Is the electricity my Utah business buys under a utility's renewable-energy 'green' tariff exempt from Utah sales and use tax?
Plain-English summary
A company planned to build a facility with very high energy needs in Utah and wanted it powered by renewable electricity. It signed a renewable-energy contract (the "Agreement") with a Utah utility (the "Power Company"), which had set up a special renewable-energy "green" tariff approved by the Public Service Commission under Utah Code §§ 54-17-801 to -806. The company asked the Tax Commission whether the electricity it buys under that tariff is exempt from Utah sales and use tax — and whether the answer changes if it later assigns the contract to a related company.
The Commission's bottom line: electricity is taxable tangible personal property in Utah (§ 59-12-102(125)(b)(i)), and a business's electricity is taxed as "commercial use" (§ 59-12-103(1)(c)(ii)) unless an exemption applies. The relevant exemption — § 59-12-104(47)(a) — is narrow. To qualify, the electricity must be:
- bought under a retail tariff adopted by the Public Service Commission, and
- produced from a new alternative energy source built after January 1, 2016, and
- designated as such in the tariff.
The Commission concluded the company's purchases would likely be a mix: some electricity meeting the exemption and some not. Going forward, when the parties actually select renewable resources built after January 1, 2016, and add them to the contract (through "Exhibit E," which becomes part of the tariff), that electricity qualifies. But until they fully switch over, some power won't. And one piece in particular fails the test: unbundled renewable-energy credits (RECs) the contract lets the company direct the utility to buy "on a least-cost basis." Because the contract doesn't require those RECs to come from a new post-2016 source designated in the tariff, the electricity tied to those RECs is taxable. A non-binding "memorandum of understanding" expressing the parties' intent to use post-2016 sources didn't change that — it expressly created no legal obligation.
Then the key practical mechanics. When a single sale mixes taxable and exempt electricity, how it's priced decides how it's taxed:
- If the two were sold for one nonitemized price, it would be a "bundled transaction" (§ 59-12-102(18)) and the whole thing would generally be taxable under § 59-12-103(2)(d).
- Here it is not bundled, because the exempt "renewable supply" is separately priced in the contract (a distinct "CHARGE FOR RENEWABLE SUPPLY" set by Exhibit E). So taxability is governed instead by § 59-12-103(2)(e): the entire transaction is taxable unless the seller, at the time of the sale, separately states the nontaxable portion on the invoice or can identify it "by reasonable and verifiable standards" from its books and records. In short, the utility has to itemize or document the exempt renewable portion to keep it exempt — otherwise the whole bill is taxed.
Finally, the Commission ruled that assigning the contract to a related-party affiliate or successor wouldn't change any of these conclusions, because the Agreement already contemplates assignment and binds any successor to the same terms (Section 14.1).
What this means for you
Large commercial and industrial electricity buyers (data centers, factories, big facilities)
Buying "green" or "renewable" power in Utah does not automatically make it tax-exempt. Your commercial electricity is taxable unless it threads the needle of § 59-12-104(47)(a): bought under a PSC-approved retail renewable tariff and generated by an alternative-energy source built after January 1, 2016 and designated that way in the tariff. Power from older renewable plants, or from a generic green program that doesn't tie to a specific new post-2016 source, stays taxable. If your facility's "renewable" supply is a blend, expect part of it to be taxed.
Anyone counting on renewable-energy credits (RECs)
This ruling is a clear warning on RECs: unbundled RECs bought "on a least-cost basis" do not earn the exemption. The exemption follows electricity actually produced from a designated new post-2016 source — not a separately purchased certificate whose origin and build date aren't pinned down in the tariff. If renewable credits are part of your strategy, don't assume they carry the sales-tax exemption with them.
Utilities and energy buyers structuring a green-tariff contract
The exemption can be lost on the invoice even when it's legally earned. Because Utah analyzes a mixed exempt/taxable electricity sale under § 59-12-103(2)(e), the entire charge is taxable unless the seller separately states the exempt renewable portion or can prove it from ordinary business records. Build the itemization and recordkeeping into the billing system from day one. Note too that intent documents (a non-binding MOU) carry no weight — only the enforceable contract terms and the tariff count.
Accountants and tax professionals
The decision is a tidy two-step: (1) classify the electricity against the strict § 59-12-104(47)(a) elements, then (2) apply the bundled-vs-separately-stated rules to a mixed transaction. The pivot is § 59-12-102(18)(d): a price "separately identified" on a binding sales document (contract, invoice, price list, etc.) is not a single nonitemized price, so the sale escapes the bundled-transaction rule (§ 59-12-103(2)(d)) and lands in § 59-12-103(2)(e) instead — where the exempt slice survives only if separately stated or documented. Two Utah side-rules worth filing: electricity for industrial use is fully exempt under § 59-12-104(39), and electricity for residential use is taxed at a reduced 2% state rate under § 59-12-103(2)(b); residential renewable customers get the (47) exemption only on the premium portion of the green-tariff rate (§ 59-12-104(47)(b)).
Common questions
Q: Is electricity taxable in Utah at all?
A: Yes. Utah treats electricity as tangible personal property, so selling, using, or consuming it is taxable under § 59-12-103(1). A business's power is taxed as "commercial use" (§ 59-12-103(1)(c)(ii)); industrial-use electricity is exempt (§ 59-12-104(39)), and residential-use electricity is taxed at a reduced 2% state rate (§ 59-12-103(2)(b)).
Q: What exactly does the renewable-energy exemption require?
A: All three of: (1) the electricity is bought under a retail tariff adopted by the Public Service Commission; (2) it's produced from a new alternative energy source built after January 1, 2016; and (3) that source is designated in the tariff. Miss any element and the sale is taxable. "Alternative energy" is a defined, enumerated list (§ 59-12-102(10)) — biomass, geothermal, hydroelectric, solar, wind, and certain others.
Q: Do renewable-energy credits (RECs) qualify for the exemption?
A: Not as structured here. The contract let the buyer direct the utility to acquire unbundled RECs "on a least-cost basis," without requiring them to come from a new post-2016 source designated in the tariff — so the electricity tied to those RECs does not meet § 59-12-104(47)(a) and is taxable.
Q: My green-power bill mixes qualifying and non-qualifying electricity. Is the whole thing taxed?
A: It can be. Under § 59-12-103(2)(e), the entire transaction is taxable unless the seller separately states the exempt portion on the invoice or can identify it from its regular books and records. Here the renewable supply was separately priced in the contract, so the sale wasn't a single-price "bundled transaction" — but the exempt portion still only stays exempt if it's actually itemized or documented.
Q: We signed an MOU promising to use only post-2016 renewable sources. Doesn't that lock in the exemption?
A: No. The MOU expressly stated it created no legally binding obligation — just a statement of intent — so it didn't satisfy the exemption's requirements. Only the enforceable Agreement terms and the tariff designation count.
Q: Does it change anything if we assign the contract to an affiliate?
A: No. The Commission concluded the conclusions are the same if the company assigns its rights and obligations to a related-party payer or assignee, because the contract already contemplates assignment and binds any successor to the same terms (Section 14.1).
Q: Can I rely on this ruling for my own renewable-power purchases?
A: Not as binding. A Utah private letter ruling binds the Commission only for the taxpayer and facts it was issued to; its weight for anyone else depends on how closely the facts match. The ruling itself is forward-looking and fact-specific (it turns on the exact contract, tariff, and resources involved).
