Utah Code Ann. § 59-12-104

Section 59-12-104(12) exempts sales or uses only when the Constitution or another applicable law prohibits Utah from taxing them, including qualifying interstate-commerce transactions.

Tummurru Trades, Inc. v. Utah State Tax Commission · filed 1990-09-19(12)

The following sales and uses are exempt from the taxes imposed by this chapter: ... (12) sales or use of property which the state is prohibited from taxing under the Constitution or laws of the United States or under the laws of this state; ... It is clear from the record that Tum-murru failed to keep adequate records with regard to its sales and that it was unable to produce the necessary exemption certificates. ... In the instant case, the Tax Commission properly determined that where Tummurru could not uphold its burden of proving that the sales were made in interstate commerce or for resale by providing records of exemption certificates, the sales tax would be levied.

Section 59-12-104(9) exempts vehicle sales to bona fide nonresidents only when the vehicles are not afterward registered or used in Utah except as necessary to transport them to the state's borders.

Putvin v. Utah State Tax Commission · filed 1992-09-01(9)

We do not find Rule 873-22-1M to be an unreasonable interpretation of the statutory term “bona fide nonresident” in view of the statutory language and the purpose of the sales tax.

The manufacturing-facility sales-tax exemption applies only when the taxpayer operates an establishment, as defined by the Commission, whose activities fall within the specified manufacturing SIC classifications; a brew pub whose beer is sold entirely through its restaurant may be treated as one retail establishment and therefore does not qualify.

Salt Lake Brewing Co. v. Auditing Division of the Utah State Tax Commission · filed 1997-09-19(16)

For a taxpayer to qualify as a “manufacturing facility” to which the exemption is available, it must be an “establishment” under the definition given to that term by the Commission, and it must perform activities described in the relevant sections of the Standard Industrial Classifications (SIC) manual. ... The Commission has defined “establishment” by administrative rule as “an economic unit of operations that is generally at a single physical location in Utah where qualifying manufacturing activities are performed. Where distinct and separate economic activities are performed at a single physical location, each activity should be treated as a separate establishment.” ... We conclude that the Commission’s finding is reasonable. SLBC’s operations during the audit period, viewed as a whole, may reasonably be described as one retail business. ... The Commission also properly applied the statute to determine that SLBC did not qualify as a manufacturing facility under section 59-12-104. ... Having exercised its discretion in determining that both of SLBC’s operations constituted one establishment, the Commission found that the brew pub could be best described as both an “eating place” (SIC Code 5812) and a “drinking place for alcoholic beverages” (SIC Code 5813) and therefore was not a manufacturer for purposes of the sales tax exemption.

Section 59-12-104(12) exempts sales or use of property only when the United States Constitution or federal law prohibits Utah from taxing it; the court held that this exemption did not bar the use tax on Questar's compressor-fuel gas because the tax was constitutional.

Questar Pipeline Co. v. Utah State Tax Commission · filed 1991-08-01(12)

Utah law, however, also recognizes that the state’s taxing authority is subject to federal law. Utah Code Ann. § 59-12-104(12) (1987) exempts “sales or use of property which the state is prohibited from taxing under the Constitution or laws of the United States.” Questar asserts that the supremacy clause, U.S. Const, art. VI, cl. 2, the commerce clause, U.S. Const, art. I, § 8, cl. 3, and Utah Code Ann. § 59-12-104(12) (1987) preempt a sales and use tax on their compressor-fuel gas. An analysis of the case law reveals the inaccuracy of this contention.

Section 59-12-104(15) exempts qualifying materials used to construct synthetic-fuel plants producing liquid or gaseous fuel from mined resources, while subsection (16) exempts manufacturing machinery and equipment but not real-property structures merely because they are specialized and support manufacturing operations.

