
             828          (A) convenience;
             829          (B) stability; or
             830          (C) for an obvious temporary purpose; or
             831          (ii) the detachment of tangible personal property from real property other than the
             832      detachment described in Subsection [(52)] (54)(b)(ii).
             833          [(53)] (55) "Person" includes any individual, firm, partnership, joint venture,
             834      association, corporation, estate, trust, business trust, receiver, syndicate, this state, any county,
             835      city, municipality, district, or other local governmental entity of the state, or any group or
             836      combination acting as a unit.
             837          [(54)] (56) "Place of primary use":
             838          (a) for telephone service other than mobile telecommunications service, means the
             839      street address representative of where the purchaser's use of the telephone service primarily
             840      occurs, which shall be:
             841          (i) the residential street address of the purchaser; or


             842          (ii) the primary business street address of the purchaser; or
             843          (b) for mobile telecommunications service, is as defined in the Mobile
             844      Telecommunications Sourcing Act, 4 U.S.C. Sec. 124.
             845          [(55)] (57) "Postproduction" means an activity related to the finishing or duplication of
             846      a medium described in Subsection 59-12-104 (60)(a).
             847          [(56)] (58) (a) "Prepared food" means:
             848          (i) food:
             849          (A) sold in a heated state; or
             850          (B) heated by a seller;
             851          (ii) two or more food ingredients mixed or combined by the seller for sale as a single
             852      item; or
             853          (iii) except as provided in Subsection [(56)] (58)(c), food sold with an eating utensil
             854      provided by the seller, including a:
             855          (A) plate;
             856          (B) knife;
             857          (C) fork;
             858          (D) spoon;
             859          (E) glass;
             860          (F) cup;
             861          (G) napkin; or
             862          (H) straw.
             863          (b) "Prepared food" does not include:
             864          (i) food that a seller only:
             865          (A) cuts;
             866          (B) repackages; or
             867          (C) pasteurizes; or
             868          (ii) (A) the following:
             869          (I) raw egg;


             870          (II) raw fish;
             871          (III) raw meat;
             872          (IV) raw poultry; or
             873          (V) a food containing an item described in Subsections [(56)] (58)(b)(ii)(A)(I) through
             874      (IV); and
             875          (B) if the Food and Drug Administration recommends in Chapter 3, Part 401.11 of the
             876      Food and Drug Administration's Food Code that a consumer cook the items described in
             877      Subsection [(56)] (58)(b)(ii)(A) to prevent food borne illness.
             878          (c) Notwithstanding Subsection [(56)] (58)(a)(iii), an eating utensil provided by the
             879      seller does not include the following used to transport the food:
             880          (i) a container; or
             881          (ii) packaging.
             882          [(57)] (59) "Prescription" means an order, formula, or recipe that is issued:
             883          (a) (i) orally;
             884          (ii) in writing;
             885          (iii) electronically; or
             886          (iv) by any other manner of transmission; and
             887          (b) by a licensed practitioner authorized by the laws of a state.
             888          [(58)] (60) (a) Except as provided in Subsection [(58)] (60)(b)(ii) or (iii), "prewritten
             889      computer software" means computer software that is not designed and developed:
             890          (i) by the author or other creator of the computer software; and
             891          (ii) to the specifications of a specific purchaser.
             892          (b) "Prewritten computer software" includes:
             893          (i) a prewritten upgrade to computer software if the prewritten upgrade to the computer
             894      software is not designed and developed:
             895          (A) by the author or other creator of the computer software; and
             896          (B) to the specifications of a specific purchaser;
             897          (ii) notwithstanding Subsection [(58)] (60)(a), computer software designed and


             898      developed by the author or other creator of the computer software to the specifications of a
             899      specific purchaser if the computer software is sold to a person other than the purchaser; or
             900          (iii) notwithstanding Subsection [(58)] (60)(a) and except as provided in Subsection
             901      [(58)] (60)(c), prewritten computer software or a prewritten portion of prewritten computer
             902      software:
             903          (A) that is modified or enhanced to any degree; and
             904          (B) if the modification or enhancement described in Subsection [(58)] (60)(b)(iii)(A) is
             905      designed and developed to the specifications of a specific purchaser.
             906          (c) Notwithstanding Subsection [(58)] (60)(b)(iii), "prewritten computer software"
             907      does not include a modification or enhancement described in Subsection [(58)] (60)(b)(iii) if
             908      the charges for the modification or enhancement are:
             909          (i) reasonable; and
             910          (ii) separately stated on the invoice or other statement of price provided to the
             911      purchaser.
             912          [(59)] (61) (a) "Prosthetic device" means a device that is worn on or in the body to:
             913          (i) artificially replace a missing portion of the body;
             914          (ii) prevent or correct a physical deformity or physical malfunction; or
             915          (iii) support a weak or deformed portion of the body.
             916          (b) "Prosthetic device" includes:
             917          (i) parts used in the repairs or renovation of a prosthetic device; or
             918          (ii) replacement parts for a prosthetic device.
             919          (c) "Prosthetic device" does not include:
             920          (i) corrective eyeglasses;
             921          (ii) contact lenses;
             922          (iii) hearing aids; or
             923          (iv) dental prostheses.
             924          [(60)] (62) (a) "Protective equipment" means an item:
             925          (i) for human wear; and


             926          (ii) that is:
             927          (A) designed as protection:
             928          (I) to the wearer against injury or disease; or
             929          (II) against damage or injury of other persons or property; and
             930          (B) not suitable for general use.
             931          (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             932      commission shall make rules:
             933          (i) listing the items that constitute "protective equipment"; and
             934          (ii) that are consistent with the list of items that constitute "protective equipment"
             935      under the agreement.
             936          [(61)] (63) (a) "Purchase price" and "sales price" mean the total amount of
             937      consideration:
             938          (i) valued in money; and
             939          (ii) for which tangible personal property or services are:
             940          (A) sold;
             941          (B) leased; or
             942          (C) rented.
             943          (b) "Purchase price" and "sales price" include:
             944          (i) the seller's cost of the tangible personal property or services sold;
             945          (ii) expenses of the seller, including:
             946          (A) the cost of materials used;
             947          (B) a labor cost;
             948          (C) a service cost;
             949          (D) interest;
             950          (E) a loss;
             951          (F) the cost of transportation to the seller; or
             952          (G) a tax imposed on the seller; or
             953          (iii) a charge by the seller for any service necessary to complete the sale.