Citations and references
Statutes (Utah Code Ann.):
- § 59-12-103(1) — imposition of sales and use tax on retail sales/use of tangible personal property and on electricity for commercial use (subsections (1)(a), (1)(c)(ii), (1)(l))
- § 59-12-103(2)(d) — taxability of bundled transactions
- § 59-12-103(2)(e) — mixed taxable/nontaxable sale sold at an itemized price (entire sale taxable unless exempt portion separately stated or documented)
- § 59-12-103(2)(b) — reduced 2% state rate for residential-use electricity
- § 59-12-104(47) — exemption for electricity from a new alternative energy source built after January 1, 2016, bought under a PSC retail tariff; (47)(b) residential-customer limit to the premium portion
- § 59-12-104(39) — exemption for electricity for industrial use
- § 59-12-102(10) — definition of "alternative energy" (enumerated list)
- § 59-12-102(18) — definition of "bundled transaction," including the (18)(d) "separately identified price" exclusion
- § 59-12-102(23) — definition of "commercial use"
- § 59-12-102(56) — definition of "industrial use"
- § 59-12-102(107) — definition of "residential use"
- § 59-12-102(125) — "tangible personal property" includes electricity
- §§ 54-17-801, 54-17-802, 54-17-806 — renewable energy tariff and renewable energy contract framework
- § 54-17-601(10) — definition of "renewable energy source"
Rule: Utah Admin. Code R861-1A-34 (private letter ruling procedure and appeal rights)
Source
- Landing page: Utah State Tax Commission — Private Letter Rulings
- Original PDF: 18-001.pdf
Original ruling text
FINAL PRIVATE LETTER RULING
RESPONSE LETTER
PRIVATE LETTER RULING 18-001
July 18, 2018
NAME
COMPANY
ADDRESS
Dear NAME:
This letter is in response to your request for a private letter ruling for TAXPAYER
(“Taxpayer”), about the applicability of the sales and use tax exemption found in Utah Code
Ann. § 59-12-104(47)(a). This exemption applies to certain sales and uses of electricity
“produced from a new alternative energy source built after January 1, 2016.” This private letter
ruling concludes that the sales of electricity by the POWER COMPANY (“Power Company”)
will likely include both sales of electricity meeting the exemption found in § 59-12-104(47)(a)
and sales of electricity not meeting that exemption. This private letter ruling also concludes that
the taxability of the sales of electricity will be governed by Utah Code Ann. § 59-12-103(2)(e).
You have also asked whether the Taxpayer’s assignment of the Taxpayer’s rights and
obligations under the agreement specified in this private letter ruling to the Taxpayer’s related-
party payers or assignees would affect the other conclusions of this private letter ruling. This
private letter ruling concludes that the Taxpayer’s assignment would not affect those other
conclusions.
I. Facts
The Taxpayer intends to construct within the United States a facility with high energy
needs (“Facility”). The Taxpayer requires that this Facility be powered by electricity generated
from alternative, renewable energy resources.
The Taxpayer entered into a renewable energy contract (“Agreement”) with the Power
Company. The Power Company is an electrical power service company located in Utah.
1
Page 2
A. Tariff
The Power Company implemented a tariff for the sale of electricity produced from
renewable energy resources (“Tariff”).1 The Tariff’s terms plainly require the Taxpayer and the
Power Company to enter into a contract for the Tariff to apply. See the Tariff’s first Condition
of Service. The Taxpayer and the Power Company entered into the Agreement in accordance
with the terms of the Tariff.
B. Agreement
Explanations and quotations from Articles I, IV, V, and XIV of the Agreement and from
Exhibit E of the Agreement are located in this Subsection I.B.
Section 1.1 of the Agreement provides definitions, including for the following terms:
“[Taxpayer] Renewable Resource” means one or more renewable resources
identified by or on behalf of the [Taxpayer] to provide electric power and energy
for use at [Taxpayer]’s Facility consistent with Utah Code § 54-17-806. A
[Taxpayer] Renewable Resource may be [Power] Company- or [Taxpayer]-
owned, procured through a contract between the [Power] Company and a third
party, or procured through a separate contract between the [Power] Company and
the [Taxpayer].
....
“Firm Power and Energy” means Power expressed in kilowatts and associated
Energy expressed in kilowatt-hours intended to have assured availability, as
provided in Electric Service Regulation No. 4, entitled “Continuity of Service,” to
meet any agreed-upon portion of [Taxpayer’s] load.
“[Taxpayer] Renewable Resource” is used in Article IV of the Agreement. “Firm Power and
Energy” is used in a memorandum of understanding (“MOU”) dated May 2018.
Article IV of the Agreement provides how the Power Company is to acquire and utilize
the new alternative, renewable energy resources. The Taxpayer and the Power Company intend
to satisfy fully the electricity needs of the Taxpayer’s Facility as soon as practicable using only
these resources. See Section 1 of the MOU dated May 2018, quoted farther below in this private
letter ruling. Section 4.4 of the Agreement provides the following, in part:
[T]he [Power] Company and the [Taxpayer] shall agree to the material terms and
conditions to be included in the contract or other commercial arrangement
between the owner of the [Taxpayer] Renewable Resource and the [Power]
Company. The terms shall include, but are not limited to:
....
1
The Utah Legislature authorized this Tariff through Utah Code Ann. § 54-17-801 through § 54-17-806, which the
Legislature most recently modified in 2016 by Senate Bill 115 from the 2016 General Session.
2
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(b) resource online date;
....
Thus, by requiring “agree[ment] to the material terms and conditions [for acquiring the]
[Taxpayer] Renewable Resource,” the Agreement allows, but does not require, the Power
Company and the Taxpayer to limit the Taxpayer Renewable Resources to new alternative
energy sources built after January 1, 2016.
The Agreement includes Exhibit E: Form of Renewable Resource Appendix, which will
include the Power Company and Taxpayer’s future agreements for specific Taxpayer Renewable
Resources.2 Similar to the “resource online date” of Subsection 4.4(b) of the Agreement,
Exhibit E provides for a “Project in Service Date” and a “Start Date.” Thus, similar to
Subsection 4.4(b), Exhibit E allows, but does not require, the Power Company and the Taxpayer
to limit the Taxpayer Renewable Resources to new alternative energy sources built after January
1, 2016.
Exhibit E will provide the “Price: $[●] per MWh” for each Taxpayer Renewable
Resource. Exhibit E is used to determine the CHARGE FOR RENEWABLE SUPPLY. See
Exhibit 1 of Exhibit E of the Agreement. The CHARGE FOR RENEWABLE SUPPLY is a
component of the purchase price of the electricity sold by the Power Company to the Taxpayer.
See Section 5.1 of the Agreement, which is quoted, in part, in the paragraph below.
Article V of the Agreement is titled “Service Rates and Charges.” Section 5.1 includes
the components of the “Rates for Power and Energy Delivered to [the Taxpayer],” with that
section stating the following:
Section 5.1 Rates for Power and Energy Delivered to [Taxpayer]. The Rate for
all Power and Energy delivered to [Taxpayer] under this Agreement shall be made
up of the following rate components summarized below, which components are
described in more detail and further defined in Section 5.2.
(a) CHARGE FOR POWER COMPANY SUPPLY – applied to all kWh of
Estimated [Power] Company Supply;
(b) CHARGE FOR RENEWABLE SUPPLY– applied to all kWh of Estimated
Renewable Supply; [3]
[THE REMAINING SUBSECTIONS OF SECTION 5.1 CONTAIN OTHER
RATE COMPONENTS.]
2
Section 1.1 of the Agreement uses Exhibit E in the Agreement’s definition of “Renewable Resource Appendix,”
which is defined as follows:
“Renewable Resource Appendix” means an agreement to be attached as an Appendix hereto to
specify the terms and conditions applicable to acquiring a [Taxpayer] Renewable Resource in
connection with electric service for the Facility, substantially in the form of Exhibit E.
3
The Agreement further addresses the CHARGE FOR RENEWABLE SUPPLY in Subsection 5.2(b).
