Are dairy farmers and dairy processing plants exempt from sales tax on their fuel and electricity bills, and what happens if a single utility meter covers both an exempt operation and a residence?

Plain-English summary

Someone advising dairy farmers asked the Utah State Tax Commission to clarify several practical questions about the sales tax exemption for fuel and electricity: are dairies entitled to it, what if the dairy and the farmer's house share one utility meter, does an exempt dairy farmer's utility RATE change, and which box should be checked on the exemption certificate.

The Commission's answers:

• Dairy farmers are agricultural producers, and both manufacturers and agricultural producers may buy fuel and electricity tax-free. A dairy farmer doesn't need a sales tax number to claim this and should check the "agricultural" block on the exemption certificate (the block that has no space for a tax number, since farmers typically don't have one).
• A dairy processing plant, by contrast, is a manufacturer — different from the farm itself. It should provide its sales tax number and check the "fuels, gas, electricity" block instead.
• Shared-meter situations are resolved by predominant use (Rule R865-19-35S): if one meter covers both an exempt operation (the dairy or the processing plant) and a non-exempt use (a residence), the tax treatment of the entire meter follows whichever use predominates. If the exempt use is greater, the WHOLE bill is exempt — a second, separately-wired meter isolating just the exempt portion is not required.
• The Tax Commission has no authority over utility rates. Whether an exempt customer gets a residential rate, a commercial rate, or something else is a matter for the Public Service Commission and the utility, not the tax authorities — the Tax Commission only determines what tax applies, not what rate a customer is billed.

What this means for you

Dairy farmers and other agricultural producers

You qualify for the fuel/electricity sales tax exemption as an agricultural producer without needing a sales tax number — just check the agricultural block on your exemption certificate. If your farm and your home share one meter, don't assume you need a second meter installed to claim the exemption; predominant use on the single meter controls the whole bill.

Dairy processors, creameries, and other food manufacturers

You're treated as a manufacturer, not an agricultural producer, for this exemption — provide your sales tax number and check the fuels/electricity box, not the agricultural box. The same predominant-use rule applies if you share a meter with a non-exempt use.

Businesses with a mixed-use utility meter generally

This ruling is a clean, general illustration of the predominant-use test: Utah doesn't require exact metering or apportionment between exempt and non-exempt uses on a shared meter — whichever use is greater determines the tax treatment of the entire bill.

Utility rate questions

If your concern is about getting a lower utility rate (e.g., residential vs. commercial) rather than sales tax exemption, that's a Public Service Commission and utility company matter — the Tax Commission's exemption rulings don't address or control utility rates.

Common questions

Q: Do dairy farmers need a sales tax number to buy electricity tax-free?
A: No — as agricultural producers, dairy farmers can claim the exemption by checking the agricultural block on the exemption certificate, which has no space for a tax number.

Q: If my dairy and my house are on the same electric meter, do I need to install a second meter to get the exemption?
A: No. Under the predominant-use test, if the exempt (dairy) use is the greater use on that meter, the exemption applies to the entire bill without a second meter.

Q: Is a dairy processing plant taxed the same way as a dairy farm for this exemption?
A: No — a dairy farm is agricultural, but a dairy processing plant is a manufacturer, and it should use its sales tax number and check the "fuels, gas, electricity" box rather than the agricultural box. The predominant-use test still applies to shared meters either way.

Q: Can the Tax Commission help me get a residential utility rate as an exempt customer?
A: No — utility rates are set by the Public Service Commission and the utility itself, not the Tax Commission, which only determines tax applicability.

Citations and references

Rules (1992-era numbering — since renumbered/amended):

• Utah Admin. Rule R865-19-35S (1992) (predominant-use test for shared-meter fuel/electricity exemptions)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/92-003.htm

Original ruling text

Response

Request

March
9 1992

XXXXX

Dear
XXXXX:

Commissioner
Pacheco has asked me to respond to your letter of February 25, 1992.

Both
manufacturers and agricultural producers are entitled to purchase fuels and
electricity tax-free. A dairy farmer is an agricultural producer and is not
required to have a sales tax number. He should sign the exemption certificate
marking the agricultural block where there is no place for a tax number. If
service is provided for the dairy operation and a residence through a single
meter, the predominant use determines whether tax is due. If predominant use is
in the dairy operation, the exemption applies to both uses. It is not required
that a second meter be installed.

A
dairy processing plant is a manufacturer. They should provide their tax number
and mark the block for fuels and electricity. The same predominant use test
applies.

The
Tax Commission has no jurisdiction in setting electricity rates. Utility
companies are regulated by the Public Service Commission and set rates
according to prescribed rules.

Respectfully,

XXXXX

Managing
Auditor

Sales
and Use Tax

February
25, 1992

Joe
Pacheco

State
Tax Commission

Room
514

Heber
Wells Building

160
East 300 South

Salt
Lake City, UT. 84134

Dear
Mr. Pacheco:

Thanks
for talking to me today on the phone. Pursuant to that conversation I am
sending this correspondence. It appears that the concerns about dairy Sales Tax
exemptions are centered around the following questions.

1. Are dairies entitled to Sales Tax exemptions
   on their utility bills?

2. If both their house and dairy operation are
   on the same meter do they have to pay to have a second meter wired that covers
   just the exempt dairy portion of their electrical use?

3. Can an exempt dairy farmer have a residential
   rate?

4. Which box is checked on the exemption
   certificate?

Following
are the answers we have received to the above questions and our references when
possible. We thought we would include them so you might know how we have been
approaching it.

1.
Dairies are entitled to Sale Tax
Exemptions and have been for many years.
XXXXX, XXXXX State Tax.

2. There would be no need for the predominate
   usage ruling (R865-19-35S) if all meters were exclusively one use or the other.
   Consequently it must be permissible to have two uses, one that is not tax
   exempt and one that is, on the same meter. Above mentioned State Tax personnel.

3. That would be the concern of the utility and
   not the taxing authorities. The taxing authorities only determine what taxes do
   and do not apply. The utility determines what the rates should be.

4. We were instructed by the State Tax people
   mentioned above to check the "fuels, gas, electricity" box on the
   Exemption Certificate. However XXXXX has requested that we check the agricultural
   box.

I
would appreciate your evaluation of these questions and look forward to hearing
your conclusions.

Sincerely

XXXXX