Morton International, Inc. v. Auditing Division of the Utah State Tax Commission · filed 1991-06-24(15) and (16)

There is ample support from the wording of the statute, the statute’s legislative history, and other methods of statutory construction to conclude that the legislature, in enacting section 59-12-104(15), intended to grant an exemption for materials used in the construction of the type of plant Dr. Wiser described: that is, a plant which removes impurities from natural resources such as coal, oil shale, and tar sands to produce a liquid or gaseous material meant to be used in combustion for the production of energy. It is also clear that given this construction, Morton’s production facilities do not qualify as a synthetic fuel processing and upgrading plant. The Commission, therefore, did not err in determining that the materials used in the construction of Morton’s facilities do not qualify for an exemption under section 59-12-104(15). ... Given the language of rule 865-19-85S, the discrepancies between rule 865-19-85S and the statutes Morton cites, and the conflicting case law, the Commission’s determination that the shells of Morton’s facilities do not constitute equipment is not unreasonable. Therefore, the Commission’s determination will not be disturbed.

Section 59-12-104 lists exemptions from sales and use tax, but no listed exemption applies to electricity transferred by a parent company to its separately incorporated subsidiary for transporting ore.

SF Phosphates Ltd. v. Auditing Division, Utah State Tax Commission · filed 1998-06-26

Moreover, Phosphates cannot rely upon any statutory exemption. Section 59-12-104 enumerates exemptions from sales and use tax; no listed exemption applies to the transaction between Phosphates and Pipeline.

Section 59-12-104(16) exempts qualifying machinery and equipment used in new or expanding manufacturing operations and does not authorize the Commission to narrow the exemption by defining “manufacturer.”

Sanders Brine Shrimp v. Audit Division of Utah State Tax Commission · filed 1993-01-28(16)

Section 59-12-104(16) authorizes the Commission to define by rule the terms “new or expanding operation” and “establishment.” However, it does not authorize the Commission to define the term “manufacturer,” nor does it authorize the Commission to otherwise limit the availability of the exemption as it has done in subparts (b) and (c) of rule R865-85S-1(A)(4). ... For the foregoing reasons, we hold that the Commission’s rule defining “manufacturer” is invalid because it improperly restricts the manufacturing sales tax exemption set forth in section 59-12-104(16).

The exemption for machinery and equipment used in new or expanding manufacturing operations covers a manufacturer of pre-recorded magnetic tape, including video tape; the SIC Code 3652 language contains no audio-only limitation.

Bonneville International Corp. v. Utah State Tax Commission · filed 1993-08-17(15)

The plain language of SIC Code 3652 demonstrates the significance of the Commission’s concession that Video West manufactures “pre-recorded magnetic tape.” The “ordinary meaning” of the term “pre-recorded magnetic tape” expressly includes Video West’s product. ... Because we are able to apply the ordinary meaning of the term “pre-recorded magnetic tape” and conclude that Video West squarely fits within SIC Code 3652, the Commission erred. ... We conclude that the Commission erroneously interpreted SIC Code 3652 when it determined that Video West’s activities did not fall within its scope.

Section 59-12-104(16) exempts machinery and equipment purchased by a Utah manufacturer for new or expanding operations, including modernization that expands production or capacity, but not ordinary operating replacements.

Newspaper Agency Corp. v. Utah State Tax Commission, Auditing Division · filed 1995-03-07(16)

Nothing in section 59-12-104(16) requires that a business participate in activities “substantially different in nature, character, or purpose from prior activities” in order to be defined as a “new or expanding operation! ].” ... We therefore hold that subpart (a) of the Commission’s rule is invalid because it is contrary to section 59-12-104(16) and improperly restricts the availability of sales tax exemptions to new products or services. ... Nothing in section 59-12-104(16) requires that a business begin operations in “a new physical plant location in Utah” in order to be defined as a “new or expanding operation!].” ... We therefore hold that subpart (b) of the Commission’s rule is invalid because it is contrary to section 59-12-104(16) and improperly restricts the availability of sales tax exemptions to equipment and machinery purchased for use in new physical locations. ... We therefore hold that Rule 865-19-85S.A.6. defining “normal operating replacements” is invalid because it is contrary to section 59-12-104(16) and imper-missibly restricts the availability of sales tax exemptions. ... Based on the Commission’s findings and the plain meaning of section 59-12-104(16), NAC met its burden of demonstrating that it was a “new or expanding operation[ ].” We therefore conclude that NAC is entitled to a sales tax exemption for its purchases of new equipment and machinery for the expansion of its Regent Street plant.

Section 59-12-104(15) exempts machinery and equipment used in new or expanding manufacturing operations, but excludes normal operating replacements even when the replacements increase plant production or capacity.