             954          (c) "Purchase price" and "sales price" do not include:
             955          (i) a discount:
             956          (A) in a form including:
             957          (I) cash;
             958          (II) term; or
             959          (III) coupon;
             960          (B) that is allowed by a seller;
             961          (C) taken by a purchaser on a sale; and
             962          (D) that is not reimbursed by a third party; or
             963          (ii) the following if separately stated on an invoice, bill of sale, or similar document
             964      provided to the purchaser:
             965          (A) the amount of a trade-in;
             966          (B) the following from credit extended on the sale of tangible personal property or
             967      services:
             968          (I) interest charges;
             969          (II) financing charges; or
             970          (III) carrying charges;
             971          (C) a tax or fee legally imposed directly on the consumer;
             972          (D) a delivery charge; or
             973          (E) an installation charge.
             974          [(62)] (64) "Purchaser" means a person to whom:
             975          (a) a sale of tangible personal property is made; or
             976          (b) a service is furnished.
             977          [(63)] (65) "Regularly rented" means:
             978          (a) rented to a guest for value three or more times during a calendar year; or
             979          (b) advertised or held out to the public as a place that is regularly rented to guests for
             980      value.
             981          [(64)] (66) "Renewable energy" means:


             982          (a) biomass energy;
             983          (b) hydroelectric energy;
             984          (c) geothermal energy;
             985          (d) solar energy; or
             986          (e) wind energy.
             987          [(65)] (67) (a) "Renewable energy production facility" means a facility that:
             988          (i) uses renewable energy to produce electricity; and
             989          (ii) has a production capacity of 20 kilowatts or greater.
             990          (b) A facility is a renewable energy production facility regardless of whether the
             991      facility is:
             992          (i) connected to an electric grid; or
             993          (ii) located on the premises of an electricity consumer.
             994          [(66)] (68) "Rental" is as defined in Subsection [(36)] (37).
             995          [(67)] (69) "Repairs or renovations of tangible personal property" means:
             996          (a) a repair or renovation of tangible personal property that is not permanently attached
             997      to real property; or
             998          (b) attaching tangible personal property to other tangible personal property if the other
             999      tangible personal property to which the tangible personal property is attached is not
             1000      permanently attached to real property.
             1001          (70) "Research and development" means the process of inquiry or experimentation
             1002      aimed at the discovery of facts, devices, technologies, or applications and the process of
             1003      preparing those devices, technologies, or applications for marketing.
             1004          [(68)] (71) "Residential use" means the use in or around a home, apartment building,
             1005      sleeping quarters, and similar facilities or accommodations.
             1006          [(69)] (72) "Retail sale" or "sale at retail" means a sale, lease, or rental for a purpose
             1007      other than:
             1008          (a) resale;
             1009          (b) sublease; or


             1010          (c) subrent.
             1011          [(70)] (73) (a) "Retailer" means any person engaged in a regularly organized business
             1012      in tangible personal property or any other taxable transaction under Subsection 59-12-103 (1),
             1013      and who is selling to the user or consumer and not for resale.
             1014          (b) "Retailer" includes commission merchants, auctioneers, and any person regularly
             1015      engaged in the business of selling to users or consumers within the state.
             1016          [(71)] (74) (a) "Sale" means any transfer of title, exchange, or barter, conditional or
             1017      otherwise, in any manner, of tangible personal property or any other taxable transaction under
             1018      Subsection 59-12-103 (1), for consideration.
             1019          (b) "Sale" includes:
             1020          (i) installment and credit sales;
             1021          (ii) any closed transaction constituting a sale;
             1022          (iii) any sale of electrical energy, gas, services, or entertainment taxable under this
             1023      chapter;
             1024          (iv) any transaction if the possession of property is transferred but the seller retains the
             1025      title as security for the payment of the price; and
             1026          (v) any transaction under which right to possession, operation, or use of any article of
             1027      tangible personal property is granted under a lease or contract and the transfer of possession
             1028      would be taxable if an outright sale were made.
             1029          [(72)] (75) "Sale at retail" is as defined in Subsection [(69)] (72).
             1030          [(73)] (76) "Sale-leaseback transaction" means a transaction by which title to tangible
             1031      personal property that is subject to a tax under this chapter is transferred:
             1032          (a) by a purchaser-lessee;
             1033          (b) to a lessor;
             1034          (c) for consideration; and
             1035          (d) if:
             1036          (i) the purchaser-lessee paid sales and use tax on the purchaser-lessee's initial purchase
             1037      of the tangible personal property;


             1038          (ii) the sale of the tangible personal property to the lessor is intended as a form of
             1039      financing:
             1040          (A) for the property; and
             1041          (B) to the purchaser-lessee; and
             1042          (iii) in accordance with generally accepted accounting principles, the purchaser-lessee
             1043      is required to:
             1044          (A) capitalize the property for financial reporting purposes; and
             1045          (B) account for the lease payments as payments made under a financing arrangement.
             1046          [(74)] (77) "Sales price" is as defined in Subsection [(61)] (63).
             1047          [(75)] (78) (a) "Sales relating to schools" means the following sales by, amounts paid
             1048      to, or amounts charged by a school:
             1049          (i) sales that are directly related to the school's educational functions or activities
             1050      including:
             1051          (A) the sale of:
             1052          (I) textbooks;
             1053          (II) textbook fees;
             1054          (III) laboratory fees;
             1055          (IV) laboratory supplies; or
             1056          (V) safety equipment;
             1057          (B) the sale of a uniform, protective equipment, or sports or recreational equipment
             1058      that:
             1059          (I) a student is specifically required to wear as a condition of participation in a
             1060      school-related event or school-related activity; and
             1061          (II) is not readily adaptable to general or continued usage to the extent that it takes the
             1062      place of ordinary clothing;
             1063          (C) sales of the following if the net or gross revenues generated by the sales are
             1064      deposited into a school district fund or school fund dedicated to school meals:
             1065          (I) food and food ingredients; or


             1066          (II) prepared food; or
             1067          (D) transportation charges for official school activities; or
             1068          (ii) amounts paid to or amounts charged by a school for admission to a school-related
             1069      event or school-related activity.
             1070          (b) "Sales relating to schools" does not include:
             1071          (i) bookstore sales of items that are not educational materials or supplies;
             1072          (ii) except as provided in Subsection [(75)] (78)(a)(i)(B):
             1073          (A) clothing;
             1074          (B) clothing accessories or equipment;
             1075          (C) protective equipment; or
             1076          (D) sports or recreational equipment; or
             1077          (iii) amounts paid to or amounts charged by a school for admission to a school-related
             1078      event or school-related activity if the amounts paid or charged are passed through to a person:
             1079          (A) other than a:
             1080          (I) school;
             1081          (II) nonprofit organization authorized by a school board or a governing body of a
             1082      private school to organize and direct a competitive secondary school activity; or
             1083          (III) nonprofit association authorized by a school board or a governing body of a
             1084      private school to organize and direct a competitive secondary school activity; and
             1085          (B) that is required to collect sales and use taxes under this chapter.
             1086          (c) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             1087      commission may make rules defining the term "passed through."
             1088          [(76)] (79) For purposes of this section and Section 59-12-104 , "school" means:
             1089          (a) an elementary school or a secondary school that:
             1090          (i) is a:
             1091          (A) public school; or
             1092          (B) private school; and
             1093          (ii) provides instruction for one or more grades kindergarten through 12; or


