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S.B. 237

             1     

COMMERCIAL AIRLINE AND AIRPORT

             2     
TAXATION AMENDMENTS

             3     
2008 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: Wayne L. Niederhauser

             6     
House Sponsor: John Dougall

             7     
             8      LONG TITLE
             9      General Description:
             10          This bill amends the Revenue and Taxation title relating to commercial airlines and
             11      airports.
             12      Highlighted Provisions:
             13          This bill:
             14          .    defines terms;
             15          .    addresses the apportionment of mobile flight equipment for purposes of taxation
             16      under Title 59, Chapter 2, Property Tax Act;
             17          .    addresses the apportionment of the following for purposes of taxation under Chapter
             18      7, Corporate Franchise and Income Taxes:
             19              .    mobile flight equipment;
             20              .    compensation of flight personnel; and
             21              .    transportation revenues;
             22          .    provides a sales and use tax exemption for sales of certain construction materials
             23      purchased by or on behalf of an international airport; and
             24          .    makes technical changes.
             25      Monies Appropriated in this Bill:
             26          None
             27      Other Special Clauses:


             28          This bill provides an effective date.
             29      Utah Code Sections Affected:
             30      AMENDS:
             31          59-2-102, as last amended by Laws of Utah 2007, Chapters 107, 234, and 329
             32          59-2-801, as last amended by Laws of Utah 1999, Chapter 134
             33          59-7-302, as last amended by Laws of Utah 1993, Chapter 169
             34          59-7-312, as renumbered and amended by Laws of Utah 1987, Chapter 2
             35          59-7-313, as renumbered and amended by Laws of Utah 1987, Chapter 2
             36          59-7-314, as last amended by Laws of Utah 1994, Chapter 83
             37          59-7-315, as renumbered and amended by Laws of Utah 1987, Chapter 2
             38          59-7-316, as renumbered and amended by Laws of Utah 1987, Chapter 2
             39          59-7-317, as renumbered and amended by Laws of Utah 1987, Chapter 2
             40          59-7-318, as last amended by Laws of Utah 1994, Chapter 83
             41          59-7-319, as last amended by Laws of Utah 1992, Chapter 165
             42          59-12-104, as last amended by Laws of Utah 2007, Chapters 76, 195, 214, 224, 288,
             43      295, and 329
             44      ENACTS:
             45          59-2-804, Utah Code Annotated 1953
             46     
             47      Be it enacted by the Legislature of the state of Utah:
             48          Section 1. Section 59-2-102 is amended to read:
             49           59-2-102. Definitions.
             50          As used in this chapter and title:
             51          (1) "Aerial applicator" means aircraft or rotorcraft used exclusively for the purpose of
             52      engaging in dispensing activities directly affecting agriculture or horticulture with an
             53      airworthiness certificate from the Federal Aviation Administration certifying the aircraft or
             54      rotorcraft's use for agricultural and pest control purposes.
             55          (2) "Air charter service" means an air carrier operation which requires the customer to
             56      hire an entire aircraft rather than book passage in whatever capacity is available on a scheduled
             57      trip.
             58          (3) "Air contract service" means an air carrier operation available only to customers


             59      who engage the services of the carrier through a contractual agreement and excess capacity on
             60      any trip and is not available to the public at large.
             61          (4) "Aircraft" is as defined in Section 72-10-102 .
             62          [(5) "Airline" means any air carrier operating interstate routes on a scheduled basis
             63      which offers to fly passengers or cargo on the basis of available capacity on regularly scheduled
             64      routes.]
             65          (5) (a) Except as provided in Subsection (5)(b), "airline" means an air carrier that:
             66          (i) operates:
             67          (A) on an interstate route; and
             68          (B) on a scheduled basis; and
             69          (ii) offers to fly one or more passengers or cargo on the basis of available capacity on a
             70      regularly scheduled route.
             71          (b) "Airline" does not include an:
             72          (i) air charter service; or
             73          (ii) air contract service.
             74          (6) "Assessment roll" means a permanent record of the assessment of property as
             75      assessed by the county assessor and the commission and may be maintained manually or as a
             76      computerized file as a consolidated record or as multiple records by type, classification, or
             77      categories.
             78          (7) (a) "Certified revenue levy" means a property tax levy that provides the same
             79      amount of ad valorem property tax revenue as was collected for the prior year, plus new
             80      growth, but exclusive of revenue from collections from redemptions, interest, and penalties.
             81          (b) For purposes of this Subsection (7), "ad valorem property tax revenue" does not
             82      include property tax revenue received by a taxing entity from personal property that is:
             83          (i) assessed by a county assessor in accordance with Part 3, County Assessment; and
             84          (ii) semiconductor manufacturing equipment.
             85          (8) "County-assessed commercial vehicle" means:
             86          (a) any commercial vehicle, trailer, or semitrailer which is not apportioned under
             87      Section 41-1a-301 and is not operated interstate to transport the vehicle owner's goods or
             88      property in furtherance of the owner's commercial enterprise;
             89          (b) any passenger vehicle owned by a business and used by its employees for


             90      transportation as a company car or vanpool vehicle; and
             91          (c) vehicles which are:
             92          (i) especially constructed for towing or wrecking, and which are not otherwise used to
             93      transport goods, merchandise, or people for compensation;
             94          (ii) used or licensed as taxicabs or limousines;
             95          (iii) used as rental passenger cars, travel trailers, or motor homes;
             96          (iv) used or licensed in this state for use as ambulances or hearses;
             97          (v) especially designed and used for garbage and rubbish collection; or
             98          (vi) used exclusively to transport students or their instructors to or from any private,
             99      public, or religious school or school activities.
             100          (9) (a) Except as provided in Subsection (9)(b), for purposes of Section 59-2-801 ,
             101      "designated tax area" means a tax area created by the overlapping boundaries of only the
             102      following taxing entities:
             103          (i) a county; and
             104          (ii) a school district.
             105          (b) Notwithstanding Subsection (9)(a), "designated tax area" includes a tax area created
             106      by the overlapping boundaries of:
             107          (i) the taxing entities described in Subsection (9)(a); and
             108          (ii) (A) a city or town if the boundaries of the school district under Subsection (9)(a)
             109      and the boundaries of the city or town are identical; or
             110          (B) a special service district if the boundaries of the school district under Subsection
             111      (9)(a) are located entirely within the special service district.
             112          (10) "Eligible judgment" means a final and unappealable judgment or order under
             113      Section 59-2-1330 :
             114          (a) that became a final and unappealable judgment or order no more than 14 months
             115      prior to the day on which the notice required by Subsection 59-2-919 (4) is required to be
             116      mailed; and
             117          (b) for which a taxing entity's share of the final and unappealable judgment or order is
             118      greater than or equal to the lesser of:
             119          (i) $5,000; or
             120          (ii) 2.5% of the total ad valorem property taxes collected by the taxing entity in the


             121      previous fiscal year.
             122          (11) (a) "Escaped property" means any property, whether personal, land, or any
             123      improvements to the property, subject to taxation and is:
             124          (i) inadvertently omitted from the tax rolls, assigned to the incorrect parcel, or assessed
             125      to the wrong taxpayer by the assessing authority;
             126          (ii) undervalued or omitted from the tax rolls because of the failure of the taxpayer to
             127      comply with the reporting requirements of this chapter; or
             128          (iii) undervalued because of errors made by the assessing authority based upon
             129      incomplete or erroneous information furnished by the taxpayer.
             130          (b) Property which is undervalued because of the use of a different valuation
             131      methodology or because of a different application of the same valuation methodology is not
             132      "escaped property."
             133          (12) "Fair market value" means the amount at which property would change hands
             134      between a willing buyer and a willing seller, neither being under any compulsion to buy or sell
             135      and both having reasonable knowledge of the relevant facts. For purposes of taxation, "fair
             136      market value" shall be determined using the current zoning laws applicable to the property in
             137      question, except in cases where there is a reasonable probability of a change in the zoning laws
             138      affecting that property in the tax year in question and the change would have an appreciable
             139      influence upon the value.
             140          (13) "Farm machinery and equipment," for purposes of the exemption provided under
             141      Section 59-2-1101 , means tractors, milking equipment and storage and cooling facilities, feed
             142      handling equipment, irrigation equipment, harvesters, choppers, grain drills and planters, tillage
             143      tools, scales, combines, spreaders, sprayers, haying equipment, and any other machinery or
             144      equipment used primarily for agricultural purposes; but does not include vehicles required to be
             145      registered with the Motor Vehicle Division or vehicles or other equipment used for business
             146      purposes other than farming.
             147          (14) "Geothermal fluid" means water in any form at temperatures greater than 120
             148      degrees centigrade naturally present in a geothermal system.
             149          (15) "Geothermal resource" means:
             150          (a) the natural heat of the earth at temperatures greater than 120 degrees centigrade;
             151      and