Eaton Kenway, Inc. v. Auditing Division of the Utah State Tax Commission · filed 1995-11-06(15)

Section 59-12-104(15) denies the exemption to “normal operating replacements, which includes replacement machinery and equipment even though they may increase plant production or capacity.” While this language is wordy, we conclude that the legislative intent was to deny the exemption to normal operating replacements of machinery and equipment even though they may increase plant production or capacity.

Section 59-12-104(16)'s normal-operating-replacements exclusion applies to both new and expanding operations.

Newspaper Agency Corp. v. Auditing Division of Utah State Tax Commission · filed 1997-03-28(16)

In view of this plain reading of the statute, we reject NAC’s position. The parenthetical sentence in section 59-12-104(16) excluding normal operating replacements applies to the entire phrase “new or expanding operations.”

Section 59-12-104’s 1996 amendment limits the industrial-use exemption for gases to natural gas.

Hercules Inc. v. Utah State Tax Commission · filed 2000-12-21(43)

This makes clear that now only sales of natural gas are exempt from taxation when used for manufacturing purposes.

Section 59-12-104(15) fully exempts machinery and equipment used in new or expanding manufacturing operations, while normal operating replacements receive only the statutory graduated exemption.

Morgan County v. Holnam, Inc. · filed 2001-07-02(15)

We agree with the Commission that in order to determine whether equipment "replaces existing machinery or equipment of a similar nature, even if the use results in increased plant production or capacity," it must first determine whether that replacement equipment was purchased in the regular course of business. - It is reasonable to make that determination based on whether the primary purpose of the equipment is expansionary or whether it is to replace existing machinery in the ordinary course of business because, as the Commission argues, "as a practical matter, a new plant will consist of machinery and equipment that serves both an expansionary and replacement purpose." This determination clearly requires the sifting of facts in each case.

Section 59-12-104(15) grants the manufacturing-equipment sales-tax exemption when a manufacturer buys equipment for new or expanding operations at a Utah facility primarily engaged in an activity covered by SIC Codes 2000 to 3999; the Commission need not find that this is the facility’s “best” code.

Atlas Steel, Inc. v. Utah State Tax Commission · filed 2002-11-19(15)

Thus, the definition of manufacturing facility incorporates by reference the language of SIC Codes 2000 to 3999 as it is used in the SIC Manual and classification system. ... Therefore, when the plain language of the statute is read in connection with the plain language of the incorporated SIC codes, the key in determining whether an establishment is described in a particular SIC code is whether that establishment is “primarily engaged in” the activity set forth in that SIC code. In order to be described by SIC Codes 2000 to 3999, the establishment must be “primarily engaged in manufacturing” the types of products referenced in the manner or under the conditions specified.

Section 59-12-104(24) exempts any container, including reusable containers, while subsection (15) requires machinery and equipment to be used in a qualifying SIC-classified manufacturing facility, including pasteurized-water production under Classification 2086.

Mt. Olympus Waters, Inc. v. Utah State Tax Commission · filed 1994-07-06(24), (15)

The section exempts manufacturers from paying sales tax on “any container,” not “any nonreusable container.” ... To qualify for a sales tax exemption for purchased machinery and equipment, an establishment must be a manufacturing facility as described in Classifications 2000 to 3999 of the SIC Manual. ... Classification 2086 describes establishments engaged in manufacturing pasteurized water.

Section 59-12-104(18) exempts intrastate freight movements from sales tax only when performed by common carriers.

Hales Sand & Gravel, Inc. v. Audit Division of the State Tax Commission · filed 1992-11-12(18)

We hold that section 59-12-104(18)’s sales tax exemption is limited to common carriers.

The authorized-carrier exemption covers truck parts only when they are integrated into the vehicle at the time of purchase; parts added afterward are not exempt.

Dick Simon Trucking, Inc. v. Utah State Tax Commission · filed 2004-01-30(36)

We hold that the only way truck parts can constitute a “vehicle” for purposes of the Authorized Carrier Exemption is for the parts to be integrated into the vehicle at the time of its purchase.

Section 59-12-104(8) does not make a business organization a religious institution merely because it conducts prayer meetings and services for its members.