3
Page 4
Section 5.3 of the Agreement addresses Renewable Energy Certificates (“RECs”), with
that section stating the following, in part:
Section 5.3 REC Procurement. The [Taxpayer] may direct the [Power]
Company to acquire unbundled RECs on behalf of the [Taxpayer] by providing
written notice to the [Power] Company. If so directed, [Power] Company will
acquire Renewable Energy Certificates on a least-cost basis. . . .
Subsection (2)(b) of the MOU dated May 2018, quoted later in this private letter ruling,
discusses Section 5.3 of the Agreement.
Section 14.1 of the Agreement allows the Taxpayer to assign its rights and obligations
under the Agreement, as follows in part:
Section 14.1 Assignment by [Taxpayer].
(a) [Taxpayer]’s rights and obligations under this Agreement may be
assigned to an Affiliate of [Taxpayer] or in connection with a sale, assignment,
lease or transfer of [Taxpayer]’s interest in its Facility, or real or personal
property related thereto, or to any Person succeeding to all or substantially all of
[Taxpayer]’s assets; in all other cases, [Taxpayer] may not assign this Agreement
without [Power] Company’s consent, which shall not be unreasonably withheld,
conditioned or delayed. Any assignment is subject to (1) such successor’s
qualification as a customer under [Power] Company’s policies and the Electric
Service Regulations, and (2) the written agreement of such successor to be bound
by this Agreement and the Electric Service Regulations and to assume the
obligation of [Taxpayer] from the date of assignment. If [Power] Company
consents to any such sale, assignment, lease or transfer, [Taxpayer] shall remain
liable for any liabilities and obligation[s] under this Agreement and the Electric
Service Regulations through the date of assignment. Commission approval shall
not be required for any assignment by [Taxpayer] as permitted hereunder.
....
C. Memorandum of Understanding
You met with Tax Commission personnel about your private letter ruling request. During
that meeting, a member of the Tax Commission suggested that the Taxpayer and the Power
Company document their commitment to have the electricity sold to the Taxpayer be produced
from new alternative energy sources built after January 1, 2016. After that meeting, you
submitted the MOU dated May 2018, regarding the Agreement.
4
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Section 3 of the MOU provides the following, in part:4
This MOU is not a modification of the Agreement but rather a further elaboration
on the intent and expectations of the Parties. Notwithstanding the preceding, it is
the express intention of the parties hereto and despite (i) any actions taken
hereafter by any party hereto, and/or (ii) any actual or claimed reliance, that this
MOU does not create any legally binding contractual obligations of the [Power]
Company or [Taxpayer] but rather is a non-binding statement of intent as to how
the parties intend to operate under the Agreement. . . .
Sections 1 and 2 of the MOU provide the following, in part:5
1. Alternative Energy is to Be Provided.
It is the intent of the Parties that the Firm Power and Energy provided under the
Agreement for the operation of the [Taxpayer’s] Facility shall be fully satisfied by
[Taxpayer] Renewable Resources, and the Parties intend to select and contract for
[Taxpayer] Renewable Resources as soon as practicable following announcement
of the [Taxpayer]’s Facility.
2. [Taxpayer] Renewable Resources are to Meet the Definition of Alternative
Energy Built After January 1, 2016.
It is the intent of the Parties that, to the extent feasible, in addition to the other
requirements of the Agreement:
(a) the [Taxpayer] Renewable Resources acquired to provide electric service to
[Taxpayer] will (1) generate “alternative energy” as that term is defined in
Utah Code 59-12-102(1)[6], and (b) be “built after January 1, 2016” as
required by Utah Code 59-12-104(47); and
(b) in the event [Taxpayer] purchases unbundled renewable energy credits
(RECs) under Section 5.34 REC Procurement of the Agreement,[7] every
unbundled REC obtained for [Taxpayer] pursuant to Section 5.34 of the
Agreement should originate from a source that (1) generates “alternative
4
Section 20.3 of the Agreement limits how the Agreement can be modified, as follows: “Except as otherwise
expressly provided, this Agreement may be modified only by a subsequent written amendment or agreement
executed by both Parties.”
5
Section 1 of the MOU uses the term “Firm Power and Energy.” That term is defined in Section 1.1 of the
Agreement. That definition was quoted previously in this private letter ruling.
6
“Alternative energy” is defined in § 59-12-102(10), not in § 59-12-102(1).
7
Subsection (2)(b) of the MOU incorrectly references Section 5.34 of the Agreement. There is no Section 5.34.
REC Procurement is found in Section 5.3.
5
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energy” as that term is defined in Utah Code 59-12-102(1),[8] and (2) is
“built after January 1, 2016” as required by Utah Code 59-12-104(47). The
Parties understand this may impact [Power] Company’s ability to procure
such RECs within the time frames specified in Section 5.3 of the Agreement,
and that the Parties will continue to work together in good faith to meet these
intentions if those time frames cannot be met with commercially reasonable
efforts.
Subsection (2)(b) of the MOU, quoted directly above, discusses Section 5.3 of the Agreement,
which has been quoted previously in this private letter ruling.
II. Applicable Law
This Applicable Law section includes Utah Code sections from Title 59 Chapter 12 and
from Title 54 Chapter 17.
A. Applicable Law from Utah Code, Title 59: Revenue and Taxation,
Chapter 12: Sales and Use Tax Act
Utah Code Ann. § 59-12-103(1) imposes sales and use taxes on certain transactions,
stating the following in part:
A tax is imposed on the purchaser . . . on the purchase price or sales price for
amounts paid or charged for the following transactions:
(a) retail sales of tangible personal property made within the state;
....
(c) sales of the following for commercial use:
....
(ii) electricity;
....
(l) amounts paid or charged for tangible personal property if within this state the
tangible personal property is:
....
(ii) used; or
(iii) consumed . . .
....
8
See footnote 6.
6
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Utah Code Ann. § 59-12-103(2) addresses the taxability of items sold together.
Subsection 59-12-103(2)(d) addresses bundled transactions as follows, in part:
(d) (i) [for a bundled transaction involving food]
(ii) [for a bundled transaction involving an optional computer software
maintenance contract]
(iii) Subject to Subsection (2)(d)(iv), for a bundled transaction other than a
bundled transaction described in Subsection (2)(d)(i) or (ii):
(A) if the sales price of the bundled transaction is attributable to tangible
personal property, a product, or a service that is subject to taxation
under this chapter and tangible personal property, a product, or
service that is not subject to taxation under this chapter, the entire
bundled transaction is subject to taxation under this chapter unless:
(I) the seller is able to identify by reasonable and verifiable
standards the tangible personal property, product, or service that
is not subject to taxation under this chapter from the books and
records the seller keeps in the seller’s regular course of
business; or
(II) state or federal law provides otherwise; . . .
....
(iv) For purposes of Subsection (2)(d)(iii), books and records that a seller
keeps in the seller’s regular course of business includes books and
records the seller keeps in the regular course of business for nontax
purposes.
Subsection 59-12-103(2)(e) addresses situations that are not bundled transactions, with
§ 59-12-103(2)(e) stating the following, in part:
(e) (i) Except as otherwise provided in this chapter and subject to Subsections
(2)(e)(ii) and (iii), if a transaction consists of the sale, lease, or rental of
tangible personal property, a product, or a service that is subject to
taxation under this chapter, and the sale, lease, or rental of tangible
personal property, other property, a product, or a service that is not
subject to taxation under this chapter, the entire transaction is subject to
taxation under this chapter unless the seller, at the time of the
transaction:
(A) separately states the portion of the transaction that is not subject to
taxation under this chapter on an invoice, bill of sale, or similar
document provided to the purchaser; or
(B) is able to identify by reasonable and verifiable standards, from the
books and records the seller keeps in the seller’s regular course of
business, the portion of the transaction that is not subject to taxation
under this chapter.
....
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(iii) For purposes of Subsections (2)(e)(i) and (ii), books and records that a
seller keeps in the seller’s regular course of business includes books and
records the seller keeps in the regular course of business for nontax
purposes.