             152          (b) the energy, in whatever form, including pressure, present in, resulting from, created
             153      by, or which may be extracted from that natural heat, directly or through a material medium.
             154          (16) (a) "Goodwill" means:
             155          (i) acquired goodwill that is reported as goodwill on the books and records:
             156          (A) of a taxpayer; and
             157          (B) that are maintained for financial reporting purposes; or
             158          (ii) the ability of a business to:
             159          (A) generate income:
             160          (I) that exceeds a normal rate of return on assets; and
             161          (II) resulting from a factor described in Subsection (16)(b); or
             162          (B) obtain an economic or competitive advantage resulting from a factor described in
             163      Subsection (16)(b).
             164          (b) The following factors apply to Subsection (16)(a)(ii):
             165          (i) superior management skills;
             166          (ii) reputation;
             167          (iii) customer relationships;
             168          (iv) patronage; or
             169          (v) a factor similar to Subsections (16)(b)(i) through (iv).
             170          (c) "Goodwill" does not include:
             171          (i) the intangible property described in Subsection (20)(a) or (b);
             172          (ii) locational attributes of real property, including:
             173          (A) zoning;
             174          (B) location;
             175          (C) view;
             176          (D) a geographic feature;
             177          (E) an easement;
             178          (F) a covenant;
             179          (G) proximity to raw materials;
             180          (H) the condition of surrounding property; or
             181          (I) proximity to markets;
             182          (iii) value attributable to the identification of an improvement to real property,


             183      including:
             184          (A) reputation of the designer, builder, or architect of the improvement;
             185          (B) a name given to, or associated with, the improvement; or
             186          (C) the historic significance of an improvement; or
             187          (iv) the enhancement or assemblage value specifically attributable to the interrelation
             188      of the existing tangible property in place working together as a unit.
             189          (17) "Governing body" means:
             190          (a) for a county, city, or town, the legislative body of the county, city, or town;
             191          (b) for a local district under Title 17B, Limited Purpose Local Government Entities -
             192      Local Districts, the local district's board of trustees;
             193          (c) for a school district, the local board of education; or
             194          (d) for a special service district under Title 17A, Chapter 2, Part 13, Utah Special
             195      Service District Act:
             196          (i) the legislative body of the county or municipality that created the special service
             197      district, to the extent that the county or municipal legislative body has not delegated authority
             198      to an administrative control board established under Section 17A-2-1326 ; or
             199          (ii) the administrative control board, to the extent that the county or municipal
             200      legislative body has delegated authority to an administrative control board established under
             201      Section 17A-2-1326 .
             202          (18) (a) For purposes of Section 59-2-103 :
             203          (i) "household" means the association of persons who live in the same dwelling,
             204      sharing its furnishings, facilities, accommodations, and expenses; and
             205          (ii) "household" includes married individuals, who are not legally separated, that have
             206      established domiciles at separate locations within the state.
             207          (b) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             208      commission may make rules defining the term "domicile."
             209          (19) (a) Except as provided in Subsection (19)(c), "improvement" means a building,
             210      structure, fixture, fence, or other item that is permanently attached to land, regardless of
             211      whether the title has been acquired to the land, if:
             212          (i) (A) attachment to land is essential to the operation or use of the item; and
             213          (B) the manner of attachment to land suggests that the item will remain attached to the


             214      land in the same place over the useful life of the item; or
             215          (ii) removal of the item would:
             216          (A) cause substantial damage to the item; or
             217          (B) require substantial alteration or repair of a structure to which the item is attached.
             218          (b) "Improvement" includes:
             219          (i) an accessory to an item described in Subsection (19)(a) if the accessory is:
             220          (A) essential to the operation of the item described in Subsection (19)(a); and
             221          (B) installed solely to serve the operation of the item described in Subsection (19)(a);
             222      and
             223          (ii) an item described in Subsection (19)(a) that:
             224          (A) is temporarily detached from the land for repairs; and
             225          (B) remains located on the land.
             226          (c) Notwithstanding Subsections (19)(a) and (b), "improvement" does not include:
             227          (i) an item considered to be personal property pursuant to rules made in accordance
             228      with Section 59-2-107 ;
             229          (ii) a moveable item that is attached to land:
             230          (A) for stability only; or
             231          (B) for an obvious temporary purpose;
             232          (iii) (A) manufacturing equipment and machinery; or
             233          (B) essential accessories to manufacturing equipment and machinery;
             234          (iv) an item attached to the land in a manner that facilitates removal without substantial
             235      damage to:
             236          (A) the land; or
             237          (B) the item; or
             238          (v) a transportable factory-built housing unit as defined in Section 59-2-1502 if that
             239      transportable factory-built housing unit is considered to be personal property under Section
             240      59-2-1503 .
             241          (20) "Intangible property" means:
             242          (a) property that is capable of private ownership separate from tangible property,
             243      including:
             244          (i) moneys;


             245          (ii) credits;
             246          (iii) bonds;
             247          (iv) stocks;
             248          (v) representative property;
             249          (vi) franchises;
             250          (vii) licenses;
             251          (viii) trade names;
             252          (ix) copyrights; and
             253          (x) patents;
             254          (b) a low-income housing tax credit; or
             255          (c) goodwill.
             256          (21) "Low-income housing tax credit" means:
             257          (a) a federal low-income housing tax credit under Section 42, Internal Revenue Code;
             258      or
             259          (b) a low-income housing tax credit under:
             260          (i) Section 59-7-607 ; or
             261          (ii) Section 59-10-1010 .
             262          (22) "Metalliferous minerals" includes gold, silver, copper, lead, zinc, and uranium.
             263          (23) "Mine" means a natural deposit of either metalliferous or nonmetalliferous
             264      valuable mineral.
             265          (24) "Mining" means the process of producing, extracting, leaching, evaporating, or
             266      otherwise removing a mineral from a mine.
             267          (25) (a) "Mobile flight equipment" means tangible personal property that is:
             268          (i) owned or operated by an:
             269          (A) air charter service;
             270          (B) air contract service; or
             271          (C) airline; and
             272          (ii) (A) capable of flight;
             273          (B) attached to an aircraft that is capable of flight; or
             274          (C) contained in an aircraft that is capable of flight if the tangible personal property is
             275      intended to be used:


             276          (I) during multiple flights;
             277          (II) during a takeoff, flight, or landing; and
             278          (III) as a service provided by an air charter service, air contract service, or airline.
             279          (b) (i) "Mobile flight equipment" does not include a spare part other than a spare
             280      engine that is rotated:
             281          (A) at regular intervals; and
             282          (B) with an engine that is attached to the aircraft.
             283          (ii) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             284      the commission may make rules defining the term "regular intervals."
             285          (26) "Nonmetalliferous minerals" includes, but is not limited to, oil, gas, coal, salts,
             286      sand, rock, gravel, and all carboniferous materials.
             287          (27) "Personal property" includes:
             288          (a) every class of property as defined in Subsection (28) which is the subject of
             289      ownership and not included within the meaning of the terms "real estate" and "improvements";
             290          (b) gas and water mains and pipes laid in roads, streets, or alleys;
             291          (c) bridges and ferries;
             292          (d) livestock which, for the purposes of the exemption provided under Section
             293      59-2-1112 , means all domestic animals, honeybees, poultry, fur-bearing animals, and fish; and
             294          (e) outdoor advertising structures as defined in Section 72-7-502 .
             295          (28) (a) "Property" means property that is subject to assessment and taxation according
             296      to its value.
             297          (b) "Property" does not include intangible property as defined in this section.
             298          (29) "Public utility," for purposes of this chapter, means the operating property of a
             299      railroad, gas corporation, oil or gas transportation or pipeline company, coal slurry pipeline
             300      company, electrical corporation, telephone corporation, sewerage corporation, or heat
             301      corporation where the company performs the service for, or delivers the commodity to, the
             302      public generally or companies serving the public generally, or in the case of a gas corporation
             303      or an electrical corporation, where the gas or electricity is sold or furnished to any member or
             304      consumers within the state for domestic, commercial, or industrial use. Public utility also
             305      means the operating property of any entity or person defined under Section 54-2-1 except water
             306      corporations.


             307          (30) "Real estate" or "real property" includes:
             308          (a) the possession of, claim to, ownership of, or right to the possession of land;
             309          (b) all mines, minerals, and quarries in and under the land, all timber belonging to
             310      individuals or corporations growing or being on the lands of this state or the United States, and
             311      all rights and privileges appertaining to these; and
             312          (c) improvements.
             313          (31) "Residential property," for the purposes of the reductions and adjustments under
             314      this chapter, means any property used for residential purposes as a primary residence. It does
             315      not include property used for transient residential use or condominiums used in rental pools.
             316          [(32) For purposes of Subsection 59-2-801 (1)(e), "route miles" means the number of
             317      miles calculated by the commission that is:]
             318          [(a) measured in a straight line by the commission; and]
             319          [(b) equal to the distance between a geographical location that begins or ends:]
             320          [(i) at a boundary of the state; and]
             321          [(ii) where an aircraft:]
             322          [(A) takes off; or]
             323          [(B) lands.]
             324          [(33)] (32) (a) "State-assessed commercial vehicle" means:
             325          (i) any commercial vehicle, trailer, or semitrailer which operates interstate or intrastate
             326      to transport passengers, freight, merchandise, or other property for hire; or
             327          (ii) any commercial vehicle, trailer, or semitrailer which operates interstate and
             328      transports the vehicle owner's goods or property in furtherance of the owner's commercial
             329      enterprise.
             330          (b) "State-assessed commercial vehicle" does not include vehicles used for hire which
             331      are specified in Subsection (8)(c) as county-assessed commercial vehicles.
             332          [(34)] (33) "Taxable value" means fair market value less any applicable reduction
             333      allowed for residential property under Section 59-2-103 .
             334          [(35)] (34) "Tax area" means a geographic area created by the overlapping boundaries
             335      of one or more taxing entities.
             336          [(36)] (35) "Taxing entity" means any county, city, town, school district, special taxing
             337      district, local district under Title 17B, Limited Purpose Local Government Entities - Local