Semeco Industries, Inc. v. Auditing Division of the Utah State Tax Commission · filed 1993-04-01(8)

The Commission concluded by stating, “Nor is the fact that [SEMECO] conducts weekly prayer meetings and services for its membership sufficient to convert [SEME-CO] from a business organization into a religious institution for purposes of the Sales Tax Act.” We agree.

Section 59-12-104(8) does not exempt a contractor's material purchases merely because the tax cost is passed to a religious organization, and section 59-12-104(28) does not require Utah to credit taxes paid later to another state when Utah's tax became due first.

Niederhauser v. TAX COM'N · filed 1993-08-13(8), (28)

The fact that the amount of the tax might be passed along to the general contractor and then on to the LDS Church does not bring this transaction under section 104(8). Accordingly, the Commission correctly assessed sales tax on petitioner's purchase of materials for the two temple contracts. ... The Chicago Bridge Court's conclusion that taxes which come due first take priority over taxes paid first is a simple, logical, and easily applied rule that applies equally well to section 104(28). Petitioner was liable for the Utah tax first because the sales of materials to petitioner in Utah occurred long before petitioner sold finished products in Nevada. Accordingly, under the Chicago Bridge rule, petitioner should be addressing its claim for a credit to Nevada.

Section 59-12-104(8) does not exempt a contractor’s purchases merely because the tax cost passes to a religious organization, and subsection (28) does not credit a later out-of-state tax against an earlier Utah tax.

Niederhauser Ornamental & Metal Works Co. v. Tax Commission, Auditing Division · filed 1993-08-13

The fact that the amount of the tax might be passed along to the general contractor and then on to the LDS Church does not bring this transaction under section 104(8). ... The Chicago Bridge Court’s conclusion that taxes which come due first take priority over taxes paid first is a simple, logical, and easily applied rule that applies equally well to section 104(28).

Section 59-12-104(10) exempts prescribed medicine from sales tax, including oxygen supplied through an oxygen concentrator.

Miller Welding Supply, Inc. v. Utah State Tax Commission, Auditing Division · filed 1993-09-02(10)

The clear purpose of Utah Code Ann. § 59-12-104(10) is to relieve those required to take prescribed medicine from the burden of having to pay sales tax on that medicine. ... We believe the legislature intended that patients should be relieved from paying sales tax when purchasing prescribed medicine, whether patients use oxygen provided by oxygen concentrators or oxygen provided in green bottles.

Section 59-12-104(13)(b) exempts inpatient meals provided at medical or nursing facilities from sales tax even when the meals are included in general care charges rather than separately itemized or priced.

Heritage Convalescent Center v. Utah State Tax Commission · filed 1997-10-24(13)(b)

We find nothing in the statutes or in our case law requiring a separate itemization or a separate price affixed for a transaction to qualify as a “sale.” ... Thus, in furnishing meals to the patients, there is a transfer of tangible personal property for consideration, and a sale has occurred, although the consideration is paid as part of the general billing for care. ... Consequently, we conclude that the inpatient meals are exempt from sales tax under section 59-12-104(13)(b), and petitioners’ bulk purchase of food is exempt under section 59-12-104(27) (1996) because it is purchased for resale within the state.

Section 59-12-104(20) exempts sprays used to control insects, diseases, and weeds in the commercial production of listed products, including liquid nitrogen sprayed on meat patties to control disease-causing microorganisms.

OSI Industries, Inc. v. Utah State Tax Commission, Auditing Division · filed 1993-09-10(20)

As the plain language of Utah Code Ann. § 59-12-104(20) (Supp.1993) reads, it applies to all sprays which are “used to control insects, diseases, and weeds for commercial production of fruits, vegetables, feeds, seeds, and animal products.... ” Accordingly, we conclude that the liquid nitrogen spray used by OSI to flash freeze meat patties is included within the plain language of that section. ... It follows that the liquid nitrogen sprayed on the meat patties, which, among other things, prevents the spread of salmonella, staphylococcus and E. coli, clearly is being “used to control ... diseases.” Utah Code Ann. § 59-12-104(20) (Supp.1993). Thus, since the liquid nitrogen purchased by OSI fits within the plain language of section 59-12-104(20), the Tax Commission’s determination cannot stand, and OSI is entitled to a tax exemption on its purchases of liquid nitrogen.