....
Utah Code Ann. § 59-12-104 provides exemptions from sales and use taxes, stating in
9
part:
Exemptions from the taxes imposed by this chapter are as follows:
....
(47) (a) sales or uses of electricity, if the sales or uses are made under a retail
tariff adopted by the Public Service Commission only for purchase of
electricity produced from a new alternative energy source built after
January 1, 2016, as designated in the tariff by the Public Service
Commission;
(b) for a residential use customer only, the exemption under Subsection
(47)(a) applies only to the portion of the tariff rate a customer pays under
the tariff described in Subsection (47)(a) that exceeds the tariff rate
under the tariff described in Subsection (47)(a) that the customer would
have paid absent the tariff;
....
The above quotation includes the terms, “alternative energy” and “residential use.” These terms,
along with other terms, are defined in Utah Code Ann. § 59-12-102, which is provided in the
paragraph below.
Section 59-12-102 defines various terms, stating in part:
As used in this chapter:
....
(10) "Alternative energy" means:
(a) biomass energy;
(b) geothermal energy;
(c) hydroelectric energy;
(d) solar energy;
(e) wind energy; or
(f) energy that is derived from:
(i) coal-to-liquids;
(ii) nuclear fuel;
(iii) oil-impregnated diatomaceous earth;
(iv) oil sands;
9
The Utah Legislature last amended this exemption in 2016 by House Bill 242 from the 2016 General Session. The
Legislature added “retail” before “tariff” and added “built after January 1, 2016” after “alternative energy source.”
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(v) oil shale;
(vi) petroleum coke; or
(vii) waste heat from:
(A) an industrial facility; or
(B) a power station in which an electric generator is driven through
a process in which water is heated, turns into steam, and spins a
steam turbine.
....
(17) (a) Except as provided in Subsection (17)(b), "biomass energy" means any
of the following that is used as the primary source of energy to produce
fuel or electricity:
(i) material from a plant or tree; or
(ii) other organic matter that is available on a renewable basis,
including:
(A) slash and brush from forests and woodlands;
(B) animal waste;
(C) waste vegetable oil;
(D) methane or synthetic gas produced at a landfill, as a byproduct
of the treatment of wastewater residuals, or through the
conversion of a waste material through a nonincineration,
thermal conversion process;
(E) aquatic plants; and
(F) agricultural products.
(b) "Biomass energy" does not include:
(i) black liquor; or
(ii) treated woods.
(18) (a) "Bundled transaction" means the sale of two or more items of tangible
personal property, products, or services if the tangible personal property,
products, or services are:
(i) distinct and identifiable; and
(ii) sold for one nonitemized price.
(b) "Bundled transaction" does not include:
(i) the sale of tangible personal property if the sales price varies, or is
negotiable, on the basis of the selection by the purchaser of the items
of tangible personal property included in the transaction;
....
(d) (i) For purposes of Subsection (18)(a)(ii), property sold for one
nonitemized price does not include a price that is separately
identified by tangible personal property, product, or service on the
following, regardless of whether the following is in paper format or
electronic format:
(A) a binding sales document; or
(B) another supporting sales-related document that is available to a
purchaser.
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(ii) For purposes of Subsection (18)(d)(i), a binding sales document or
another supporting sales-related document that is available to a
purchaser includes:
(A) a bill of sale;
(B) a contract;
(C) an invoice;
(D) a lease agreement;
(E) a periodic notice of rates and services;
(F) a price list;
(G) a rate card;
(H) a receipt; or
(I) a service agreement.
....
(22) "Coal-to-liquid" means the process of converting coal into a liquid synthetic
fuel.
(23) "Commercial use" means the use of gas, electricity, heat, coal, fuel oil, or
other fuels that does not constitute industrial use under Subsection (56) or
residential use under Subsection (106).[10]
....
(52) "Geothermal energy" means energy contained in heat that continuously flows
outward from the earth that is used as the sole source of energy to produce
electricity.
....
(55) "Hydroelectric energy" means water used as the sole source of energy to
produce electricity.
(56) "Industrial use" means the use of natural gas, electricity, heat, coal, fuel oil,
or other fuels:
(a) in mining or extraction of minerals;
(b) in agricultural operations to produce an agricultural product up to the
time of harvest or placing the agricultural product into a storage facility,
including:
(i) commercial greenhouses;
(ii) irrigation pumps;
(iii) farm machinery;
(iv) implements of husbandry as defined in Section 41-1a-102 that are
not registered under Title 41, Chapter 1a, Part 2, Registration; and
(v) other farming activities;
(c) in manufacturing tangible personal property at an establishment
described in SIC Codes 2000 to 3999 of the 1987 Standard Industrial
Classification Manual of the federal Executive Office of the President,
Office of Management and Budget;[11]
(d) by a scrap recycler if:
10
“Residential use” is defined in § 59-12-102(107), not Subsection (106).
11
Subsection 59-12-102(56)(c) will be superseded effective July 1, 2018. The revised § 59-12-102(56)(c) will
include Subsections (56)(c)(i) and (ii).
10
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(i) from a fixed location, the scrap recycler utilizes machinery or
equipment to process one or more of the following items into
prepared grades of processed materials for use in new products:
(A) iron;
(B) steel;
(C) nonferrous metal;
(D) paper;
(E) glass;
(F) plastic;
(G) textile; or
(H) rubber; and
(ii) the new products under Subsection (56)(d)(i) would otherwise be
made with nonrecycled materials; or
(e) in producing a form of energy or steam described in Subsection
54-2-1(3)(a) by a cogeneration facility as defined in Section 54-2-1.
....
(77) "Oil sands" means impregnated bituminous sands that:
(a) contain a heavy, thick form of petroleum that is released when heated,
mixed with other hydrocarbons, or otherwise treated;
(b) yield mixtures of liquid hydrocarbon; and
(c) require further processing other than mechanical blending before
becoming finished petroleum products.
(78) "Oil shale" means a group of fine black to dark brown shales containing
kerogen material that yields petroleum upon heating and distillation.
....
(99) (a) "Purchase price" and "sales price" mean the total amount of
consideration:
(i) valued in money; and
(ii) for which tangible personal property, a product transferred
electronically, or services are:
(A) sold;
....
(107) "Residential use" means the use in or around a home, apartment building,
sleeping quarters, and similar facilities or accommodations.
....
(109) "Retail sale" or "sale at retail" means a sale, lease, or rental for a purpose
other than:
(a) resale;
(b) sublease; or
(c) subrent.
(110)(a) "Sale" means any transfer of title, exchange, or barter, conditional or
otherwise, in any manner, of tangible personal property or any other
taxable transaction under Subsection 59-12-103(1), for consideration.
(b) "Sale" includes:
....
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(iii) any sale of electrical energy, gas, services, or entertainment taxable
under this chapter;
....
(121) "Solar energy" means the sun used as the sole source of energy for
producing electricity.
(125)(a) Except as provided in Subsection (125)(d) or (e), [12] "tangible personal
property" means personal property that:
(i) may be:
(A) seen;
(B) weighed;
(C) measured;
(D) felt; or
(E) touched; or
(ii) is in any manner perceptible to the senses.
(b) "Tangible personal property" includes:
(i) electricity;
....
(136)(a) "Use" means the exercise of any right or power over tangible personal
property, a product transferred electronically, or a service under
Subsection 59-12-103(1), incident to the ownership or the leasing of that
tangible personal property, product transferred electronically, or service.
....
(144) "Wind energy" means wind used as the sole source of energy to produce
electricity.
....
B. Applicable Law from Utah Code, Title 54: Public Utilities, Chapter 17:
Energy Resource Procurement Act
Utah Code Ann. § 54-17-806 addresses how a renewable energy tariff may be enacted,
stating the following:
(1) The commission[13] may authorize a qualified utility to implement a
renewable energy tariff in accordance with this section if the commission
determines the tariff that the qualified utility proposes is reasonable and in
the public interest.