             1094          (b) a public school district.
             1095          [(77)] (80) "Seller" means a person that makes a sale, lease, or rental of:
             1096          (a) tangible personal property; or
             1097          (b) a service.
             1098          [(78)] (81) (a) "Semiconductor fabricating or processing materials" means tangible
             1099      personal property:
             1100          (i) used primarily in the process of:
             1101          (A) (I) manufacturing a semiconductor; or
             1102          (II) fabricating a semiconductor; or
             1103          (B) maintaining an environment suitable for a semiconductor; or
             1104          (ii) consumed primarily in the process of:
             1105          (A) (I) manufacturing a semiconductor; or
             1106          (II) fabricating a semiconductor; or
             1107          (B) maintaining an environment suitable for a semiconductor.
             1108          (b) "Semiconductor fabricating or processing materials" includes:
             1109          (i) parts used in the repairs or renovations of tangible personal property described in
             1110      Subsection [(78)] (81)(a); or
             1111          (ii) a chemical, catalyst, or other material used to:
             1112          (A) produce or induce in a semiconductor a:
             1113          (I) chemical change; or
             1114          (II) physical change;
             1115          (B) remove impurities from a semiconductor; or
             1116          (C) improve the marketable condition of a semiconductor.
             1117          [(79)] (82) "Senior citizen center" means a facility having the primary purpose of
             1118      providing services to the aged as defined in Section 62A-3-101 .
             1119          [(80)] (83) "Simplified electronic return" means the electronic return:
             1120          (a) described in Section 318(C) of the agreement; and
             1121          (b) approved by the governing board of the agreement.


             1122          [(81)] (84) "Solar energy" means the sun used as the sole source of energy for
             1123      producing electricity.
             1124          [(82)] (85) (a) "Sports or recreational equipment" means an item:
             1125          (i) designed for human use; and
             1126          (ii) that is:
             1127          (A) worn in conjunction with:
             1128          (I) an athletic activity; or
             1129          (II) a recreational activity; and
             1130          (B) not suitable for general use.
             1131          (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             1132      commission shall make rules:
             1133          (i) listing the items that constitute "sports or recreational equipment"; and
             1134          (ii) that are consistent with the list of items that constitute "sports or recreational
             1135      equipment" under the agreement.
             1136          [(83)] (86) "State" means the state of Utah, its departments, and agencies.
             1137          [(84)] (87) "Storage" means any keeping or retention of tangible personal property or
             1138      any other taxable transaction under Subsection 59-12-103 (1), in this state for any purpose
             1139      except sale in the regular course of business.
             1140          [(85)] (88) (a) "Tangible personal property" means personal property that:
             1141          (i) may be:
             1142          (A) seen;
             1143          (B) weighed;
             1144          (C) measured;
             1145          (D) felt; or
             1146          (E) touched; or
             1147          (ii) is in any manner perceptible to the senses.
             1148          (b) "Tangible personal property" includes:
             1149          (i) electricity;


             1150          (ii) water;
             1151          (iii) gas;
             1152          (iv) steam; or
             1153          (v) prewritten computer software.
             1154          (89) "Tar sands" means impregnated sands that yield mixtures of liquid hydrocarbon
             1155      and require further processing other than mechanical blending before becoming finished
             1156      petroleum products.
             1157          [(86)] (90) (a) "Telephone service" means a two-way transmission:
             1158          (i) by:
             1159          (A) wire;
             1160          (B) radio;
             1161          (C) lightwave; or
             1162          (D) other electromagnetic means; and
             1163          (ii) of one or more of the following:
             1164          (A) a sign;
             1165          (B) a signal;
             1166          (C) writing;
             1167          (D) an image;
             1168          (E) sound;
             1169          (F) a message;
             1170          (G) data; or
             1171          (H) other information of any nature.
             1172          (b) "Telephone service" includes:
             1173          (i) mobile telecommunications service;
             1174          (ii) private communications service; or
             1175          (iii) automated digital telephone answering service.
             1176          (c) "Telephone service" does not include a service or a transaction that a state or a
             1177      political subdivision of a state is prohibited from taxing as of July 1, 2001, under the Internet


             1178      Tax Freedom Act, Pub. L. No. 105-277.
             1179          [(87)] (91) Notwithstanding where a call is billed or paid, "telephone service address"
             1180      means:
             1181          (a) if the location described in this Subsection [(87)] (91)(a) is known, the location of
             1182      the telephone service equipment:
             1183          (i) to which a call is charged; and
             1184          (ii) from which the call originates or terminates;
             1185          (b) if the location described in Subsection [(87)] (91)(a) is not known but the location
             1186      described in this Subsection [(87)] (91)(b) is known, the location of the origination point of the
             1187      signal of the telephone service first identified by:
             1188          (i) the telecommunications system of the seller; or
             1189          (ii) if the system used to transport the signal is not that of the seller, information
             1190      received by the seller from its service provider; or
             1191          (c) if the locations described in Subsection [(87)] (91)(a) or (b) are not known, the
             1192      location of a purchaser's primary place of use.
             1193          [(88)] (92) (a) "Telephone service provider" means a person that:
             1194          (i) owns, controls, operates, or manages a telephone service; and
             1195          (ii) engages in an activity described in Subsection [(88)] (92)(a)(i) for the shared use
             1196      with or resale to any person of the telephone service.
             1197          (b) A person described in Subsection [(88)] (92)(a) is a telephone service provider
             1198      whether or not the Public Service Commission of Utah regulates:
             1199          (i) that person; or
             1200          (ii) the telephone service that the person owns, controls, operates, or manages.
             1201          [(89)] (93) "Tobacco" means:
             1202          (a) a cigarette;
             1203          (b) a cigar;
             1204          (c) chewing tobacco;
             1205          (d) pipe tobacco; or


             1206          (e) any other item that contains tobacco.
             1207          [(90)] (94) (a) "Use" means the exercise of any right or power over tangible personal
             1208      property under Subsection 59-12-103 (1), incident to the ownership or the leasing of that
             1209      property, item, or service.
             1210          (b) "Use" does not include the sale, display, demonstration, or trial of that property in
             1211      the regular course of business and held for resale.
             1212          [(91)] (95) (a) Subject to Subsection [(91)] (95)(b), "vehicle" means the following that
             1213      are required to be titled, registered, or titled and registered:
             1214          (i) an aircraft as defined in Section 72-10-102 ;
             1215          (ii) a vehicle as defined in Section 41-1a-102 ;
             1216          (iii) an off-highway vehicle as defined in Section 41-22-2 ; or
             1217          (iv) a vessel as defined in Section 41-1a-102 .
             1218          (b) For purposes of Subsection 59-12-104 (35) only, "vehicle" includes:
             1219          (i) a vehicle described in Subsection [(91)] (95)(a); or
             1220          (ii) (A) a locomotive;
             1221          (B) a freight car;
             1222          (C) railroad work equipment; or
             1223          (D) other railroad rolling stock.
             1224          [(92)] (96) "Vehicle dealer" means a person engaged in the business of buying, selling,
             1225      or exchanging a vehicle as defined in Subsection [(91)] (95).
             1226          [(93)] (97) (a) Except as provided in Subsection [(93)] (97)(b), "waste energy facility"
             1227      means a facility that generates electricity:
             1228          (i) using as the primary source of energy waste materials that would be placed in a
             1229      landfill or refuse pit if it were not used to generate electricity, including:
             1230          (A) tires;
             1231          (B) waste coal; or
             1232          (C) oil shale; and
             1233          (ii) in amounts greater than actually required for the operation of the facility.