             338      Districts, or other political subdivision of the state with the authority to levy a tax on property.
             339          [(37)] (36) "Tax roll" means a permanent record of the taxes charged on property, as
             340      extended on the assessment roll and may be maintained on the same record or records as the
             341      assessment roll or may be maintained on a separate record properly indexed to the assessment
             342      roll. It includes tax books, tax lists, and other similar materials.
             343          Section 2. Section 59-2-801 is amended to read:
             344           59-2-801. Apportionment of property assessed by commission.
             345          (1) Before May 25 of each year, the commission shall apportion to each tax area the
             346      total assessment of all of the property the commission assesses as provided in Subsections
             347      (1)(a) through (f).
             348          (a) (i) The commission shall apportion the assessments of the property described in
             349      Subsection (1)(a)(ii):
             350          (A) to each tax area through which the public utility or company described in
             351      Subsection (1)(a)(ii) operates; and
             352          (B) in proportion to the property's value in each tax area.
             353          (ii) Subsection (1)(a)(i) applies to property owned by:
             354          (A) a public utility, except for the rolling stock of a public utility;
             355          (B) a pipeline company;
             356          (C) a power company;
             357          (D) a canal company; or
             358          (E) an irrigation company.
             359          (b) The commission shall apportion the assessments of the rolling stock of a railroad:
             360          (i) to the tax areas through which railroads operate; and
             361          (ii) in the proportion that the length of the main tracks, sidetracks, passing tracks,
             362      switches, and tramways of the railroads in each tax area bears to the total length of the main
             363      tracks, sidetracks, passing tracks, switches, and tramways in the state.
             364          (c) The commission shall apportion the assessments of the property of a car company
             365      to:
             366          (i) each tax area in which a railroad is operated; and
             367          (ii) in the proportion that the length of the main tracks, passing tracks, sidetracks,
             368      switches, and tramways of all of the railroads in each tax area bears to the total length of the


             369      main tracks, passing tracks, sidetracks, switches, and tramways of all of the railroads in the
             370      state.
             371          (d) (i) The commission shall apportion the assessments of the property described in
             372      Subsection (1)(d)(ii) to each tax area in which the property is located.
             373          (ii) Subsection (1)(d)(i) applies to the following property:
             374          (A) mines;
             375          (B) mining claims; or
             376          (C) mining property.
             377          (e) (i) As used in this Subsection (1)(e), "ground hours" means the total number of
             378      hours during the calendar year immediately preceding the January 1 described in Section
             379      59-2-103 that aircraft owned or operated by the following are on the ground:
             380          (A) an air charter service;
             381          (B) an air contract service; or
             382          (C) an airline.
             383          (ii) The commission shall apportion the assessments of the property described in
             384      Subsection (1)(e)[(ii)] (iii) to:
             385          (A) each designated tax area; and
             386          (B) in the proportion that the [route miles] ground hours in each designated tax area
             387      bear to the total [route miles] ground hours in the state.
             388          [(ii)] (iii) Subsection (1)(e)[(i)] (ii) applies to the mobile flight equipment owned by
             389      an:
             390          (A) air charter service;
             391          (B) air contract service; or
             392          (C) airline.
             393          (f) (i) The commission shall apportion the assessments of the property described in
             394      Subsection (1)(f)(ii) to each tax area in which the property is located as of January 1 of each
             395      year.
             396          (ii) Subsection (1)(f)(i) applies to the real and tangible personal property, other than
             397      mobile flight equipment, owned by an:
             398          (A) air charter service;
             399          (B) air contract service; or


             400          (C) airline.
             401          (2) (a) (i) (A) State-assessed commercial vehicles that weigh 12,001 pounds or more
             402      shall be taxed at a statewide average rate which is calculated from the overall county average
             403      tax rates from the preceding year, exclusive of the property subject to the statewide uniform
             404      fee, weighted by lane miles of principal routes in each county.
             405          (B) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
             406      the commission shall adopt rules to define "principal routes."
             407          (ii) State-assessed commercial vehicles that weigh 12,000 pounds or less are subject to
             408      the uniform fee provided in Section 59-2-405.1 .
             409          (b) The combined revenue from all state-assessed commercial vehicles shall be
             410      apportioned to the counties based on:
             411          (i) 40% by the percentage of lane miles of principal routes within each county as
             412      determined by the commission; and
             413          (ii) 60% by the percentage of total state-assessed vehicles having business situs in each
             414      county.
             415          (c) At least quarterly, the commission shall apportion the total taxes paid on
             416      state-assessed commercial vehicles to the counties.
             417          (d) Each county shall apportion its share of the revenues under this Subsection (2) to
             418      the taxing entities within its boundaries in the same proportion as the assessments of other:
             419          (i) real property;
             420          (ii) tangible personal property; and
             421          (iii) property assessed by the commission.
             422          Section 3. Section 59-2-804 is enacted to read:
             423          59-2-804. Interstate allocation of mobile flight equipment.
             424          (1) As used in this section:
             425          (a) "Aircraft type" means a particular model of aircraft as designated by the
             426      manufacturer of the aircraft.
             427          (b) "Airline ground hours calculation" means an amount equal to the product of:
             428          (i) the total number of hours aircraft owned or operated by an airline are on the ground,
             429      calculated by aircraft type; and
             430          (ii) the cost percentage.


             431          (c) "Airline revenue ton miles" means, for an airline, the total revenue ton miles during
             432      the calendar year that immediately precedes the January 1 described in Section 59-2-103 .
             433          (d) "Cost percentage" means a fraction, calculated by aircraft type, the numerator of
             434      which is the airline's average cost of the aircraft type and the denominator of which is the
             435      airline's average cost of the aircraft type:
             436          (i) owned or operated by the airline; and
             437          (ii) that has the lowest average cost.
             438          (e) "Ground hours factor" means the product of:
             439          (i) a fraction, the numerator of which is the Utah ground hours calculation and the
             440      denominator of which is the airline ground hours calculation; and
             441          (ii) .50.
             442          (f) (i) Except as provided in Subsection (1)(f)(ii), "mobile flight equipment" is as
             443      defined in Section 59-2-102 .
             444          (ii) "Mobile flight equipment" does not include tangible personal property described in
             445      Subsection 59-2-102 (25) owned by an:
             446          (A) air charter service; or
             447          (B) air contract service.
             448          (g) "Mobile flight equipment allocation factor" means the sum of:
             449          (i) the ground hours factor; and
             450          (ii) the revenue ton miles factor.
             451          (h) "Revenue ton miles" is determined in accordance with 14 C.F.R. Part 241.
             452          (i) "Revenue ton miles factor" means the product of:
             453          (i) a fraction, the numerator of which is the Utah revenue ton miles and the
             454      denominator of which is the airline revenue ton miles; and
             455          (ii) .50.
             456          (j) "Utah ground hours calculation" means an amount equal to the product of:
             457          (i) the total number of hours aircraft owned or operated by an airline are on the ground
             458      in this state, calculated by aircraft type; and
             459          (ii) the cost percentage.
             460          (k) "Utah revenue ton miles" means, for an airline, the total revenue ton miles within
             461      the borders of this state:


             462          (i) during the calendar year that immediately precedes the January 1 described in
             463      Section 59-2-103 ; and
             464          (ii) from flight stages that originate or terminate in this state.
             465          (2) For purposes of the assessment of an airline's mobile flight equipment by the
             466      commission, a portion of the value of the airline's mobile flight equipment shall by allocated to
             467      the state by calculating the product of:
             468          (a) the total value of the mobile flight equipment; and
             469          (b) the mobile flight equipment allocation factor.
             470          Section 4. Section 59-7-302 is amended to read:
             471           59-7-302. Definitions.
             472          As used in this part, unless the context otherwise requires:
             473          (1) "Aircraft type" means a particular model of aircraft as designated by the
             474      manufacturer of the aircraft.
             475          (2) "Airline" is as defined in Section 59-2-102 .
             476          (3) "Airline revenue ton miles" means, for an airline, the total revenue ton miles during
             477      the airline's tax period.
             478          [(1)] (4) "Business income" means income arising from transactions and activity in the
             479      regular course of the taxpayer's trade or business and includes income from tangible and
             480      intangible property if the acquisition, management, and disposition of the property constitutes
             481      integral parts of the taxpayer's regular trade or business operations.
             482          [(2)] (5) "Commercial domicile" means the principal place from which the trade or
             483      business of the taxpayer is directed or managed.
             484          [(3)] (6) "Compensation" means wages, salaries, commissions, and any other form of
             485      remuneration paid to employees for personal services.
             486          (7) (a) Except as provided in Subsection (7)(b), "mobile flight equipment" is as defined
             487      in Section 59-2-102 .
             488          (b) "Mobile flight equipment" does not include:
             489          (i) a spare engine; or
             490          (ii) tangible personal property described in Subsection 59-2-102 (25) owned by an:
             491          (A) air charter service; or
             492          (B) air contract service.