(2) If a tariff is authorized under Subsection (1), a qualified utility customer with
an aggregated electrical load of at least five megawatts and who agrees to
service that is subject to the renewable energy tariff shall pay:
(a) the customer's normal tariff rate;
12
Subsections 59-12-102(125)(d) and (e) have not be included in this Applicable Law section because they do not
apply to the Taxpayer’s situation.
13
Utah Code Ann. § 54-2-1(4) defines “commission” as the Public Service Commission for purposes of Utah Code
Title 54.
12
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(b) an incremental charge in an amount equal to the difference between the
cost to the qualified utility to supply renewable generation to the
renewable energy tariff customer and the qualified utility's avoided costs
as defined in Subsection 54-2-1(1), or a different methodology
recommended by the qualified utility; and
(c) an administrative fee in an amount approved by the commission.
(3) The commission shall allow a qualified utility to recover the qualified utility's
prudently incurred cost of renewable generation procured pursuant to the
tariff established in this section that is not otherwise recovered from the
proceeds of the tariff paid by customers agreeing to service that is subject to
the renewable energy tariff.
Section 54-17-806 uses the terms “qualified utility,” “renewable energy facility,” and “renewable
energy tariff.” These terms are defined in Utah Code Ann. § 54-17-801, which is provided
further below.
Utah Code Ann. 54-17-802 requires a “renewable energy contract” in certain situations,
with § 54-17-802(1) stating the following:
Within a reasonable time after receiving a request from a contract customer and
subject to reasonable credit requirements, a qualified utility shall enter into a
renewable energy contract with the requesting contract customer to supply some
or all of the contract customer's electric service from one or more renewable
energy facilities selected by the contract customer.
(Emphasis added.)
Section 54-17-801 uses the terms “contract customer” and “renewable energy contract.” These
terms are defined in § 54-17-801, which is provided in the paragraph below.
Section 54-17-801 defines the terms referenced above for § 54-17-806 and § 54-17-802
as follows:
As used in this part:
(1) "Contract customer" means a person who executes or will execute a
renewable energy contract with a qualified utility.
(2) "Qualified utility" means an electric corporation that serves more than
200,000 retail customers in the state.
(3) "Renewable energy contract" means a contract under this part for the delivery
of electricity from one or more renewable energy facilities to a contract
customer requiring the use of a qualified utility's transmission or distribution
system to deliver the electricity from a renewable energy facility to the
contract customer.
13
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(4) (a) "Renewable energy facility" means a renewable energy source as defined
in Section 54-17-601 that:
(i) is located in the state; or
(ii) (A) is located outside the state; and
(B) provides energy from baseload renewable resources.
(b) "Renewable energy facility" does not include an electric generating
facility for which the electric generating facility's costs are included in a
qualified utility's rates as a facility that provides electric service to the
qualified utility's system.
(5) "Renewable energy tariff" means a tariff offered by a qualified utility that
allows the qualified utility to procure renewable generation on behalf of and
to serve its customers.
Notably, in § 54-17-801(4)(a) quoted above, the definition of “renewable energy facility” is
defined in part as “a renewable energy source as defined in Section 54-17-601.” Section
54-17-601 is provided, in part, in the paragraph below.
Utah Code Ann. § 54-17-601(10) defines “renewable energy source,” as follows:14
"Renewable energy source" means:
(a) an electric generation facility or generation capability or upgrade that
becomes operational on or after January 1, 1995 that derives its energy from
one or more of the following:
(i) wind energy;
(ii) solar photovoltaic and solar thermal energy;
(iii) wave, tidal, and ocean thermal energy;
(iv) except for combustion of wood that has been treated with chemical
preservatives such as creosote, pentachlorophenol or chromated copper
arsenate, biomass and biomass byproducts, including:
(A) organic waste;
(B) forest or rangeland woody debris from harvesting or thinning
conducted to improve forest or rangeland ecological health and to
reduce wildfire risk;
(C) agricultural residues;
(D) dedicated energy crops; and
(E) landfill gas or biogas produced from organic matter, wastewater,
anaerobic digesters, or municipal solid waste;
(v) geothermal energy located outside the state;
(vi) waste gas and waste heat capture or recovery whether or not it is
renewable, including methane gas from:
(A) an abandoned coal mine; or
14
Section 54-17-601 further defines the following terms that are used in § 54-17-601(10): “electrical corporation,”
defined in § 54-17-601(5), and “renewable energy certificate,” defined in § 54-17-601(9).
14
Page 15
(B) a coal degassing operation associated with a state-approved mine
permit;
(vii) efficiency upgrades to a hydroelectric facility, without regard to the date
upon which the facility became operational, if the upgrades become
operational on or after January 1, 1995;
(viii) compressed air, if:
(A) the compressed air is taken from compressed air energy storage; and
(B) the energy used to compress the air is a renewable energy source; or
(ix) municipal solid waste;
(b) any of the following:
(i) up to 50 average megawatts of electricity per year per electrical
corporation from a certified low-impact hydroelectric facility, without
regard to the date upon which the facility becomes operational, if the
facility is certified as a low-impact hydroelectric facility on or after
January 1, 1995, by a national certification organization;
(ii) geothermal energy if located within the state, without regard to the date
upon which the facility becomes operational; or
(iii) hydroelectric energy if located within the state, without regard to the date
upon which the facility becomes operational;
(c) hydrogen gas derived from any source of energy described in Subsection
(10)(a) or (b);
(d) if an electric generation facility employs multiple energy sources, that portion
of the electricity generated that is attributable to energy sources described in
Subsections (10)(a) through (c); and
(e) any of the following located in the state and owned by a user of energy:
(i) a demand side management measure, as defined by Subsection 54-7-
12.8(1), with the quantity of renewable energy certificates to which the
user is entitled determined by the equivalent energy saved by the
measure;
(ii) a solar thermal system that reduces the consumption of fossil fuels, with
the quantity of renewable energy certificates to which the user is entitled
determined by the equivalent kilowatt-hours saved, except to the extent
the commission determines otherwise with respect to net-metered
energy;
(iii) a solar photovoltaic system that reduces the consumption of fossil fuels
with the quantity of renewable energy certificates to which the user is
entitled determined by the total production of the system, except to the
extent the commission determines otherwise with respect to net-metered
energy;
(iv) a hydroelectric or geothermal facility with the quantity of renewable
energy certificates to which the user is entitled determined by the total
production of the facility, except to the extent the commission
determines otherwise with respect to net-metered energy;
(v) a waste gas or waste heat capture or recovery system, other than from a
combined cycle combustion turbine that does not use waste gas or waste
heat, with the quantity of renewable energy certificates to which the user
15
Page 16
is entitled determined by the total production of the system, except to the
extent the commission determines otherwise with respect to net-metered
energy; and
(vi) the station use of solar thermal energy, solar photovoltaic energy,
hydroelectric energy, geothermal energy, waste gas, or waste heat
capture and recovery.
III. Analysis
This Analysis section addresses the application of § 59-12-104(47)(a) to the Taxpayer’s
purchases of electricity from the Power Company. This private letter ruling concludes that the
sales of electricity by the Power Company will likely include both sales of electricity meeting the
exemption found in § 59-12-104(47)(a) and sales of electricity not meeting that exemption. This
private letter ruling also concludes that the taxability of these sales of electricity will be governed
by § 59-12-103(2)(e).
This Analysis section also addresses whether the Taxpayer’s assignment of the
Taxpayer’s rights and obligations under the Agreement would affect the other conclusions of this
private letter ruling. This private letter ruling concludes that those other conclusions would be
the same if the Taxpayer were to assign the Taxpayer’s rights and obligations under the
Agreement to the Taxpayer’s related-party payers or assignees.