Section 59-12-104(27) exempts property purchased for resale, but a service provider that retains ownership and uses equipment as an incidental tool to provide services is the equipment's ultimate consumer and owes sales tax.

Broadcast International, Inc. v. Utah State Tax Commission · filed 1994-09-30(27)

However, property purchased for resale is exempt from sales tax. ... Broadcast’s claim for exemption is based on Utah Code Ann. § 59-12-104(27) (1992), which exempts property purchased for resale from taxation. ... Instead, the record supports the Tax Commission’s finding that Broadcast never intended to resell the equipment. ... Accordingly, we affirm the Tax Commission’s conclusion that Broadcast is the ultimate consumer of the equipment, and therefore subject to sales tax on its purchase.

Section 59-12-104(27) exempts ingredients or component parts only when the property was purchased for resale, rather than consumed as a manufacturing aid.

Gull Laboratories, Inc. v. Utah State Tax Commission, Auditing Division · filed 1997-04-03(27)

However, just because a manufacturer buys a material that becomes an ingredient or component part in a final product does not mean that purchase is exempt from sales tax under section 59-12-104(27). ... We therefore shift our focus to the critical requirement that ingredients found in manufactured products be “purchased for resale” to qualify for exemption. ... Thus, if Gull’s purpose is to effectively consume the media mix in the manufacturing process, and the mix becomes only an incidental ingredient of the kits, then the mix is not “purchased for resale,” and mix purchases are not exempt. ... Accordingly, given Gull’s primary purpose in buying and using media mix, we conclude media mix is not “purchased for resale” by Gull under section 59-12-104(27). Thus, the Commission was correct to uphold the assessment of sales tax on Gull’s media mix purchases.

The resale exemption applies only when property is purchased for resale; a telephone association that remains the equipment's end-user cannot claim the exemption.

South Central Utah Telephone Ass'n v. Auditing Division of the Utah State Tax Commission · filed 1997-12-30(27)

Section 59-12-103 also governs the remaining issue: whether South Central’s telephone equipment was “purchased for resale” and therefore exempt from sales tax. Although tangible personal property is taxable pursuant to Utah Code Ann. § 59-12-103(1), subsection 59-12-104(27) exempts “property purchased for resale in this state.” Therefore, for South Central’s purchases of telephone transmission equipment to be exempt from sales tax pursuant to subsection 59-12-104(27), they had to have been “purchased for resale.” ... Accordingly, we affirm the Tax Commission’s finding that South Central did not purchase the telephone equipment for resale but was the end-user. Therefore, South Central was liable for sales tax on the purchase price.

Section 59-12-104(26) exempts a purchase of tangible personal property for resale from sales tax.

Matrix Funding Corp. v. Utah State Tax Commission · filed 2002-08-16(26)

We therefore hold that title passed to Matrix from ZCMI under the clear provision of the Agreement. This sale is tax exempt, however, as a purchase for resale.

Section 59-12-104(28)’s resale exemption may require resale to be the primary purpose of a purchase; manufacturing equipment that only incidentally enters the finished product remains taxable.

Nucor Corp., Nucor Steel—Utah Division v. Utah State Tax Commission · filed 1992-05-18(28)

Clearly, Nucor did not primarily purchase the items as an iron source but as equipment to further the manufacturing process, which equipment then incidentally supplies a portion of the iron in the product.

Section 59-12-104(27) exempts property purchased for resale in Utah in the regular course of business from sales tax.

Matrix Funding Corp. v. Auditing Division of the Utah State Tax Commission · filed 1994-02-03(27)

However, the sale from Customer to Matrix is exempt from sales tax since the “property [was] purchased for resale in this state, in the regular course of business_” Utah Code Ann. § 59-12-104(27) (1992).

Section 59-12-104(2) exempts a sale from sales tax only when the sale is made to the state or its political subdivisions; payment by a state warrant does not, by itself, qualify a sale to a private contractor for the exemption.

Rocky Mountain Energy v. Utah State Tax Commission · filed 1993-04-28(2)

Rule 42S was enacted pursuant to section 59-12-104(2), which requires a sale to the state in order to qualify for an exemption from sales tax.