             493          [(4)] (8) "Nonbusiness income" means all income other than business income.
             494          (9) "Revenue ton miles" is determined in accordance with 14 C.F.R. Part 241.
             495          [(5)] (10) "Sales" means all gross receipts of the taxpayer not allocated under Sections
             496      59-7-306 through 59-7-310 .
             497          [(6)] (11) "State" means any state of the United States, the District of Columbia, the
             498      Commonwealth of Puerto Rico, any territory or possession of the United States, and any
             499      foreign country or political subdivision thereof.
             500          (12) "Transportation revenue" means revenue an airline earns from:
             501          (a) transporting a passenger or cargo; or
             502          (b) from miscellaneous sales of merchandise as part of providing transportation
             503      services.
             504          (13) "Utah revenue ton miles" means, for an airline, the total revenue ton miles within
             505      the borders of this state:
             506          (a) during the airline's tax period; and
             507          (b) from flight stages that originate or terminate in this state.
             508          Section 5. Section 59-7-312 is amended to read:
             509           59-7-312. Property factor for apportionment of business income -- Mobile flight
             510      equipment of an airline.
             511          (1) [The] Except as provided in Subsection (2), the property factor is a fraction, the
             512      numerator of which is the average value of the taxpayer's real and tangible personal property
             513      owned or rented and used in this state during the tax period and the denominator of which is
             514      the average value of all the taxpayer's real and tangible personal property owned or rented and
             515      used during the tax period.
             516          (2) The average value of an airline's real and tangible personal property owned or
             517      rented and used in this state attributable to mobile flight equipment for purposes of the
             518      numerator of the fraction described in Subsection (1) shall be calculated for each aircraft type
             519      by determining the product of:
             520          (a) the total average value of the airline's mobile flight equipment of the aircraft type
             521      owned or rented and used in the state during the tax period; and
             522          (b) a fraction, the numerator of which is the Utah revenue ton miles for the aircraft type
             523      and the denominator of which is the airline revenue ton miles for the aircraft type.


             524          Section 6. Section 59-7-313 is amended to read:
             525           59-7-313. Valuation of property for inclusion in property factor.
             526          (1) Property owned by the taxpayer is valued at its original cost.
             527          (2) Property rented by the taxpayer is valued at eight times the net annual rental rate.
             528          (3) Net annual rental rate is the annual rental rate paid by the taxpayer less any annual
             529      rental rate received by the taxpayer from subrentals.
             530          (4) Property owned or rented by an airline is valued as provided in this section, subject
             531      to the calculation required by Subsection 59-7-312 (2).
             532          Section 7. Section 59-7-314 is amended to read:
             533           59-7-314. Averaging property values for inclusion in property factors.
             534          (1) The average value of property shall be determined by averaging the values at the
             535      beginning and ending of the tax period or averaging of monthly values during the tax period if
             536      monthly averaging more clearly reflects the average value of the taxpayer's property.
             537          (2) The average value of property of an airline is valued as provided in this section,
             538      subject to the calculation required by Subsection 59-7-312 (2).
             539          Section 8. Section 59-7-315 is amended to read:
             540           59-7-315. Payroll factor for apportionment of business income -- Compensation
             541      of flight personnel by an airline.
             542          (1) [The] Except as provided in Subsection (2), the payroll factor is a fraction, the
             543      numerator of which is the total amount paid in this state during the tax period by the taxpayer
             544      for compensation, and the denominator of which is the total compensation paid everywhere
             545      during the tax period.
             546          (2) The total amount paid in this state during the tax period by an airline for
             547      compensation attributable to the compensation of flight personnel for purposes of the
             548      numerator of the fraction described in Subsection (1) shall be calculated for each aircraft type
             549      by determining the product of:
             550          (a) the total amount paid during the tax period by the airline to flight personnel for
             551      compensation for the aircraft type; and
             552          (b) a fraction, the numerator of which is the Utah revenue ton miles for the aircraft type
             553      and the denominator of which is the airline revenue ton miles for the aircraft type.
             554          Section 9. Section 59-7-316 is amended to read:


             555           59-7-316. Determination of compensation for inclusion in payroll factor.
             556          (1) Compensation is paid in this state if:
             557          [(1)] (a) the individual's service is performed entirely within the state; or
             558          [(2)] (b) the individual's service is performed both within and without the state, but the
             559      service performed without the state is incidental to the individual's service within the state; or
             560          [(3)] (c) some of the service is performed in the state and:
             561          [(a)] (i) the base of operations or, if there is no base of operations, the place from
             562      which the service is directed or controlled is in the state; or
             563          [(b)] (ii) the base of operations or the place from which the service is directed or
             564      controlled is not in any state in which some part of the service is performed, but the individual's
             565      residence is in this state.
             566          (2) Whether compensation paid by an airline is paid in this state is determined as
             567      provided in this section, subject to the calculation required by Subsection 59-7-315 (2).
             568          Section 10. Section 59-7-317 is amended to read:
             569           59-7-317. Sales factor for apportionment of business income -- Transportation
             570      revenues of an airline.
             571          (1) [The] Except as provided in Subsection (2), the sales factor is a fraction, the
             572      numerator of which is the total sales of the taxpayer in this state during the tax period, and the
             573      denominator of which is the total sales of the taxpayer everywhere during the tax period.
             574          (2) The total sales of an airline in this state during the tax period attributable to
             575      transportation revenues in this state during the taxable year for purposes of the numerator of the
             576      fraction described in Subsection (1) shall be calculated by determining the product of:
             577          (a) the total transportation revenues in this state during the taxable year of the airline;
             578      and
             579          (b) a fraction, the numerator of which is the Utah revenue ton miles and the
             580      denominator of which is the airline revenue ton miles.
             581          Section 11. Section 59-7-318 is amended to read:
             582           59-7-318. Sales of tangible personal property.
             583          (1) Sales of tangible personal property are in this state if:
             584          [(1)] (a) the property is delivered or shipped to a purchaser, other than the United
             585      States Government, within this state regardless of the f.o.b. point or other conditions of the


             586      sale; or
             587          [(2)] (b) (i) the property is shipped from an office, store, warehouse, factory, or other
             588      place of storage in this state[,]; and[:]
             589          [(a)] (ii) (A) the purchaser is the United States Government; or
             590          [(b)] (B) the taxpayer is not taxable in the state of the purchaser.
             591          (2) Whether sales of tangible personal property by an airline are in this state is
             592      determined as provided in this section, subject to the calculation required by Subsection
             593      59-7-317 (2).
             594          Section 12. Section 59-7-319 is amended to read:
             595           59-7-319. Sales of items other than tangible personal property -- When
             596      considered to occur in this state.
             597          (1) Sales, other than sales of tangible personal property, are in this state if:
             598          (a) the income-producing activity is performed in this state; or
             599          (b) the income-producing activity is performed both in and outside this state and a
             600      greater proportion of the income-producing activity is performed in this state than in any other
             601      state, based on costs of performance.
             602          (2) Notwithstanding Subsection (1), sales, other than sales of tangible personal
             603      property, derived, directly or indirectly, from the sale of management, distribution, or
             604      administration services to, or on behalf of a regulated investment company, as defined in
             605      Section 851(a) of the Internal Revenue Code of 1986, including trustees or sponsors of
             606      employee benefit plans which have accounts in a regulated investment company, shall be
             607      assigned to this state to the extent that shareholders of the investment company are domiciled
             608      in the state as follows:
             609          (a) by multiplying the taxpayer's total dollar amount of sales of such services by a
             610      fraction, the numerator of which is the average of the sum of the beginning of the year and the
             611      end of year balance of shares owned by the investment company shareholders domiciled in this
             612      state; and the denominator of which is the average of the sum of the beginning of the year and
             613      end of year balance of shares owned by the investment company shareholders.
             614          (b) A separate computation shall be made to determine the sales for each investment
             615      company.
             616          (3) (a) Notwithstanding Subsection (1), the following sales shall be assigned to the


             617      state to the extent that customers of a securities brokerage business are domiciled in the state:
             618          (i) sales, other than sales of tangible personal property, derived, directly or indirectly,
             619      from the sale of securities brokerage services by a taxpayer which in this state is primarily
             620      engaged in providing services to a regulated investment company as described in Subsection
             621      (2); or
             622          (ii) sales, other than sales of tangible personal property, derived, directly or indirectly
             623      from the sale of securities brokerage services by a taxpayer which is an affiliate of a taxpayer
             624      which, in this state, provides services to a regulated investment company as described in
             625      Subsection (2).
             626          (b) This assignment of sales shall be determined as follows: by multiplying the
             627      taxpayer's total dollar amount of sales of securities brokerage services by a fraction, the
             628      numerator of which is the receipts from securities brokerage services from customers of the
             629      taxpayer domiciled in this state, and the denominator of which is the receipts from securities
             630      brokerage services from all customers of the taxpayer.
             631          (4) Whether sales by an airline, other than sales of tangible personal property, are in
             632      this state is determined as provided in this section, subject to the calculation required by
             633      Subsection 59-7-317 (2).
             634          Section 13. Section 59-12-104 is amended to read:
             635           59-12-104. Exemptions.
             636          The following sales and uses are exempt from the taxes imposed by this chapter:
             637          (1) sales of aviation fuel, motor fuel, and special fuel subject to a Utah state excise tax
             638      under Chapter 13, Motor and Special Fuel Tax Act;
             639          (2) sales to the state, its institutions, and its political subdivisions; however, this
             640      exemption does not apply to sales of:
             641          (a) construction materials except:
             642          (i) construction materials purchased by or on behalf of institutions of the public
             643      education system as defined in Utah Constitution Article X, Section 2, provided the
             644      construction materials are clearly identified and segregated and installed or converted to real
             645      property which is owned by institutions of the public education system; and
             646          (ii) construction materials purchased by the state, its institutions, or its political
             647      subdivisions which are installed or converted to real property by employees of the state, its