This Analysis section includes the following subsections:
A. The sales of electricity by the Power Company to the Taxpayer are subject to
sales and use taxes under § 59-12-103(1), unless an exemption applies.
B. In the future, some of the sales of electricity by the Power Company to the
Taxpayer will likely meet the exemption found in § 59-12-104(47)(a), for sales of
electricity produced from a new alternative energy source built after January 1,
2016.
C. The sales of electricity by the Power Company will likely include sales of
electricity meeting the exemption found in § 59-12-104(47)(a) and sales of
electricity not meeting that exemption; the taxability of these sales of two types of
electricity will be governed by § 59-12-103(2)(e).
D. The conclusions of Subsections III.A.-III.C. of this private letter ruling would be
the same if the Taxpayer were to assign the Taxpayer’s rights and obligations
under the Agreement to the Taxpayer’s related-party payers or assignees.
16
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A. The sales of electricity by the Power Company to the Taxpayer are subject to
sales and use taxes under § 59-12-103(1), unless an exemption applies.
Subsection 59-12-103(1) imposes sales and use taxes “on the purchase price or sales
price for amounts paid or charged for . . . (a) retail sales of tangible personal property made
within the state.”15 Subsection 59-12-102(125)(b)(i) defines tangible personal property to
include “electricity.” Thus, the Power Company’s sales of electricity to the Taxpayer meets
§ 59-12-103(1)(a).
Subsection 59-12-103(1)(l) imposes sales and use taxes on “amounts paid or charged for
tangible personal property if within this state the tangible personal property is . . . used[] or . . .
consumed.”16 Because “electricity” is tangible personal property under § 59-12-102(125)(b)(i),
the Taxpayer’s use of that electricity within Utah will be taxable under § 59-12-103(1)(l), as
well.
Subsection 59-12-103(1)(c)(ii) imposes sales and use taxes on sales of electricity for
commercial use. Commercial use is defined in § 59-12-102(23) as not being industrial or
residential use. The Taxpayer’s use will not meet the definition of industrial use found in
§ 59-12-102(56) or the definition of residential use found in § 59-12-102(107).17 Therefore, the
Taxpayer’s use will be commercial use. Thus, the Power Company’s sales of electricity to the
Taxpayer will be taxable under § 59-12-103(1)(c)(ii), also.
The focus of this private letter ruling, though, is not whether the Power Company’s sales
of electricity to the Taxpayer are subject to sales and use taxes. Instead, the focus is on whether
these sales are exempt under § 59-12-104(47)(a).
B. In the future, some of the sales of electricity by the Power Company to the
Taxpayer will likely meet the exemption found in § 59-12-104(47)(a), for sales
of electricity produced from a new alternative energy source built after
January 1, 2016.
Subsection 59-12-104(47) provides a sales and use tax exemption for purchases of certain
“electricity produced from a new alternative energy source built after January 1, 2016,” as
follows:
15
“Retail sale” and “sale” are defined in § 59-12-102(109) and § 59-12-102(110), respectively. “Purchase price”
and “sales price” are defined in § 59-12-102(99).
16
“Use” is defined in § 59-12-102(136).
17
Sales of electricity for industrial use are exempt under § 59-12-104(39). Sales of electricity for residential use are
subject to sales and use taxes at a reduced state sales and use tax rate of 2% plus applicable local sales and use taxes
under § 59-12-103(2)(b).
17
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Exemptions from the taxes imposed by this chapter are as follows:
....
(47) (a) sales or uses of electricity, if the sales or uses are made under a retail
tariff adopted by the Public Service Commission only for purchase of
electricity produced from a new alternative energy source built after
January 1, 2016, as designated in the tariff by the Public Service
Commission;
(b) for a residential use customer only, the exemption under Subsection (47)(a)
applies only to the portion of the tariff rate a customer pays under the tariff
described in Subsection (47)(a) that exceeds the tariff rate under the tariff
described in Subsection (47)(a) that the customer would have paid absent the
tariff;
Subsection 59-12-104(47)(b) does not apply to the Taxpayer’s situation because the
Taxpayer is not “a residential use customer.”18 Thus, to receive the exemption found in
§ 59-12-104(47), the Taxpayer must only meet Subsection (47)(a).
Subsection 59-12-104(47)(a) applies to certain “sales or uses of electricity.” The
Taxpayer’s proposed purchases or uses of electricity are the only transactions at issue in this
private letter ruling. Thus, this area of § 59-12-104(47)(a) is met for all electricity purchased by
the Taxpayer from the Power Company.
Subsection 59-12-104(47)(a) requires that the sales or uses of electricity be “made under
a retail tariff adopted by the Public Service Commission.” The Taxpayer’s proposed purchases
will be made under a retail tariff adopted by the Public Service Commission. Thus, this area of
§ 59-12-104(47)(a) is met for all electricity purchased by the Taxpayer from the Power
Company.
Subsection 59-12-104(47)(a) requires that the sales or uses be “only for purchase of
electricity produced from a new alternative energy source built after January 1, 2016.”19 As seen
by Sections 1 and 2 of the MOU dated May 2018, the parties intend to fully satisfy the electricity
needs of the Taxpayer’s Facility as soon as practicable using only new alternative energy sources
built after January 1, 2016. Thus, until it is practicable to use only new alternative energy
18
“Residential use” is defined in § 59-12-102(107).
19
Section 1.1 of the Agreement defines “[Taxpayer] Renewable Resource” in terms of § 54-17-806. Section
54-17-806 uses the term, “renewable energy.” Subsection 54-17-801(4) defines “renewable energy facility” in part
as “a renewable energy source as defined in Section 54-17-601.” Subsection 54-17-601(10) defines “renewable
energy source” in part as an energy source deriving its energy through certain means, like wind energy, solar energy,
wave energy, etc.
The sales and use tax exemption found in § 59-12-104(47) uses the term, “alternative energy.” Subsection
59-12-102(10) defines “alternative energy” as including “biomass energy,” “geothermal energy,” “hydroelectric
energy,” etc. Thus, “alternative energy” is defined based on the means by which the energy is produced.
After reviewing the § 54-17-601(10) definition of “renewable energy source” and the § 59-12-102(10) definition
of “alternative energy,” energy produced from a “renewable energy source” also meets the definition of “alternative
energy.” This conclusion might change if the Utah Legislature changes either of these definitions.
18
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sources built after January 1, 2016, some purchased electricity will not be from new alternative
energy sources built after January 1, 2016. Therefore, some of the purchased electricity will not
meet this requirement.
Subsection 59-12-104(47)(a) requires that the “purchase of electricity produced from a
new alternative energy source built after January 1, 2016, [be] designated in the tariff by the
Public Service Commission.” As explained in Subsection I.A. of this private letter ruling, the
Tariff requires the Agreement. Similarly, the Utah Code also requires the Agreement. Section
54-17-806 allows the Public Service Commission to authorize the Tariff, and § 54-17-802
requires a “renewable energy contract,” which is the “Agreement.” Thus, the terms of the
Agreement are incorporated into the Tariff. Therefore, the terms of the Agreement are to be
considered when determining whether “electricity produced from a new alternative energy
source built after January 1, 2016, [has been] designated in the tariff.”
As previously explained in Subsection I.B. of this private letter ruling, under Section 4.4
of the Agreement and Exhibit E of the Agreement, the parties may select Taxpayer Renewable
Resources that are “new alternative energy source[s] built after January 1, 2016,” but the parties
are not required to do so. When the parties agree on specific Taxpayer Renewable Resources,
the parties will enter into agreements for those resources. Those future agreements will become
part of the Agreement, through Exhibit E. By becoming part of the Agreement, they also
become part of the Tariff, though incorporation. If in the future the parties select Taxpayer
Renewable Resources that are “new alternative energy source[s] built after January 1, 2016,”
those resources will meet the requirements of § 59-12-104(47)(a), including the requirement that
the “electricity [be] produced from a new alternative energy source built after January 1, 2016, as
designated in the tariff by the Public Service Commission.”