             1234          (b) "Waste energy facility" does not include a facility that incinerates:
             1235          (i) municipal solid waste;
             1236          (ii) hospital waste as defined in 40 C.F.R. 60.51c; or
             1237          (iii) medical/infectious waste as defined in 40 C.F.R. 60.51c.
             1238          [(94)] (98) "Watercraft" means a vessel as defined in Section 73-18-2 .
             1239          [(95)] (99) "Wind energy" means wind used as the sole source of energy to produce
             1240      electricity.
             1241          [(96)] (100) "ZIP Code" means a Zoning Improvement Plan Code assigned to a
             1242      geographic location by the United States Postal Service.
             1243          Section 6. Section 59-12-104 is amended to read:
             1244           59-12-104. Exemptions.
             1245          The following sales and uses are exempt from the taxes imposed by this chapter:
             1246          (1) sales of aviation fuel, motor fuel, and special fuel subject to a Utah state excise tax
             1247      under Chapter 13, Motor and Special Fuel Tax Act;
             1248          (2) sales to the state, its institutions, and its political subdivisions; however, this
             1249      exemption does not apply to sales of:
             1250          (a) construction materials except:
             1251          (i) construction materials purchased by or on behalf of institutions of the public
             1252      education system as defined in Utah Constitution Article X, Section 2, provided the
             1253      construction materials are clearly identified and segregated and installed or converted to real
             1254      property which is owned by institutions of the public education system; and
             1255          (ii) construction materials purchased by the state, its institutions, or its political
             1256      subdivisions which are installed or converted to real property by employees of the state, its
             1257      institutions, or its political subdivisions; or
             1258          (b) tangible personal property in connection with the construction, operation,
             1259      maintenance, repair, or replacement of a project, as defined in Section 11-13-103 , or facilities
             1260      providing additional project capacity, as defined in Section 11-13-103 ;
             1261          (3) (a) sales of an item described in Subsection (3)(b) from a vending machine if:


             1262          (i) the proceeds of each sale do not exceed $1; and
             1263          (ii) the seller or operator of the vending machine reports an amount equal to 150% of
             1264      the cost of the item described in Subsection (3)(b) as goods consumed; and
             1265          (b) Subsection (3)(a) applies to:
             1266          (i) food and food ingredients; or
             1267          (ii) prepared food;
             1268          (4) sales of the following to a commercial airline carrier for in-flight consumption:
             1269          (a) food and food ingredients;
             1270          (b) prepared food; or
             1271          (c) services related to Subsection (4)(a) or (b);
             1272          (5) sales of parts and equipment for installation in aircraft operated by common carriers
             1273      in interstate or foreign commerce;
             1274          (6) sales of commercials, motion picture films, prerecorded audio program tapes or
             1275      records, and prerecorded video tapes by a producer, distributor, or studio to a motion picture
             1276      exhibitor, distributor, or commercial television or radio broadcaster;
             1277          (7) sales of cleaning or washing of tangible personal property by a coin-operated
             1278      laundry or dry cleaning machine;
             1279          (8) sales made to or by religious or charitable institutions in the conduct of their regular
             1280      religious or charitable functions and activities, if the requirements of Section 59-12-104.1 are
             1281      fulfilled;
             1282          (9) sales of vehicles of a type required to be registered under the motor vehicle laws of
             1283      this state which are made to bona fide nonresidents of this state and are not afterwards
             1284      registered or used in this state except as necessary to transport them to the borders of this state;
             1285          (10) (a) amounts paid for an item described in Subsection (10)(b) if:
             1286          (i) the item is intended for human use; and
             1287          (ii) (A) a prescription was issued for the item; or
             1288          (B) the item was purchased by a hospital or other medical facility; and
             1289          (b) (i) Subsection (10)(a) applies to:


             1290          (A) a drug;
             1291          (B) a syringe; or
             1292          (C) a stoma supply; and
             1293          (ii) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             1294      commission may by rule define the terms:
             1295          (A) "syringe"; or
             1296          (B) "stoma supply";
             1297          (11) sales or use of property, materials, or services used in the construction of or
             1298      incorporated in pollution control facilities allowed by Sections 19-2-123 through 19-2-127 ;
             1299          (12) (a) sales of an item described in Subsection (12)(c) served by:
             1300          (i) the following if the item described in Subsection (12)(c) is not available to the
             1301      general public:
             1302          (A) a church; or
             1303          (B) a charitable institution;
             1304          (ii) an institution of higher education if:
             1305          (A) the item described in Subsection (12)(c) is not available to the general public; or
             1306          (B) the item described in Subsection (12)(c) is prepaid as part of a student meal plan
             1307      offered by the institution of higher education; or
             1308          (b) sales of an item described in Subsection (12)(c) provided for a patient by:
             1309          (i) a medical facility; or
             1310          (ii) a nursing facility; and
             1311          (c) Subsections (12)(a) and (b) apply to:
             1312          (i) food and food ingredients;
             1313          (ii) prepared food; or
             1314          (iii) alcoholic beverages;
             1315          (13) isolated or occasional sales by persons not regularly engaged in business, except
             1316      the sale of vehicles or vessels required to be titled or registered under the laws of this state in
             1317      which case the tax is based upon:


             1318          (a) the bill of sale or other written evidence of value of the vehicle or vessel being sold;
             1319      or
             1320          (b) in the absence of a bill of sale or other written evidence of value, the then existing
             1321      fair market value of the vehicle or vessel being sold as determined by the commission;
             1322          (14) (a) the following purchases or leases by a manufacturer on or after July 1, 1995:
             1323          (i) machinery and equipment:
             1324          (A) used in the manufacturing process;
             1325          (B) having an economic life of three or more years; and
             1326          (C) used:
             1327          (I) to manufacture an item sold as tangible personal property; and
             1328          (II) in new or expanding operations in a manufacturing facility in the state; and
             1329          (ii) subject to the provisions of Subsection (14)(b), normal operating replacements that:
             1330          (A) have an economic life of three or more years;
             1331          (B) are used in the manufacturing process in a manufacturing facility in the state;
             1332          (C) are used to replace or adapt an existing machine to extend the normal estimated
             1333      useful life of the machine; and
             1334          (D) do not include repairs and maintenance;
             1335          (b) the rates for the exemption under Subsection (14)(a)(ii) are as follows:
             1336          (i) beginning July 1, 1996, through June 30, 1997, 30% of the sale or lease described in
             1337      Subsection (14)(a)(ii) is exempt;
             1338          (ii) beginning July 1, 1997, through June 30, 1998, 60% of the sale or lease described
             1339      in Subsection (14)(a)(ii) is exempt; and
             1340          (iii) beginning July 1, 1998, 100% of the sale or lease described in Subsection
             1341      (14)(a)(ii) is exempt;
             1342          (c) for purposes of this Subsection (14), the commission shall by rule define the terms
             1343      "new or expanding operations" and "establishment"; and
             1344          (d) on or before October 1, 1991, and every five years after October 1, 1991, the
             1345      commission shall:


             1346          (i) review the exemptions described in Subsection (14)(a) and make recommendations
             1347      to the Revenue and Taxation Interim Committee concerning whether the exemptions should be
             1348      continued, modified, or repealed; and
             1349          (ii) include in its report:
             1350          (A) the cost of the exemptions;
             1351          (B) the purpose and effectiveness of the exemptions; and
             1352          (C) the benefits of the exemptions to the state;
             1353          (15) (a) sales of the following if the requirements of Subsection (15)(b) are met:
             1354          (i) tooling;
             1355          (ii) special tooling;
             1356          (iii) support equipment;
             1357          (iv) special test equipment; or
             1358          (v) parts used in the repairs or renovations of tooling or equipment described in
             1359      Subsections (15)(a)(i) through (iv); and
             1360          (b) sales of tooling, equipment, or parts described in Subsection (15)(a) are exempt if:
             1361          (i) the tooling, equipment, or parts are used or consumed exclusively in the
             1362      performance of any aerospace or electronics industry contract with the United States
             1363      government or any subcontract under that contract; and
             1364          (ii) under the terms of the contract or subcontract described in Subsection (15)(b)(i),
             1365      title to the tooling, equipment, or parts is vested in the United States government as evidenced
             1366      by:
             1367          (A) a government identification tag placed on the tooling, equipment, or parts; or
             1368          (B) listing on a government-approved property record if placing a government
             1369      identification tag on the tooling, equipment, or parts is impractical;
             1370          (16) intrastate movements of:
             1371          (a) freight by common carriers; or
             1372          (b) passengers:
             1373          (i) by taxicabs as described in SIC Code 4121 of the 1987 Standard Industrial


             1374      Classification Manual of the federal Executive Office of the President, Office of Management
             1375      and Budget;
             1376          (ii) transported by an establishment described in SIC Code 4111 of the 1987 Standard
             1377      Industrial Classification Manual of the federal Executive Office of the President, Office of
             1378      Management and Budget, if the transportation originates and terminates within a county of the
             1379      first, second, or third class; or
             1380          (iii) transported by the following described in SIC Code 4789 of the 1987 Standard
             1381      Industrial Classification Manual of the federal Executive Office of the President, Office of
             1382      Management and Budget:
             1383          (A) a horse-drawn cab; or
             1384          (B) a horse-drawn carriage;
             1385          (17) sales of newspapers or newspaper subscriptions;
             1386          (18) (a) except as provided in Subsection (18)(b), tangible personal property traded in
             1387      as full or part payment of the purchase price, except that for purposes of calculating sales or use
             1388      tax upon vehicles not sold by a vehicle dealer, trade-ins are limited to other vehicles only, and
             1389      the tax is based upon:
             1390          (i) the bill of sale or other written evidence of value of the vehicle being sold and the
             1391      vehicle being traded in; or
             1392          (ii) in the absence of a bill of sale or other written evidence of value, the then existing
             1393      fair market value of the vehicle being sold and the vehicle being traded in, as determined by the
             1394      commission; and
             1395          (b) notwithstanding Subsection (18)(a), Subsection (18)(a) does not apply to the
             1396      following items of tangible personal property traded in as full or part payment of the purchase
             1397      price:
             1398          (i) money;
             1399          (ii) electricity;
             1400          (iii) water;
             1401          (iv) gas; or


             1402          (v) steam;
             1403          (19) (a) (i) except as provided in Subsection (19)(b), sales of tangible personal property
             1404      used or consumed primarily and directly in farming operations, regardless of whether the
             1405      tangible personal property:
             1406          (A) becomes part of real estate; or
             1407          (B) is installed by a:
             1408          (I) farmer;
             1409          (II) contractor; or
             1410          (III) subcontractor; or
             1411          (ii) sales of parts used in the repairs or renovations of tangible personal property if the
             1412      tangible personal property is exempt under Subsection (19)(a)(i); and
             1413          (b) notwithstanding Subsection (19)(a), amounts paid or charged for the following
             1414      tangible personal property are subject to the taxes imposed by this chapter:
             1415          (i) (A) subject to Subsection (19)(b)(i)(B), the following tangible personal property if
             1416      the tangible personal property is used in a manner that is incidental to farming:
             1417          (I) machinery;
             1418          (II) equipment;
             1419          (III) materials; or
             1420          (IV) supplies; and
             1421          (B) tangible personal property that is considered to be used in a manner that is
             1422      incidental to farming includes:
             1423          (I) hand tools; or
             1424          (II) maintenance and janitorial equipment and supplies;
             1425          (ii) (A) subject to Subsection (19)(b)(ii)(B), tangible personal property if the tangible
             1426      personal property is used in an activity other than farming; and
             1427          (B) tangible personal property that is considered to be used in an activity other than
             1428      farming includes:
             1429          (I) office equipment and supplies; or


             1430          (II) equipment and supplies used in:
             1431          (Aa) the sale or distribution of farm products;
             1432          (Bb) research; or
             1433          (Cc) transportation; or
             1434          (iii) a vehicle required to be registered by the laws of this state during the period
             1435      ending two years after the date of the vehicle's purchase;
             1436          (20) sales of hay;
             1437          (21) exclusive sale of locally grown seasonal crops, seedling plants, or garden, farm, or
             1438      other agricultural produce if sold by a producer during the harvest season;
             1439          (22) purchases made using a coupon as defined in 7 U.S.C. Sec. 2012 that is issued
             1440      under the Food Stamp Program, 7 U.S.C. Sec. 2011 et seq.;
             1441          (23) sales of nonreturnable containers, nonreturnable labels, nonreturnable bags,
             1442      nonreturnable shipping cases, and nonreturnable casings to a manufacturer, processor,
             1443      wholesaler, or retailer for use in packaging tangible personal property to be sold by that
             1444      manufacturer, processor, wholesaler, or retailer;
             1445          (24) property stored in the state for resale;
             1446          (25) property brought into the state by a nonresident for his or her own personal use or
             1447      enjoyment while within the state, except property purchased for use in Utah by a nonresident
             1448      living and working in Utah at the time of purchase;
             1449          (26) property purchased for resale in this state, in the regular course of business, either
             1450      in its original form or as an ingredient or component part of a manufactured or compounded
             1451      product;
             1452          (27) property upon which a sales or use tax was paid to some other state, or one of its
             1453      subdivisions, except that the state shall be paid any difference between the tax paid and the tax
             1454      imposed by this part and Part 2, Local Sales and Use Tax Act, and no adjustment is allowed if
             1455      the tax paid was greater than the tax imposed by this part and Part 2, Local Sales and Use Tax
             1456      Act;
             1457          (28) any sale of a service described in Subsections 59-12-103 (1)(b), (c), and (d) to a