             648      institutions, or its political subdivisions; or
             649          (b) tangible personal property in connection with the construction, operation,
             650      maintenance, repair, or replacement of a project, as defined in Section 11-13-103 , or facilities
             651      providing additional project capacity, as defined in Section 11-13-103 ;
             652          (3) (a) sales of an item described in Subsection (3)(b) from a vending machine if:
             653          (i) the proceeds of each sale do not exceed $1; and
             654          (ii) the seller or operator of the vending machine reports an amount equal to 150% of
             655      the cost of the item described in Subsection (3)(b) as goods consumed; and
             656          (b) Subsection (3)(a) applies to:
             657          (i) food and food ingredients; or
             658          (ii) prepared food;
             659          (4) sales of the following to a commercial airline carrier for in-flight consumption:
             660          (a) food and food ingredients;
             661          (b) prepared food; or
             662          (c) services related to Subsection (4)(a) or (b);
             663          (5) sales of parts and equipment for installation in aircraft operated by common carriers
             664      in interstate or foreign commerce;
             665          (6) sales of commercials, motion picture films, prerecorded audio program tapes or
             666      records, and prerecorded video tapes by a producer, distributor, or studio to a motion picture
             667      exhibitor, distributor, or commercial television or radio broadcaster;
             668          (7) (a) subject to Subsection (7)(b), sales of cleaning or washing of tangible personal
             669      property if the cleaning or washing of the tangible personal property is not assisted cleaning or
             670      washing of tangible personal property;
             671          (b) if a seller that sells at the same business location assisted cleaning or washing of
             672      tangible personal property and cleaning or washing of tangible personal property that is not
             673      assisted cleaning or washing of tangible personal property, the exemption described in
             674      Subsection (7)(a) applies if the seller separately accounts for the sales of the assisted cleaning
             675      or washing of the tangible personal property; and
             676          (c) for purposes of Subsection (7)(b) and in accordance with Title 63, Chapter 46a,
             677      Utah Administrative Rulemaking Act, the commission may make rules:
             678          (i) governing the circumstances under which sales are at the same business location;


             679      and
             680          (ii) establishing the procedures and requirements for a seller to separately account for
             681      sales of assisted cleaning or washing of tangible personal property;
             682          (8) sales made to or by religious or charitable institutions in the conduct of their regular
             683      religious or charitable functions and activities, if the requirements of Section 59-12-104.1 are
             684      fulfilled;
             685          (9) sales of a vehicle of a type required to be registered under the motor vehicle laws of
             686      this state if the vehicle is:
             687          (a) not registered in this state; and
             688          (b) (i) not used in this state; or
             689          (ii) used in this state:
             690          (A) if the vehicle is not used to conduct business, for a time period that does not
             691      exceed the longer of:
             692          (I) 30 days in any calendar year; or
             693          (II) the time period necessary to transport the vehicle to the borders of this state; or
             694          (B) if the vehicle is used to conduct business, for the time period necessary to transport
             695      the vehicle to the borders of this state;
             696          (10) (a) amounts paid for an item described in Subsection (10)(b) if:
             697          (i) the item is intended for human use; and
             698          (ii) (A) a prescription was issued for the item; or
             699          (B) the item was purchased by a hospital or other medical facility; and
             700          (b) (i) Subsection (10)(a) applies to:
             701          (A) a drug;
             702          (B) a syringe; or
             703          (C) a stoma supply; and
             704          (ii) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             705      commission may by rule define the terms:
             706          (A) "syringe"; or
             707          (B) "stoma supply";
             708          (11) sales or use of property, materials, or services used in the construction of or
             709      incorporated in pollution control facilities allowed by Sections 19-2-123 through 19-2-127 ;


             710          (12) (a) sales of an item described in Subsection (12)(c) served by:
             711          (i) the following if the item described in Subsection (12)(c) is not available to the
             712      general public:
             713          (A) a church; or
             714          (B) a charitable institution;
             715          (ii) an institution of higher education if:
             716          (A) the item described in Subsection (12)(c) is not available to the general public; or
             717          (B) the item described in Subsection (12)(c) is prepaid as part of a student meal plan
             718      offered by the institution of higher education; or
             719          (b) sales of an item described in Subsection (12)(c) provided for a patient by:
             720          (i) a medical facility; or
             721          (ii) a nursing facility; and
             722          (c) Subsections (12)(a) and (b) apply to:
             723          (i) food and food ingredients;
             724          (ii) prepared food; or
             725          (iii) alcoholic beverages;
             726          (13) (a) except as provided in Subsection (13)(b), the sale of tangible personal property
             727      by a person:
             728          (i) regardless of the number of transactions involving the sale of that tangible personal
             729      property by that person; and
             730          (ii) not regularly engaged in the business of selling that type of tangible personal
             731      property;
             732          (b) this Subsection (13) does not apply if:
             733          (i) the sale is one of a series of sales of a character to indicate that the person is
             734      regularly engaged in the business of selling that type of tangible personal property;
             735          (ii) the person holds that person out as regularly engaged in the business of selling that
             736      type of tangible personal property;
             737          (iii) the person sells an item of tangible personal property that the person purchased as
             738      a sale that is exempt under Subsection (25); or
             739          (iv) the sale is of a vehicle or vessel required to be titled or registered under the laws of
             740      this state in which case the tax is based upon:


             741          (A) the bill of sale or other written evidence of value of the vehicle or vessel being
             742      sold; or
             743          (B) in the absence of a bill of sale or other written evidence of value, the fair market
             744      value of the vehicle or vessel being sold at the time of the sale as determined by the
             745      commission; and
             746          (c) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             747      commission shall make rules establishing the circumstances under which:
             748          (i) a person is regularly engaged in the business of selling a type of tangible personal
             749      property;
             750          (ii) a sale of tangible personal property is one of a series of sales of a character to
             751      indicate that a person is regularly engaged in the business of selling that type of tangible
             752      personal property; or
             753          (iii) a person holds that person out as regularly engaged in the business of selling a type
             754      of tangible personal property;
             755          (14) (a) except as provided in Subsection (14)(b), amounts paid or charged on or after
             756      July 1, 2006, for a purchase or lease by a manufacturing facility other than a cogeneration
             757      facility, for the following:
             758          (i) machinery and equipment that:
             759          (A) is used:
             760          (I) for a manufacturing facility other than a manufacturing facility that is a scrap
             761      recycler described in Subsection 59-12-102 (48)(b):
             762          (Aa) in the manufacturing process; and
             763          (Bb) to manufacture an item sold as tangible personal property; or
             764          (II) for a manufacturing facility that is a scrap recycler described in Subsection
             765      59-12-102 (48)(b), to process an item sold as tangible personal property; and
             766          (B) has an economic life of three or more years; and
             767          (ii) normal operating repair or replacement parts that:
             768          (A) have an economic life of three or more years; and
             769          (B) are used:
             770          (I) for a manufacturing facility in the state other than a manufacturing facility that is a
             771      scrap recycler described in Subsection 59-12-102 (48)(b), in the manufacturing process; or


             772          (II) for a manufacturing facility in the state that is a scrap recycler described in
             773      Subsection 59-12-102 (48)(b), to process an item sold as tangible personal property;
             774          (b) (i) amounts paid or charged on or after July 1, 2005, for a purchase or lease by a
             775      manufacturing facility that is a cogeneration facility placed in service on or after May 1, 2006,
             776      for the following:
             777          (A) machinery and equipment that:
             778          (I) is used:
             779          (Aa) in the manufacturing process; and
             780          (Bb) to manufacture an item sold as tangible personal property; and
             781          (II) has an economic life of three or more years; and
             782          (B) normal operating repair or replacement parts that:
             783          (I) are used in the manufacturing process in a manufacturing facility in the state; and
             784          (II) have an economic life of three or more years; and
             785          (ii) for amounts paid or charged on or after July 1, 2005, but on or before June 30,
             786      2006, for a purchase or lease described in Subsection (14)(b)(i), a cogeneration facility may
             787      claim the exemption allowed by Subsection (14)(b)(i) by filing for a refund:
             788          (A) for sales and use taxes paid under this chapter on the purchase or lease payment;
             789      and
             790          (B) in accordance with Section 59-12-110 ;
             791          (c) amounts paid or charged for a purchase or lease made on or after January 1, 2008,
             792      by an establishment described in NAICS Subsector 212, Mining (except Oil and Gas), or
             793      NAICS Code 213113, Support Activities for Coal Mining, 213114, Support Activities for
             794      Metal Mining, or 213115, Support Activities for Nonmetallic Minerals (except Fuels) Mining,
             795      of the 2002 North American Industry Classification System of the federal Executive Office of
             796      the President, Office of Management and Budget:
             797          (i) machinery and equipment that:
             798          (A) are used in:
             799          (I) the production process, other than the production of real property; or
             800          (II) research and development; and
             801          (B) have an economic life of three or more years; and
             802          (ii) normal operating repair or replacement parts that:


             803          (A) have an economic life of three or more years; and
             804          (B) are used in:
             805          (I) the production process, other than the production of real property, in an
             806      establishment described in this Subsection (14)(c) in the state; or
             807          (II) research and development in an establishment described in this Subsection (14)(c)
             808      in the state;
             809          (d) for purposes of this Subsection (14) and in accordance with Title 63, Chapter 46a,
             810      Utah Administrative Rulemaking Act, the commission:
             811          (i) shall by rule define the term "establishment"; and
             812          (ii) may by rule define what constitutes:
             813          (A) processing an item sold as tangible personal property;
             814          (B) the production process, other than the production of real property; or
             815          (C) research and development; and
             816          (e) on or before October 1, 2011, and every five years after October 1, 2011, the
             817      commission shall:
             818          (i) review the exemptions described in this Subsection (14) and make
             819      recommendations to the Revenue and Taxation Interim Committee concerning whether the
             820      exemptions should be continued, modified, or repealed; and
             821          (ii) include in its report:
             822          (A) the cost of the exemptions;
             823          (B) the purpose and effectiveness of the exemptions; and
             824          (C) the benefits of the exemptions to the state;
             825          (15) (a) sales of the following if the requirements of Subsection (15)(b) are met:
             826          (i) tooling;
             827          (ii) special tooling;
             828          (iii) support equipment;
             829          (iv) special test equipment; or
             830          (v) parts used in the repairs or renovations of tooling or equipment described in
             831      Subsections (15)(a)(i) through (iv); and
             832          (b) sales of tooling, equipment, or parts described in Subsection (15)(a) are exempt if:
             833          (i) the tooling, equipment, or parts are used or consumed exclusively in the


             834      performance of any aerospace or electronics industry contract with the United States
             835      government or any subcontract under that contract; and
             836          (ii) under the terms of the contract or subcontract described in Subsection (15)(b)(i),
             837      title to the tooling, equipment, or parts is vested in the United States government as evidenced
             838      by:
             839          (A) a government identification tag placed on the tooling, equipment, or parts; or
             840          (B) listing on a government-approved property record if placing a government
             841      identification tag on the tooling, equipment, or parts is impractical;
             842          (16) sales of newspapers or newspaper subscriptions;
             843          (17) (a) except as provided in Subsection (17)(b), tangible personal property traded in
             844      as full or part payment of the purchase price, except that for purposes of calculating sales or use
             845      tax upon vehicles not sold by a vehicle dealer, trade-ins are limited to other vehicles only, and
             846      the tax is based upon:
             847          (i) the bill of sale or other written evidence of value of the vehicle being sold and the
             848      vehicle being traded in; or
             849          (ii) in the absence of a bill of sale or other written evidence of value, the then existing
             850      fair market value of the vehicle being sold and the vehicle being traded in, as determined by the
             851      commission; and
             852          (b) notwithstanding Subsection (17)(a), Subsection (17)(a) does not apply to the
             853      following items of tangible personal property traded in as full or part payment of the purchase
             854      price:
             855          (i) money;
             856          (ii) electricity;
             857          (iii) water;
             858          (iv) gas; or
             859          (v) steam;
             860          (18) (a) (i) except as provided in Subsection (18)(b), sales of tangible personal property
             861      used or consumed primarily and directly in farming operations, regardless of whether the
             862      tangible personal property:
             863          (A) becomes part of real estate; or
             864          (B) is installed by a:


             865          (I) farmer;
             866          (II) contractor; or
             867          (III) subcontractor; or
             868          (ii) sales of parts used in the repairs or renovations of tangible personal property if the
             869      tangible personal property is exempt under Subsection (18)(a)(i); and
             870          (b) notwithstanding Subsection (18)(a), amounts paid or charged for the following
             871      tangible personal property are subject to the taxes imposed by this chapter:
             872          (i) (A) subject to Subsection (18)(b)(i)(B), the following tangible personal property if
             873      the tangible personal property is used in a manner that is incidental to farming:
             874          (I) machinery;
             875          (II) equipment;
             876          (III) materials; or
             877          (IV) supplies; and
             878          (B) tangible personal property that is considered to be used in a manner that is
             879      incidental to farming includes:
             880          (I) hand tools; or
             881          (II) maintenance and janitorial equipment and supplies;
             882          (ii) (A) subject to Subsection (18)(b)(ii)(B), tangible personal property if the tangible
             883      personal property is used in an activity other than farming; and
             884          (B) tangible personal property that is considered to be used in an activity other than
             885      farming includes:
             886          (I) office equipment and supplies; or
             887          (II) equipment and supplies used in:
             888          (Aa) the sale or distribution of farm products;
             889          (Bb) research; or
             890          (Cc) transportation; or
             891          (iii) a vehicle required to be registered by the laws of this state during the period
             892      ending two years after the date of the vehicle's purchase;
             893          (19) sales of hay;
             894          (20) exclusive sale during the harvest season of seasonal crops, seedling plants, or
             895      garden, farm, or other agricultural produce if the seasonal crops are, seedling plants are, or


             896      garden, farm, or other agricultural produce is sold by:
             897          (a) the producer of the seasonal crops, seedling plants, or garden, farm, or other
             898      agricultural produce;
             899          (b) an employee of the producer described in Subsection (20)(a); or
             900          (c) a member of the immediate family of the producer described in Subsection (20)(a);
             901          (21) purchases made using a coupon as defined in 7 U.S.C. Sec. 2012 that is issued
             902      under the Food Stamp Program, 7 U.S.C. Sec. 2011 et seq.;
             903          (22) sales of nonreturnable containers, nonreturnable labels, nonreturnable bags,
             904      nonreturnable shipping cases, and nonreturnable casings to a manufacturer, processor,
             905      wholesaler, or retailer for use in packaging tangible personal property to be sold by that
             906      manufacturer, processor, wholesaler, or retailer;
             907          (23) property stored in the state for resale;
             908          (24) (a) purchases of property if:
             909          (i) the property is:
             910          (A) purchased outside of this state;
             911          (B) brought into this state:
             912          (I) at any time after the purchase described in Subsection (24)(a)(i)(A); and
             913          (II) by a nonresident person who is not living or working in this state at the time of the
             914      purchase;
             915          (C) used for the personal use or enjoyment of the nonresident person described in
             916      Subsection (24)(a)(i)(B)(II) while that nonresident person is within the state; and
             917          (D) not used in conducting business in this state; and
             918          (ii) for:
             919          (A) property other than the property described in Subsection (24)(a)(ii)(B), the first use
             920      of the property for a purpose for which the property is designed occurs outside of this state;
             921          (B) a boat, the boat is registered outside of this state; or
             922          (C) a vehicle other than a vehicle sold to an authorized carrier, the vehicle is registered
             923      outside of this state;
             924          (b) the exemption provided for in Subsection (24)(a) does not apply to:
             925          (i) a lease or rental of property; or
             926          (ii) a sale of a vehicle exempt under Subsection (33); and


             927          (c) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, for
             928      purposes of Subsection (24)(a), the commission may by rule define what constitutes the
             929      following:
             930          (i) conducting business in this state if that phrase has the same meaning in this
             931      Subsection (24) as in Subsection (66);
             932          (ii) the first use of property if that phrase has the same meaning in this Subsection (24)
             933      as in Subsection (66); or
             934          (iii) a purpose for which property is designed if that phrase has the same meaning in
             935      this Subsection (24) as in Subsection (66);
             936          (25) property purchased for resale in this state, in the regular course of business, either
             937      in its original form or as an ingredient or component part of a manufactured or compounded
             938      product;
             939          (26) property upon which a sales or use tax was paid to some other state, or one of its
             940      subdivisions, except that the state shall be paid any difference between the tax paid and the tax
             941      imposed by this part and Part 2, Local Sales and Use Tax Act, and no adjustment is allowed if
             942      the tax paid was greater than the tax imposed by this part and Part 2, Local Sales and Use Tax
             943      Act;
             944          (27) any sale of a service described in Subsections 59-12-103 (1)(b), (c), and (d) to a
             945      person for use in compounding a service taxable under the subsections;
             946          (28) purchases made in accordance with the special supplemental nutrition program for
             947      women, infants, and children established in 42 U.S.C. Sec. 1786;
             948          (29) beginning on July 1, 1999, through June 30, 2014, sales or leases of rolls, rollers,
             949      refractory brick, electric motors, or other replacement parts used in the furnaces, mills, or ovens
             950      of a steel mill described in SIC Code 3312 of the 1987 Standard Industrial Classification
             951      Manual of the federal Executive Office of the President, Office of Management and Budget;
             952          (30) sales of a boat of a type required to be registered under Title 73, Chapter 18, State
             953      Boating Act, a boat trailer, or an outboard motor if the boat, boat trailer, or outboard motor is:
             954          (a) not registered in this state; and
             955          (b) (i) not used in this state; or
             956          (ii) used in this state:
             957          (A) if the boat, boat trailer, or outboard motor is not used to conduct business, for a