As explained below, the unbundled RECs do not meet the requirement of “electricity
produced from a new alternative energy source built after January 1, 2016, as designated in the
tariff” (emphasis added). As previously explained in Subsection I.B. of this private letter ruling,
under Section 5.3 of the Agreement, “[t]he [Taxpayer] may direct the [Power] Company to
acquire unbundled RECs on behalf of the [Taxpayer] . . . If so directed, [Power] Company will
acquire Renewable Energy Certificates on a least-cost basis” (emphasis added). Thus, the
Agreement clearly provides that the RECs are to be acquired “on a least-cost basis.” The
Agreement does not direct the Power Company to acquire the RECs from “a new alternative
energy source built after January 1, 2016” and “on a least-cost basis.” Therefore, the electricity
associated with the unbundled REC will not meet the requirement of § 59-12-104(47)(a) because
the acquisition is not of “electricity produced from a new alternative energy source built after
January 1, 2016, as designated in the tariff by the Public Service Commission” (emphasis
added). The sales of this electricity will not be exempt under § 59-12-104(47)(a).
The parties’ unenforceable intents and expectations for the unbundled RECs as expressed
in the MOU does not change the above conclusion. In Section 2 of the MOU, the parties
expressed their intent for the unbundled RECs as follows:
19
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It is the intent of the Parties that, to the extent feasible, in addition to the other
requirements of the Agreement:
....
(b) . . . every unbundled REC obtained for [Taxpayer] . . . should originate from a
source that (1) generates “alternative energy” as that term is defined in Utah Code
59-12-102(1), and (2) is “built after January 1, 2016” as required by Utah Code
59-12-104(47). The Parties understand this may impact [Power] Company’s
ability to procure such RECs within the time frames specified in Section 5.3 of
the Agreement, and that the Parties will continue to work together in good faith to
meet these intentions if those time frames cannot be met with commercially
reasonable efforts.
This language from Section 2 of the MOU does not require that the “electricity [will be]
produced from a new alternative energy source built after January 1, 2016, as designated in the
tariff by the Public Service Commission.” The MOU is not part of the Agreement; the MOU is
not incorporated into the Tariff. Instead, the MOU is unenforceable based on Section 3 of the
MOU, which clearly states that “this MOU does not create any legally binding contractual
obligations of the [Power] Company or [Taxpayer] but rather is a non-binding statement of intent
. . .”
In summary, the sales of electricity produced from future Taxpayer Renewable Resources
that are “new alternative energy source[s] built after January 1, 2016” will meet the requirements
of § 59-12-104(47)(a). The sales of electricity produced from other sources will not meet all of
the requirements of § 59-12-104(47)(a); those sales will remain subject to Utah sales and use
taxes.
C. The sales of electricity by the Power Company will likely include sales of
electricity meeting the exemption found in § 59-12-104(47)(a) and sales of
electricity not meeting that exemption; the taxability of these sales of two
types of electricity will be governed by § 59-12-103(2)(e).
The Power Company will likely be selling the Taxpayer two distinct and identifiable
items for one price. The first item is the sale of electricity produced from future Taxpayer
Renewable Resources that will be “new alternative energy source[s] built after January 1, 2016.”
If this first item were sold separately, it would be exempt under § 59-12-104(47)(a). The second
item is the sale of electricity produced from other sources. This second item will be taxable.
The Utah Code addresses the taxability of two distinct and identifiable items sold for one
price. The taxability of that transaction depends on whether the two distinct and identifiable
items are sold for one nonitemized price.
As explained below, in general if two distinct and identifiable items are sold for one
nonitemized price, the sale is a bundled transaction and the sale is taxable according to
§ 59-12-103(2)(d). Subsection 59-12-102(18)(a) defines “bundled transaction” as follows, in
part:
20
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“Bundled transaction” means the sale of two or more items of tangible personal
property . . . if the tangible personal property . . . are: (i) distinct and identifiable;
and (ii) sold for one nonitemized price.
The taxability of “bundled transactions” is governed by § 59-12-103(2)(d). Subsection
59-12-103(2)(d) states the following:
(iii) . . . .
(A) if the sales price of the bundled transaction is attributable to tangible
personal property . . . that is subject to taxation under this chapter and
tangible personal property . . . that is not subject to taxation under this
chapter, the entire bundled transaction is subject to taxation under this
chapter unless:
(I) the seller is able to identify by reasonable and verifiable standards
the tangible personal property . . . that is not subject to taxation
under this chapter from the books and records the seller keeps in the
seller’s regular course of business; or
(II) state or federal law provides otherwise; . . .
(iv) For purposes of Subsection (2)(d)(iii), books and records that a seller keeps in
the seller’s regular course of business includes books and records the seller
keeps in the regular course of business for nontax purposes.
Bundled transactions do not include the sale of items for an itemized price. The
taxability of a sale of items for an itemized price is governed by § 59-12-103(2)(e), which states
the following:
(i) . . . if a transaction consists of the sale . . . of tangible personal property . . .
that is subject to taxation under this chapter, and the sale . . . of tangible
personal property . . . that is not subject to taxation under this chapter, the
entire transaction is subject to taxation under this chapter unless the seller, at
the time of the transaction:
(A) separately states the portion of the transaction that is not subject to
taxation under this chapter on an invoice, bill of sale, or similar
document provided to the purchaser; or
(B) is able to identify by reasonable and verifiable standards, from the books
and records the seller keeps in the seller’s regular course of business, the
portion of the transaction that is not subject to taxation under this
chapter.
....
(iii) For purposes of Subsections (2)(e)(i) . . . , books and records that a seller
keeps in the seller’s regular course of business includes books and records the
seller keeps in the regular course of business for nontax purposes.
As explained below, the sales of electricity by the Power Company to the Taxpayer are
not bundled transactions because the electricity meeting the exemption and the electricity not
21
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meeting the exemption are not “sold for one nonitemized price,” as required by § 59-12-
102(18)(a)(ii).
As explained previously in this private letter ruling, a bundled transaction involves two
items “sold for one nonitemized price.” See § 59-12-102(18)(a)(ii). Subsection 59-12-
102(18)(d) of the definition of “bundled transaction” instructs when “property [is] sold for one
nonitemized price,” with § 59-12-102(18)(d) stating the following, in part:
(i) For purposes of Subsection (18)(a)(ii), property sold for one nonitemized
price does not include a price that is separately identified by tangible
personal property . . . on the following . . . :
(A) a binding sales document; or
(B) another supporting sales-related document that is available to a
purchaser.
(ii) For purposes of Subsection (18)(d)(i), a binding sales document or another
supporting sales-related document that is available to a purchaser includes:
(A) a bill of sale;
(B) a contract;
(C) an invoice;
(D) a lease agreement;
(E) a periodic notice of rates and services;
(F) a price list;
(G) a rate card;
(H) a receipt; or
(I) a service agreement.
(Emphasis added.)
As explained below, the Agreement “separately identifie[s]” “a price” for the electricity
produced from Taxpayer Renewable Resources. The details of the Taxpayer Renewable
Resources will be provided in Appendix E of the Agreement. The parties intend these future
Taxpayer Renewable Resources to meet § 59-12-104(47). The information on Appendix E
should be sufficient in the future to determine which Taxpayer Renewable Resources, if not all
of them, meet § 59-12-104(47). The information in Appendix E will be used to calculate the
CHARGE FOR RENEWABLE SUPPLY, a component of the purchase price. See § 5.1 of the
Agreement for a list of the components of the service rate. Thus, the Agreement “separately
identifies” through the CHARGE FOR RENEWABLE SUPPLY and Appendix E at least part of
the purchase price for the electricity meeting the exemption found in § 59-12-104(47).