             1458      person for use in compounding a service taxable under the subsections;
             1459          (29) purchases made in accordance with the special supplemental nutrition program for
             1460      women, infants, and children established in 42 U.S.C. Sec. 1786;
             1461          (30) beginning on July 1, 1999, through June 30, 2014, sales or leases of rolls, rollers,
             1462      refractory brick, electric motors, or other replacement parts used in the furnaces, mills, or ovens
             1463      of a steel mill described in SIC Code 3312 of the 1987 Standard Industrial Classification
             1464      Manual of the federal Executive Office of the President, Office of Management and Budget;
             1465          (31) sales of boats of a type required to be registered under Title 73, Chapter 18, State
             1466      Boating Act, boat trailers, and outboard motors which are made to bona fide nonresidents of
             1467      this state and are not thereafter registered or used in this state except as necessary to transport
             1468      them to the borders of this state;
             1469          (32) sales of aircraft manufactured in Utah if sold for delivery and use outside Utah
             1470      where a sales or use tax is not imposed, even if the title is passed in Utah;
             1471          (33) amounts paid for the purchase of telephone service for purposes of providing
             1472      telephone service;
             1473          (34) fares charged to persons transported directly by a public transit district created
             1474      under the authority of Title 17A, Chapter 2, Part 10, Utah Public Transit District Act;
             1475          (35) sales or leases of vehicles to, or use of vehicles by an authorized carrier;
             1476          (36) (a) 45% of the sales price of any new manufactured home; and
             1477          (b) 100% of the sales price of any used manufactured home;
             1478          (37) sales relating to schools and fundraising sales;
             1479          (38) sales or rentals of durable medical equipment if:
             1480          (a) a person presents a prescription for the durable medical equipment; and
             1481          (b) the durable medical equipment is used for home use only;
             1482          (39) (a) sales to a ski resort of electricity to operate a passenger ropeway as defined in
             1483      Section 72-11-102 ; and
             1484          (b) the commission shall by rule determine the method for calculating sales exempt
             1485      under Subsection (39)(a) that are not separately metered and accounted for in utility billings;


             1486          (40) sales to a ski resort of:
             1487          (a) snowmaking equipment;
             1488          (b) ski slope grooming equipment;
             1489          (c) passenger ropeways as defined in Section 72-11-102 ; or
             1490          (d) parts used in the repairs or renovations of equipment or passenger ropeways
             1491      described in Subsections (40)(a) through (c);
             1492          (41) sales of natural gas, electricity, heat, coal, fuel oil, or other fuels for industrial use;
             1493          (42) sales or rentals of the right to use or operate for amusement, entertainment, or
             1494      recreation a coin-operated amusement device as defined in Section 59-12-102 ;
             1495          (43) sales of cleaning or washing of tangible personal property by a coin-operated car
             1496      wash machine;
             1497          (44) sales by the state or a political subdivision of the state, except state institutions of
             1498      higher education as defined in Section 53B-3-102 , of:
             1499          (a) photocopies; or
             1500          (b) other copies of records held or maintained by the state or a political subdivision of
             1501      the state;
             1502          (45) (a) amounts paid:
             1503          (i) to a person providing intrastate transportation to an employer's employee to or from
             1504      the employee's primary place of employment;
             1505          (ii) by an:
             1506          (A) employee; or
             1507          (B) employer; and
             1508          (iii) pursuant to a written contract between:
             1509          (A) the employer; and
             1510          (B) (I) the employee; or
             1511          (II) a person providing transportation to the employer's employee; and
             1512          (b) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             1513      commission may for purposes of Subsection (45)(a) make rules defining what constitutes an


             1514      employee's primary place of employment;
             1515          (46) amounts paid for admission to an athletic event at an institution of higher
             1516      education that is subject to the provisions of Title IX of the Education Amendments of 1972,
             1517      20 U.S.C. Sec. 1681 et seq.;
             1518          (47) sales of telephone service charged to a prepaid telephone calling card;
             1519          (48) (a) sales of:
             1520          (i) hearing aids;
             1521          (ii) hearing aid accessories; or
             1522          (iii) except as provided in Subsection (48)(b), parts used in the repairs or renovations
             1523      of hearing aids or hearing aid accessories; and
             1524          (b) for purposes of this Subsection (48), notwithstanding Subsection (48)(a)(iii),
             1525      "parts" does not include batteries;
             1526          (49) (a) sales made to or by:
             1527          (i) an area agency on aging; or
             1528          (ii) a senior citizen center owned by a county, city, or town; or
             1529          (b) sales made by a senior citizen center that contracts with an area agency on aging;
             1530          (50) (a) beginning on July 1, 2001, through June 30, 2007, and subject to Subsection
             1531      (50)(b), a sale or lease of semiconductor fabricating or processing materials regardless of
             1532      whether the semiconductor fabricating or processing materials:
             1533          (i) actually come into contact with a semiconductor; or
             1534          (ii) ultimately become incorporated into real property;
             1535          (b) (i) beginning on July 1, 2001, through June 30, 2002, 10% of the sale or lease
             1536      described in Subsection (50)(a) is exempt;
             1537          (ii) beginning on July 1, 2002, through June 30, 2003, 50% of the sale or lease
             1538      described in Subsection (50)(a) is exempt; and
             1539          (iii) beginning on July 1, 2003, through June 30, 2007, the entire amount of the sale or
             1540      lease described in Subsection (50)(a) is exempt; and
             1541          (c) each year on or before the November interim meeting, the Revenue and Taxation


             1542      Interim Committee shall:
             1543          (i) review the exemption described in this Subsection (50) and make recommendations
             1544      concerning whether the exemption should be continued, modified, or repealed; and
             1545          (ii) include in the review under this Subsection (50)(c):
             1546          (A) the cost of the exemption;
             1547          (B) the purpose and effectiveness of the exemption; and
             1548          (C) the benefits of the exemption to the state;
             1549          (51) an amount paid by or charged to a purchaser for accommodations and services
             1550      described in Subsection 59-12-103 (1)(i) to the extent the amount is exempt under Section
             1551      59-12-104.2 ;
             1552          (52) beginning on September 1, 2001, the lease or use of a vehicle issued a temporary
             1553      sports event registration certificate in accordance with Section 41-3-306 for the event period
             1554      specified on the temporary sports event registration certificate;
             1555          (53) sales or uses of electricity, if the sales or uses are:
             1556          (a) made under a tariff adopted by the Public Service Commission of Utah only for
             1557      purchase of electricity produced from a new wind, geothermal, biomass, or solar power energy
             1558      source, as designated in the tariff by the Public Service Commission of Utah; and
             1559          (b) for an amount of electricity that is:
             1560          (i) unrelated to the amount of electricity used by the person purchasing the electricity
             1561      under the tariff described in Subsection (53)(a); and
             1562          (ii) equivalent to the number of kilowatthours specified in the tariff described in
             1563      Subsection (53)(a) that may be purchased under the tariff described in Subsection (53)(a);
             1564          (54) sales or rentals of mobility enhancing equipment if a person presents a
             1565      prescription for the mobility enhancing equipment;
             1566          (55) sales of water in a:
             1567          (a) pipe;
             1568          (b) conduit;
             1569          (c) ditch; or