             958      time period that does not exceed the longer of:
             959          (I) 30 days in any calendar year; or
             960          (II) the time period necessary to transport the boat, boat trailer, or outboard motor to
             961      the borders of this state; or
             962          (B) if the boat, boat trailer, or outboard motor is used to conduct business, for the time
             963      period necessary to transport the boat, boat trailer, or outboard motor to the borders of this
             964      state;
             965          (31) sales of aircraft manufactured in Utah if sold for delivery and use outside Utah
             966      where a sales or use tax is not imposed, even if the title is passed in Utah;
             967          (32) amounts paid for the purchase of telephone service for purposes of providing
             968      telephone service;
             969          (33) sales, leases, or uses of the following:
             970          (a) a vehicle by an authorized carrier; or
             971          (b) tangible personal property that is installed on a vehicle:
             972          (i) sold or leased to or used by an authorized carrier; and
             973          (ii) before the vehicle is placed in service for the first time;
             974          (34) (a) 45% of the sales price of any new manufactured home; and
             975          (b) 100% of the sales price of any used manufactured home;
             976          (35) sales relating to schools and fundraising sales;
             977          (36) sales or rentals of durable medical equipment if:
             978          (a) a person presents a prescription for the durable medical equipment; and
             979          (b) the durable medical equipment is used for home use only;
             980          (37) (a) sales to a ski resort of electricity to operate a passenger ropeway as defined in
             981      Section 72-11-102 ; and
             982          (b) the commission shall by rule determine the method for calculating sales exempt
             983      under Subsection (37)(a) that are not separately metered and accounted for in utility billings;
             984          (38) sales to a ski resort of:
             985          (a) snowmaking equipment;
             986          (b) ski slope grooming equipment;
             987          (c) passenger ropeways as defined in Section 72-11-102 ; or
             988          (d) parts used in the repairs or renovations of equipment or passenger ropeways


             989      described in Subsections (38)(a) through (c);
             990          (39) sales of natural gas, electricity, heat, coal, fuel oil, or other fuels for industrial use;
             991          (40) (a) subject to Subsection (40)(b), sales or rentals of the right to use or operate for
             992      amusement, entertainment, or recreation an unassisted amusement device as defined in Section
             993      59-12-102 ;
             994          (b) if a seller that sells or rents at the same business location the right to use or operate
             995      for amusement, entertainment, or recreation one or more unassisted amusement devices and
             996      one or more assisted amusement devices, the exemption described in Subsection (40)(a)
             997      applies if the seller separately accounts for the sales or rentals of the right to use or operate for
             998      amusement, entertainment, or recreation for the assisted amusement devices; and
             999          (c) for purposes of Subsection (40)(b) and in accordance with Title 63, Chapter 46a,
             1000      Utah Administrative Rulemaking Act, the commission may make rules:
             1001          (i) governing the circumstances under which sales are at the same business location;
             1002      and
             1003          (ii) establishing the procedures and requirements for a seller to separately account for
             1004      the sales or rentals of the right to use or operate for amusement, entertainment, or recreation for
             1005      assisted amusement devices;
             1006          (41) (a) sales of photocopies by:
             1007          (i) a governmental entity; or
             1008          (ii) an entity within the state system of public education, including:
             1009          (A) a school; or
             1010          (B) the State Board of Education; or
             1011          (b) sales of publications by a governmental entity;
             1012          (42) amounts paid for admission to an athletic event at an institution of higher
             1013      education that is subject to the provisions of Title IX of the Education Amendments of 1972,
             1014      20 U.S.C. Sec. 1681 et seq.;
             1015          (43) sales of telephone service charged to a prepaid telephone calling card;
             1016          (44) (a) sales of:
             1017          (i) hearing aids;
             1018          (ii) hearing aid accessories; or
             1019          (iii) except as provided in Subsection (44)(b), parts used in the repairs or renovations


             1020      of hearing aids or hearing aid accessories; and
             1021          (b) for purposes of this Subsection (44), notwithstanding Subsection (44)(a)(iii),
             1022      "parts" does not include batteries;
             1023          (45) (a) sales made to or by:
             1024          (i) an area agency on aging; or
             1025          (ii) a senior citizen center owned by a county, city, or town; or
             1026          (b) sales made by a senior citizen center that contracts with an area agency on aging;
             1027          (46) sales or leases of semiconductor fabricating, processing, research, or development
             1028      materials regardless of whether the semiconductor fabricating, processing, research, or
             1029      development materials:
             1030          (a) actually come into contact with a semiconductor; or
             1031          (b) ultimately become incorporated into real property;
             1032          (47) an amount paid by or charged to a purchaser for accommodations and services
             1033      described in Subsection 59-12-103 (1)(i) to the extent the amount is exempt under Section
             1034      59-12-104.2 ;
             1035          (48) beginning on September 1, 2001, the lease or use of a vehicle issued a temporary
             1036      sports event registration certificate in accordance with Section 41-3-306 for the event period
             1037      specified on the temporary sports event registration certificate;
             1038          (49) sales or uses of electricity, if the sales or uses are:
             1039          (a) made under a tariff adopted by the Public Service Commission of Utah only for
             1040      purchase of electricity produced from a new wind, geothermal, biomass, or solar power energy
             1041      source, as designated in the tariff by the Public Service Commission of Utah; and
             1042          (b) for an amount of electricity that is:
             1043          (i) unrelated to the amount of electricity used by the person purchasing the electricity
             1044      under the tariff described in Subsection (49)(a); and
             1045          (ii) equivalent to the number of kilowatthours specified in the tariff described in
             1046      Subsection (49)(a) that may be purchased under the tariff described in Subsection (49)(a);
             1047          (50) sales or rentals of mobility enhancing equipment if a person presents a
             1048      prescription for the mobility enhancing equipment;
             1049          (51) sales of water in a:
             1050          (a) pipe;


             1051          (b) conduit;
             1052          (c) ditch; or
             1053          (d) reservoir;
             1054          (52) sales of currency or coinage that constitute legal tender of the United States or of a
             1055      foreign nation;
             1056          (53) (a) sales of an item described in Subsection (53)(b) if the item:
             1057          (i) does not constitute legal tender of any nation; and
             1058          (ii) has a gold, silver, or platinum content of 80% or more; and
             1059          (b) Subsection (53)(a) applies to a gold, silver, or platinum:
             1060          (i) ingot;
             1061          (ii) bar;
             1062          (iii) medallion; or
             1063          (iv) decorative coin;
             1064          (54) amounts paid on a sale-leaseback transaction;
             1065          (55) sales of a prosthetic device:
             1066          (a) for use on or in a human;
             1067          (b) for which a prescription is issued; and
             1068          (c) to a person that presents a prescription for the prosthetic device;
             1069          (56) (a) except as provided in Subsection (56)(b), purchases, leases, or rentals of
             1070      machinery or equipment by an establishment described in Subsection (56)(c) if the machinery
             1071      or equipment is primarily used in the production or postproduction of the following media for
             1072      commercial distribution:
             1073          (i) a motion picture;
             1074          (ii) a television program;
             1075          (iii) a movie made for television;
             1076          (iv) a music video;
             1077          (v) a commercial;
             1078          (vi) a documentary; or
             1079          (vii) a medium similar to Subsections (56)(a)(i) through (vi) as determined by the
             1080      commission by administrative rule made in accordance with Subsection (56)(d); or
             1081          (b) notwithstanding Subsection (56)(a), purchases, leases, or rentals of machinery or


             1082      equipment by an establishment described in Subsection (56)(c) that is used for the production
             1083      or postproduction of the following are subject to the taxes imposed by this chapter:
             1084          (i) a live musical performance;
             1085          (ii) a live news program; or
             1086          (iii) a live sporting event;
             1087          (c) the following establishments listed in the 1997 North American Industry
             1088      Classification System of the federal Executive Office of the President, Office of Management
             1089      and Budget, apply to Subsections (56)(a) and (b):
             1090          (i) NAICS Code 512110; or
             1091          (ii) NAICS Code 51219; and
             1092          (d) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             1093      commission may by rule:
             1094          (i) prescribe what constitutes a medium similar to Subsections (56)(a)(i) through (vi);
             1095      or
             1096          (ii) define:
             1097          (A) "commercial distribution";
             1098          (B) "live musical performance";
             1099          (C) "live news program"; or
             1100          (D) "live sporting event";
             1101          (57) (a) leases of seven or more years or purchases made on or after July 1, 2004 but on
             1102      or before June 30, 2009, of machinery or equipment that:
             1103          (i) is leased or purchased for or by a facility that:
             1104          (A) is a renewable energy production facility;
             1105          (B) is located in the state; and
             1106          (C) (I) becomes operational on or after July 1, 2004; or
             1107          (II) has its generation capacity increased by one or more megawatts on or after July 1,
             1108      2004 as a result of the use of the machinery or equipment;
             1109          (ii) has an economic life of five or more years; and
             1110          (iii) is used to make the facility or the increase in capacity of the facility described in
             1111      Subsection (57)(a)(i) operational up to the point of interconnection with an existing
             1112      transmission grid including:


             1113          (A) a wind turbine;
             1114          (B) generating equipment;
             1115          (C) a control and monitoring system;
             1116          (D) a power line;
             1117          (E) substation equipment;
             1118          (F) lighting;
             1119          (G) fencing;
             1120          (H) pipes; or
             1121          (I) other equipment used for locating a power line or pole; and
             1122          (b) this Subsection (57) does not apply to:
             1123          (i) machinery or equipment used in construction of:
             1124          (A) a new renewable energy production facility; or
             1125          (B) the increase in the capacity of a renewable energy production facility;
             1126          (ii) contracted services required for construction and routine maintenance activities;
             1127      and
             1128          (iii) unless the machinery or equipment is used or acquired for an increase in capacity
             1129      of the facility described in Subsection (57)(a)(i)(C)(II), machinery or equipment used or
             1130      acquired after:
             1131          (A) the renewable energy production facility described in Subsection (57)(a)(i) is
             1132      operational as described in Subsection (57)(a)(iii); or
             1133          (B) the increased capacity described in Subsection (57)(a)(i) is operational as described
             1134      in Subsection (57)(a)(iii);
             1135          (58) (a) leases of seven or more years or purchases made on or after July 1, 2004 but on
             1136      or before June 30, 2009, of machinery or equipment that:
             1137          (i) is leased or purchased for or by a facility that:
             1138          (A) is a waste energy production facility;
             1139          (B) is located in the state; and
             1140          (C) (I) becomes operational on or after July 1, 2004; or
             1141          (II) has its generation capacity increased by one or more megawatts on or after July 1,
             1142      2004 as a result of the use of the machinery or equipment;
             1143          (ii) has an economic life of five or more years; and