Because of this separate identification, the electricity sold that meets § 59-12-104(47) and
the electricity sold that does not meet § 59-12-104(47) are not “sold for one nonitemized price.”
Because these two types of electricity are not “sold for one nonitemized price,” these sales of
electricity are not bundled transactions.20
20
This conclusion from the analysis of § 59-12-102(18)(d) is consistent with the conclusion from an
analysis of § 59-12-102(18)(b). Subsection 59-12-102(18)(b) of the definition of “bundled transaction” states the
following in part:
22
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Because the sales of electricity by the Power Company to the Taxpayer are not bundled
transactions, the taxability of the sales are governed by § 59-12-103(2)(e). Subsection
59-12-103(2)(e)(i) provides the following in part:
[T]he entire transaction is subject to taxation under this chapter unless the seller,
at the time of the transaction:
(A) separately states the portion of the transaction that is not subject to
taxation under this chapter on an invoice, bill of sale, or similar
document provided to the purchaser; or
(B) is able to identify by reasonable and verifiable standards, from the books
and records the seller keeps in the seller’s regular course of business, the
portion of the transaction that is not subject to taxation under this
chapter.
Next, Subsection 59-12-103(2)(e)(iii) explains that “books and records that a seller keeps in the
seller’s regular course of business includes books and records the seller keeps in the regular
course of business for nontax purposes.”
Thus, the taxability of the electricity sold by the Power Company to the Taxpayer will be
determined using the Power Company’s books and records. To have some of the sales of
electricity exempt from sales and use taxes, the Power Company, at the time of the transaction,
should do the following:
“separately state[] the portion of the transaction that is not subject to taxation
under this chapter on an invoice, bill of sale, or similar document provided to the
purchaser.”
Alternatively, the Power Company should be able to do the following at the time of the
transaction:
“identify . . . from the books and records the [Power Company] keeps in the
[Power Company’s] regular course of business, the portion of the transaction that
is not subject to taxation . . .”
“Bundled transaction” does not include: (i) the sale of tangible personal property if the sales price
varies, or is negotiable, on the basis of the selection by the purchaser of the items of tangible
personal property included in the transaction.
Under the Agreement, the price the Taxpayer will pay for electricity will “var[y] . . . on the basis of the selection by
the [Taxpayer] of the [Taxpayer Renewable Resources producing the electricity].” Thus, the sales of electricity by
the Power Company to the Taxpayer will not be a bundled transaction based on § 59-12-102(18)(b). This
conclusion for § 59-12-102(18)(b) is consistent with the conclusion for § 59-12-102(18)(d), which is that the sales of
electricity cannot be a bundled transaction because the sales lack a nonitemized price.
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If the Power Company does not separately state the nontaxable portion and is unable to identify
the nontaxable portion from the Power Company’s books and records, “the entire transaction
[will be] subject to taxation,” under § 59-12-103(2)(e)(i).
D. The conclusions of Subsections III.A.-III.C. of this private letter ruling would
be the same if the Taxpayer were to assign the Taxpayer’s rights and
obligations under the Agreement to the Taxpayer’s related-party payers or
assignees.
You have asked whether the conclusions of this private letter ruling would be the same if
the Taxpayer were to assign its rights and obligations under the Agreement to the Taxpayer’s
related-party payers or assignees. This private letter ruling concludes that the conclusions would
be the same.
Section 14.1 of the Agreement allows the Taxpayer to assign its rights and obligations
under the Agreement, as follows in part:
Section 14.1 Assignment by [Taxpayer].
(a) [Taxpayer]’s rights and obligations under this Agreement may be
assigned to an Affiliate of [Taxpayer] or in connection with a sale, assignment,
lease or transfer of [Taxpayer]’s interest in its Facility, or real or personal
property related thereto, or to any Person succeeding to all or substantially all of
[Taxpayer]’s assets; in all other cases, [Taxpayer] may not assign this Agreement
without [Power] Company’s consent, which shall not be unreasonably withheld,
conditioned or delayed. Any assignment is subject to (1) such successor’s
qualification as a customer under [Power] Company’s policies and the Electric
Service Regulations, and (2) the written agreement of such successor to be
bound by this Agreement and the Electric Service Regulations and to assume
the obligation of [Taxpayer] from the date of assignment. If [Power] Company
consents to any such sale, assignment, lease or transfer, [Taxpayer] shall remain
liable for any liabilities and obligation under this Agreement and the Electric
Service Regulations through the date of assignment. Commission approval shall
not be required for any assignment by [Taxpayer] as permitted hereunder.
(Emphasis added.)
Based on Section 14.1 quoted above, any future contract with a successor is presently
contemplated by the Agreement. Additionally, after an assignment, the Agreement will continue
to apply, as seen by the following:
“Any assignment is subject to . . . (2) the written agreement of such successor to
be bound by this Agreement and the Electric Service Regulations.”
And
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“[Public Service] Commission approval shall not be required for any assignment
by [Taxpayer] as permitted hereunder.”
Based on the language found in Section 14.1, the conclusions of this private letter ruling would
be the same if the Taxpayer were to assign its rights and obligations under the Agreement to the
Taxpayer’s related-party payers or assignees.
IV. Conclusion
This private letter ruling concludes that, in the future, some of the sales of electricity by
the Power Company to the Taxpayer will likely meet the exemption found in § 59-12-104(47)(a),
for sales of electricity produced from a new alternative energy source built after January 1, 2016.
These future sales of electricity will be produced from future Taxpayer Renewable Resources
that will be built after January 1, 2016. The taxability of the sales of electricity will be governed
by § 59-12-103(2)(e) when those sales include both sales of electricity meeting the exemption
found in § 59-12-104(47)(a) and sales of electricity not meeting that exemption.
This private letter ruling also concludes that the Taxpayer’s assignment of the Taxpayer’s
rights and obligations under the Agreement to the Taxpayer’s related-party payers or assignees
will not affect the other conclusions of this private letter ruling.
The Tax Commission’s conclusions are based on the facts as you described them and the
Utah law currently in effect. Should the facts be different or if the law were to change, a
different conclusion may be warranted. If you feel we have misunderstood the facts as you have
presented them, you have additional facts that may be relevant, or you have any other questions,
please feel free to contact the Commission.
Additionally, you may also appeal the private letter ruling in the following two ways.
First, you may file a petition for declaratory order, which would serve to challenge
the Commission's interpretation of statutory language or authority under a statute. This petition
must be in written form, and submitted within thirty (30) days after the date of this private letter
ruling. You may submit your petition by any of the means given below. Failure to submit
your petition within the 30-day time frame could forfeit your appeal rights and will be
deemed a failure to exhaust your administrative remedies. Declaratory orders are discussed
in Utah Administrative Code R861-1A-34 C.2., available online at
http://tax.utah.gov/commission/ effective/r861-01a-034.pdf, and in Utah Administrative Code
R861-1A-31, available online at http://tax.utah.gov/commission/effective/r861-01a-031.pdf.
Second, you may file a petition for redetermination of agency action if your private letter
ruling leads to an audit assessment, a denial of a claim, or some other agency action at a division
level. This petition must be written and may use form TC-738, available online
at http://tax.utah.gov/forms/current/tc-738.pdf. Your petition must be submitted by any of the
means given below, within thirty (30) days, generally, of the date of the notice of agency action
that describes the agency action you are challenging.
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You may access general information about Tax Commission Appeals online
at http://tax.utah.gov/commission-office/appeals. You may file an appeal through any of the
means provided below:
• Best way—by email: [email protected]
• By mail: Tax Appeals
USTC
210 North 1950 West
Salt Lake City, UT 84134
• By fax: 801-297-3919
For the Commission,
Rebecca L. Rockwell
Commissioner
RLR/aln
18-001
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