             1570          (d) reservoir;
             1571          (56) sales of currency or coinage that constitute legal tender of the United States or of a
             1572      foreign nation;
             1573          (57) (a) sales of an item described in Subsection (57)(b) if the item:
             1574          (i) does not constitute legal tender of any nation; and
             1575          (ii) has a gold, silver, or platinum content of 80% or more; and
             1576          (b) Subsection (57)(a) applies to a gold, silver, or platinum:
             1577          (i) ingot;
             1578          (ii) bar;
             1579          (iii) medallion; or
             1580          (iv) decorative coin;
             1581          (58) amounts paid on a sale-leaseback transaction;
             1582          (59) sales of a prosthetic device:
             1583          (a) for use on or in a human;
             1584          (b) for which a prescription is issued; and
             1585          (c) to a person that presents a prescription for the prosthetic device;
             1586          (60) (a) except as provided in Subsection (60)(b), purchases, leases, or rentals of
             1587      machinery or equipment by an establishment described in Subsection (60)(c) if the machinery
             1588      or equipment is primarily used in the production or postproduction of the following media for
             1589      commercial distribution:
             1590          (i) a motion picture;
             1591          (ii) a television program;
             1592          (iii) a movie made for television;
             1593          (iv) a music video;
             1594          (v) a commercial;
             1595          (vi) a documentary; or
             1596          (vii) a medium similar to Subsections (60)(a)(i) through (vi) as determined by the
             1597      commission by administrative rule made in accordance with Subsection (60)(d); or


             1598          (b) notwithstanding Subsection (60)(a), purchases, leases, or rentals of machinery or
             1599      equipment by an establishment described in Subsection (60)(c) that is used for the production
             1600      or postproduction of the following are subject to the taxes imposed by this chapter:
             1601          (i) a live musical performance;
             1602          (ii) a live news program; or
             1603          (iii) a live sporting event;
             1604          (c) the following establishments listed in the 1997 North American Industry
             1605      Classification System of the federal Executive Office of the President, Office of Management
             1606      and Budget, apply to Subsections (60)(a) and (b):
             1607          (i) NAICS Code 512110; or
             1608          (ii) NAICS Code 51219; and
             1609          (d) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             1610      commission may by rule:
             1611          (i) prescribe what constitutes a medium similar to Subsections (60)(a)(i) through (vi);
             1612      or
             1613          (ii) define:
             1614          (A) "commercial distribution";
             1615          (B) "live musical performance";
             1616          (C) "live news program"; or
             1617          (D) "live sporting event";
             1618          (61) (a) leases of seven or more years or purchases made on or after July 1, 2004 but on
             1619      or before June 30, 2009, of machinery or equipment that:
             1620          (i) is leased or purchased for or by a facility that:
             1621          (A) is a renewable energy production facility;
             1622          (B) is located in the state; and
             1623          (C) (I) becomes operational on or after July 1, 2004; or
             1624          (II) has its generation capacity increased by one or more megawatts on or after July 1,
             1625      2004 as a result of the use of the machinery or equipment;


             1626          (ii) has an economic life of five or more years; and
             1627          (iii) is used to make the facility or the increase in capacity of the facility described in
             1628      Subsection (61)(a)(i) operational up to the point of interconnection with an existing
             1629      transmission grid including:
             1630          (A) a wind turbine;
             1631          (B) generating equipment;
             1632          (C) a control and monitoring system;
             1633          (D) a power line;
             1634          (E) substation equipment;
             1635          (F) lighting;
             1636          (G) fencing;
             1637          (H) pipes; or
             1638          (I) other equipment used for locating a power line or pole; and
             1639          (b) this Subsection (61) does not apply to:
             1640          (i) machinery or equipment used in construction of:
             1641          (A) a new renewable energy production facility; or
             1642          (B) the increase in the capacity of a renewable energy production facility;
             1643          (ii) contracted services required for construction and routine maintenance activities;
             1644      and
             1645          (iii) unless the machinery or equipment is used or acquired for an increase in capacity
             1646      of the facility described in Subsection (61)(a)(i)(C)(II), machinery or equipment used or
             1647      acquired after:
             1648          (A) the renewable energy production facility described in Subsection (61)(a)(i) is
             1649      operational as described in Subsection (61)(a)(iii); or
             1650          (B) the increased capacity described in Subsection (61)(a)(i) is operational as described
             1651      in Subsection (61)(a)(iii);
             1652          (62) (a) leases of seven or more years or purchases made on or after July 1, 2004 but on
             1653      or before June 30, 2009, of machinery or equipment that:


             1654          (i) is leased or purchased for or by a facility that:
             1655          (A) is a waste energy production facility;
             1656          (B) is located in the state; and
             1657          (C) (I) becomes operational on or after July 1, 2004; or
             1658          (II) has its generation capacity increased by one or more megawatts on or after July 1,
             1659      2004 as a result of the use of the machinery or equipment;
             1660          (ii) has an economic life of five or more years; and
             1661          (iii) is used to make the facility or the increase in capacity of the facility described in
             1662      Subsection (62)(a)(i) operational up to the point of interconnection with an existing
             1663      transmission grid including:
             1664          (A) generating equipment;
             1665          (B) a control and monitoring system;
             1666          (C) a power line;
             1667          (D) substation equipment;
             1668          (E) lighting;
             1669          (F) fencing;
             1670          (G) pipes; or
             1671          (H) other equipment used for locating a power line or pole; and
             1672          (b) this Subsection (62) does not apply to:
             1673          (i) machinery or equipment used in construction of:
             1674          (A) a new waste energy facility; or
             1675          (B) the increase in the capacity of a waste energy facility;
             1676          (ii) contracted services required for construction and routine maintenance activities;
             1677      and
             1678          (iii) unless the machinery or equipment is used or acquired for an increase in capacity
             1679      described in Subsection (62)(a)(i)(C)(II), machinery or equipment used or acquired after:
             1680          (A) the waste energy facility described in Subsection (62)(a)(i) is operational as
             1681      described in Subsection (62)(a)(iii); or