             1144          (iii) is used to make the facility or the increase in capacity of the facility described in
             1145      Subsection (58)(a)(i) operational up to the point of interconnection with an existing
             1146      transmission grid including:
             1147          (A) generating equipment;
             1148          (B) a control and monitoring system;
             1149          (C) a power line;
             1150          (D) substation equipment;
             1151          (E) lighting;
             1152          (F) fencing;
             1153          (G) pipes; or
             1154          (H) other equipment used for locating a power line or pole; and
             1155          (b) this Subsection (58) does not apply to:
             1156          (i) machinery or equipment used in construction of:
             1157          (A) a new waste energy facility; or
             1158          (B) the increase in the capacity of a waste energy facility;
             1159          (ii) contracted services required for construction and routine maintenance activities;
             1160      and
             1161          (iii) unless the machinery or equipment is used or acquired for an increase in capacity
             1162      described in Subsection (58)(a)(i)(C)(II), machinery or equipment used or acquired after:
             1163          (A) the waste energy facility described in Subsection (58)(a)(i) is operational as
             1164      described in Subsection (58)(a)(iii); or
             1165          (B) the increased capacity described in Subsection (58)(a)(i) is operational as described
             1166      in Subsection (58)(a)(iii);
             1167          (59) (a) leases of five or more years or purchases made on or after July 1, 2004 but on
             1168      or before June 30, 2009, of machinery or equipment that:
             1169          (i) is leased or purchased for or by a facility that:
             1170          (A) is located in the state;
             1171          (B) produces fuel from biomass energy including:
             1172          (I) methanol; or
             1173          (II) ethanol; and
             1174          (C) (I) becomes operational on or after July 1, 2004; or


             1175          (II) has its capacity to produce fuel increase by 25% or more on or after July 1, 2004 as
             1176      a result of the installation of the machinery or equipment;
             1177          (ii) has an economic life of five or more years; and
             1178          (iii) is installed on the facility described in Subsection (59)(a)(i);
             1179          (b) this Subsection (59) does not apply to:
             1180          (i) machinery or equipment used in construction of:
             1181          (A) a new facility described in Subsection (59)(a)(i); or
             1182          (B) the increase in capacity of the facility described in Subsection (59)(a)(i); or
             1183          (ii) contracted services required for construction and routine maintenance activities;
             1184      and
             1185          (iii) unless the machinery or equipment is used or acquired for an increase in capacity
             1186      described in Subsection (59)(a)(i)(C)(II), machinery or equipment used or acquired after:
             1187          (A) the facility described in Subsection (59)(a)(i) is operational; or
             1188          (B) the increased capacity described in Subsection (59)(a)(i) is operational;
             1189          (60) amounts paid to a purchaser as a rebate from the manufacturer of a new vehicle
             1190      for purchasing the new vehicle;
             1191          (61) (a) subject to Subsection (61)(b), sales of tangible personal property to persons
             1192      within this state that is subsequently shipped outside the state and incorporated pursuant to
             1193      contract into and becomes a part of real property located outside of this state, except to the
             1194      extent that the other state or political entity imposes a sales, use, gross receipts, or other similar
             1195      transaction excise tax on it against which the other state or political entity allows a credit for
             1196      taxes imposed by this chapter; and
             1197          (b) the exemption provided for in Subsection (61)(a):
             1198          (i) is allowed only if the exemption is applied:
             1199          (A) in calculating the purchase price of the tangible personal property; and
             1200          (B) to a written contract that is in effect on July 1, 2004; and
             1201          (ii) (A) does not apply beginning on the day on which the contract described in
             1202      Subsection (61)(b)(i):
             1203          (I) is substantially modified; or
             1204          (II) terminates; and
             1205          (B) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,


             1206      the commission may by rule prescribe the circumstances under which a contract is substantially
             1207      modified;
             1208          (62) purchases:
             1209          (a) of one or more of the following items in printed or electronic format:
             1210          (i) a list containing information that includes one or more:
             1211          (A) names; or
             1212          (B) addresses; or
             1213          (ii) a database containing information that includes one or more:
             1214          (A) names; or
             1215          (B) addresses; and
             1216          (b) used to send direct mail;
             1217          (63) redemptions or repurchases of property by a person if that property was:
             1218          (a) delivered to a pawnbroker as part of a pawn transaction; and
             1219          (b) redeemed or repurchased within the time period established in a written agreement
             1220      between the person and the pawnbroker for redeeming or repurchasing the property;
             1221          (64) (a) purchases or leases of an item described in Subsection (64)(b) if the item:
             1222          (i) is purchased or leased by, or on behalf of, a telephone service provider; and
             1223          (ii) has a useful economic life of one or more years; and
             1224          (b) the following apply to Subsection (64)(a):
             1225          (i) telecommunications enabling or facilitating equipment, machinery, or software;
             1226          (ii) telecommunications equipment, machinery, or software required for 911 service;
             1227          (iii) telecommunications maintenance or repair equipment, machinery, or software;
             1228          (iv) telecommunications switching or routing equipment, machinery, or software; or
             1229          (v) telecommunications transmission equipment, machinery, or software;
             1230          (65) (a) beginning on July 1, 2006, and ending on June 30, 2016, purchases of tangible
             1231      personal property used in the research and development of coal-to-liquids, oil shale, or tar
             1232      sands technology; and
             1233          (b) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             1234      commission may, for purposes of Subsection (65)(a), make rules defining what constitutes
             1235      tangible personal property used in the research and development of coal-to-liquids, oil shale,
             1236      and tar sands technology;


             1237          (66) (a) purchases of property if:
             1238          (i) the property is:
             1239          (A) purchased outside of this state;
             1240          (B) brought into this state at any time after the purchase described in Subsection
             1241      (66)(a)(i)(A); and
             1242          (C) used in conducting business in this state; and
             1243          (ii) for:
             1244          (A) property other than the property described in Subsection (66)(a)(ii)(B), the first use
             1245      of the property for a purpose for which the property is designed occurs outside of this state; or
             1246          (B) a vehicle other than a vehicle sold to an authorized carrier, the vehicle is registered
             1247      outside of this state;
             1248          (b) the exemption provided for in Subsection (66)(a) does not apply to:
             1249          (i) a lease or rental of property; or
             1250          (ii) a sale of a vehicle exempt under Subsection (33); and
             1251          (c) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, for
             1252      purposes of Subsection (66)(a), the commission may by rule define what constitutes the
             1253      following:
             1254          (i) conducting business in this state if that phrase has the same meaning in this
             1255      Subsection (66) as in Subsection (24);
             1256          (ii) the first use of property if that phrase has the same meaning in this Subsection (66)
             1257      as in Subsection (24); or
             1258          (iii) a purpose for which property is designed if that phrase has the same meaning in
             1259      this Subsection (66) as in Subsection (24);
             1260          (67) sales of disposable home medical equipment or supplies if:
             1261          (a) a person presents a prescription for the disposable home medical equipment or
             1262      supplies;
             1263          (b) the disposable home medical equipment or supplies are used exclusively by the
             1264      person to whom the prescription described in Subsection (67)(a) is issued; and
             1265          (c) the disposable home medical equipment and supplies are listed as eligible for
             1266      payment under:
             1267          (i) Title XVIII, federal Social Security Act; or


             1268          (ii) the state plan for medical assistance under Title XIX, federal Social Security Act;
             1269      [and]
             1270          (68) sales to a public transit district under Title 17B, Chapter 2a, Part 8, Public Transit
             1271      District Act, or to a subcontractor of a public transit district, including sales of construction
             1272      materials that are to be installed or converted to real property owned by the public transit
             1273      district[.]; and
             1274          (69) sales of construction materials:
             1275          (a) purchased by, on behalf of, or for the benefit of an international airport:
             1276          (i) located within a county of the first class; and
             1277          (ii) that has a United States customs office on its premises; and
             1278          (b) if the construction materials are:
             1279          (i) clearly identified;
             1280          (ii) segregated; and
             1281          (iii) installed or converted to real property:
             1282          (A) owned or operated by the international airport described in Subsection (69)(a); and
             1283          (B) located at the international airport described in Subsection (69)(a).
             1284          Section 14. Effective date.
             1285          (1) Except as provided in Subsection (2) or (3), this bill has retrospective operation for
             1286      taxable years beginning on or after January 1, 2008.
             1287          (2) The amendments to Section 59-2-804 take effect on January 1, 2009.
             1288          (3) The amendments to Section 59-12-104 take effect on July 1, 2008.




Legislative Review Note
    as of 2-19-08 9:40 AM


Office of Legislative Research and General Counsel


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