             1682          (B) the increased capacity described in Subsection (62)(a)(i) is operational as described
             1683      in Subsection (62)(a)(iii);
             1684          (63) (a) leases of five or more years or purchases made on or after July 1, 2004 but on
             1685      or before June 30, 2009, of machinery or equipment that:
             1686          (i) is leased or purchased for or by a facility that:
             1687          (A) is located in the state;
             1688          (B) produces fuel from biomass energy including:
             1689          (I) methanol; or
             1690          (II) ethanol; and
             1691          (C) (I) becomes operational on or after July 1, 2004; or
             1692          (II) has its capacity to produce fuel increase by 25% or more on or after July 1, 2004 as
             1693      a result of the installation of the machinery or equipment;
             1694          (ii) has an economic life of five or more years; and
             1695          (iii) is installed on the facility described in Subsection (63)(a)(i);
             1696          (b) this Subsection (63) does not apply to:
             1697          (i) machinery or equipment used in construction of:
             1698          (A) a new facility described in Subsection (63)(a)(i); or
             1699          (B) the increase in capacity of the facility described in Subsection (63)(a)(i); or
             1700          (ii) contracted services required for construction and routine maintenance activities;
             1701      and
             1702          (iii) unless the machinery or equipment is used or acquired for an increase in capacity
             1703      described in Subsection (63)(a)(i)(C)(II), machinery or equipment used or acquired after:
             1704          (A) the facility described in Subsection (63)(a)(i) is operational; or
             1705          (B) the increased capacity described in Subsection (63)(a)(i) is operational;
             1706          (64) amounts paid to a purchaser as a rebate from the manufacturer of a new vehicle
             1707      for purchasing the new vehicle;
             1708          (65) (a) subject to Subsection (65)(b), sales of tangible personal property to persons
             1709      within this state that is subsequently shipped outside the state and incorporated pursuant to


             1710      contract into and becomes a part of real property located outside of this state, except to the
             1711      extent that the other state or political entity imposes a sales, use, gross receipts, or other similar
             1712      transaction excise tax on it against which the other state or political entity allows a credit for
             1713      taxes imposed by this chapter; and
             1714          (b) the exemption provided for in Subsection (65)(a):
             1715          (i) is allowed only if the exemption is applied:
             1716          (A) in calculating the purchase price of the tangible personal property; and
             1717          (B) to a written contract that is in effect on July 1, 2004; and
             1718          (ii) (A) does not apply beginning on the day on which the contract described in
             1719      Subsection (65)(b)(i):
             1720          (I) is substantially modified; or
             1721          (II) terminates; and
             1722          (B) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             1723      the commission may by rule prescribe the circumstances under which a contract is substantially
             1724      modified;
             1725          (66) purchases:
             1726          (a) of one or more of the following items in printed or electronic format:
             1727          (i) a list containing information that includes one or more:
             1728          (A) names; or
             1729          (B) addresses; or
             1730          (ii) a database containing information that includes one or more:
             1731          (A) names; or
             1732          (B) addresses; and
             1733          (b) used to send direct mail; and
             1734          (67) redemptions or repurchases of property by a person if that property was:
             1735          (a) delivered to a pawnbroker as part of a pawn transaction; [and]
             1736          (b) redeemed or repurchased within the time period established in a written agreement
             1737      between the person and the pawnbroker for redeeming or repurchasing the property[.]; and


             1738          (68) (a) beginning on July 1, 2006 and ending on June 30, 2016, purchases of tangible
             1739      personal property used in the research and development of coal-to-liquids, oil shale, or tar
             1740      sands technology; and
             1741          (b) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             1742      commission may, for purposes of Subsection (68)(a), make rules defining what constitutes
             1743      tangible personal property used in the research and development of coal-to-liquids, oil shale,
             1744      and tar sands technology.
             1745          Section 7. Section 59-12-104.5 is amended to read:
             1746           59-12-104.5. Review of sales tax exemptions.
             1747          (1) Beginning with the 2001 interim, the Utah Tax Review Commission, in
             1748      cooperation with the governor's office and the tax commission, shall conduct a review of the
             1749      sales and use tax exemptions created by Section 59-12-104 as provided in this section.
             1750          (2) The Utah Tax Review Commission shall:
             1751          (a) review each of the sales and use tax exemptions created by Section 59-12-104 one
             1752      or more times every eight years; and
             1753          (b) subject to Subsection (2)(a) and except as provided in Subsection (3), for each year
             1754      select the exemptions that the Utah Tax Review Commission will review for that year.
             1755          (3) Notwithstanding Subsection (2):
             1756          (a) the Utah Tax Review Commission shall review Subsection 59-12-104 (29) before
             1757      October 1 of the year after the year in which Congress permits a state to participate in the
             1758      special supplemental nutrition program under 42 U.S.C. Sec. 1786 even if state or local sales
             1759      taxes are collected within the state on purchases of food under that program; [and]
             1760          (b) the Utah Tax Review Commission shall review Subsection 59-12-104 (22) before
             1761      October 1 of the year after the year in which Congress permits a state to participate in the food
             1762      stamp program under the Food Stamp Act, 7 U.S.C. Sec. 2011 et seq., even if state or local
             1763      sales taxes are collected within the state on purchases of food under that program[.]; and
             1764          (c) the Utah Tax Review Commission shall review Subsection 59-12-104 (68) before
             1765      the October 2011 interim meeting.


             1766          (4) The Utah Tax Review Commission shall for each sales and use tax exemption the
             1767      Utah Tax Review Commission reviews make a report to the governor and the Revenue and
             1768      Taxation Interim Committee:
             1769          (a) on or before the November interim meeting in the year in which the Utah Tax
             1770      Review Commission reviews the sales and use tax exemption;
             1771          (b) including:
             1772          (i) a review of the cost of the sales and use tax exemption;
             1773          (ii) a review of the following criteria for granting or extending incentives for
             1774      businesses:
             1775          (A) whether the business is willing to make a substantial capital investment in the state
             1776      indicating that it will be a long-term member of the community in which the business is or will
             1777      be located;
             1778          (B) whether the business brings new dollars into the state, which generally means the
             1779      business must export goods or services outside of the state, not just recirculate existing dollars;
             1780          (C) subject to Subsection (5), whether the business pays higher than average wages in
             1781      the area in which the business is or will be located, increasing the state's overall household
             1782      income;
             1783          (D) whether the same incentives offered to a new business locating in the state from
             1784      another state are available to existing in-state businesses so as not to discriminate against the
             1785      in-state businesses; and
             1786          (E) whether the incentives clearly produce a positive return on investment as
             1787      determined by state economic modeling formulas;
             1788          (iii) a determination of whether the sales and use tax exemption is consistent with the
             1789      Legislature's sales and use tax policy positions adopted in 1990 General Session H.J.R. 32;
             1790          (iv) a review of the purpose of the sales and use tax exemption;
             1791          (v) a review of the effectiveness of the sales and use tax exemption; and
             1792          (vi) a review of the benefits of the sales and use tax exemption to the state;
             1793          (c) recommending whether the sales and use tax exemption should be:


             1794          (i) continued;
             1795          (ii) modified; or
             1796          (iii) repealed; and
             1797          (d) reviewing any other issue the Utah Tax Review Commission determines to study.
             1798          (5) For purposes of Subsection (4)(b)(ii)(C), in determining whether a business pays
             1799      higher than average wages in the area in which the business is or will be located, the Utah Tax
             1800      Review Commission may not include wages of the following in making average wage
             1801      calculations:
             1802          (a) wages of school district employees;
             1803          (b) wages of county, city, or town employees;
             1804          (c) wages of state employees; or
             1805          (d) wages of federal government employees.
             1806          Section 8. Retrospective operation.
             1807          Section 59-5-120 and the amendments to Sections 59-5-101 , 59-12-102 , and 59-12-104
             1808      have retrospective operation for taxable years beginning on or after January 1, 2006.


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