Once a Utah facility is certified for the pollution control sales/use tax exemption, what counts as a tax-free 'qualifying purchase' -- equipment, consumable supplies, and electricity used to run the certified equipment?

Plain-English summary

A hazardous waste incineration facility received certification from the Utah Division of Air Quality for a sales/use tax exemption on selected pollution control equipment, under Utah Administrative Code R865-19-83S. The facility's controller asked the Commission to clarify what counts as a "qualifying purchase" once certified -- specifically whether replacement pumps and spray nozzles for a spray dryer, filtration equipment for a baghouse, soda ash used to neutralize acidic gases, and electricity to run the equipment were included.

The Commission's Auditing Division drew three lines:

1. Equipment is exempt. All purchases of certified pollution control equipment qualify, and so do replacement equipment and parts bought to repair certified equipment.
2. Consumables are taxable. Consumable supplies, chemicals, and cleaning materials don't qualify for the exemption. Filtration equipment/supplies qualify only if reusable (a one-time-use filter is a taxable consumable). Soda ash used to neutralize acidic gases was specifically found to be a taxable consumable supply, not exempt equipment.
3. Electricity to run the equipment is generally taxable. A separate rule, Sales Tax Rule R865-19-35S, exempts fuels and electricity used in agriculture, manufacturing, and mining -- but this taxpayer, a hazardous waste incinerator, was not a manufacturer, so power used to run its certified pollution control equipment did not qualify under that separate exemption either.

What this means for you

Facilities with certified pollution control equipment

Don't assume "certified" means every input to running that equipment is tax-free. The exemption reaches the equipment itself and true repair/replacement parts. It does NOT reach consumables you feed into the process (chemicals, cleaning materials, single-use filters) -- track whether a filtration item is reusable, since that alone can flip its taxability.

Facilities that also manufacture

If your certified pollution control equipment sits inside a manufacturing operation, check the separate agriculture/manufacturing/mining fuels-and-electricity exemption (Rule R865-19-35S) -- it might cover your power costs even where the pollution-control-specific exemption doesn't. A non-manufacturer (like this hazardous waste incinerator) gets no such relief.

Accountants and tax professionals

This ruling draws a durable equipment-vs-consumable line that likely generalizes to other certified pollution control exemptions: durable/reusable/repair-related purchases are in, consumables are out, and electricity needs its own independent exemption basis (manufacturing status) rather than riding along with the pollution control certification.

Common questions

Q: Is everything used to run certified pollution control equipment tax-exempt?
A: No. Only the equipment itself and true replacement/repair parts are exempt. Consumable supplies, chemicals, and cleaning materials used with the equipment are taxable.

Q: Does reusable filtration equipment qualify?
A: Yes, if it's reusable. Single-use or consumed filtration items do not.

Q: Is electricity to run certified pollution control equipment exempt?
A: Only if the facility separately qualifies for the agriculture/manufacturing/mining fuels-and-electricity exemption under Rule R865-19-35S. A non-manufacturer facility (like the incinerator in this ruling) pays tax on that power.

Q: Can I rely on this ruling for my own pollution control facility?
A: Not automatically -- it's binding on the Commission only for the taxpayer and facts presented (a certified hazardous waste incineration facility that is not a manufacturer). Another taxpayer's facts, especially manufacturing status, could change the electricity-exemption outcome.

Citations and references

Rules:

• Utah Administrative Code R865-19-83S (pollution control facility exemption certification/procedure)
• Utah Sales Tax Rule R865-19-35S (fuels and electricity exemption for agriculture, manufacturing, and mining)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/92-024.pdf

Note: the cached page for this ruling was captured together with a separate, unrelated ruling, PLR 92-023 (third-party drop shipments), enriched separately at ut/plr-92-023-third-party-drop-shipments.md.

Original ruling text

92-024DJ

Response
July 10, 1992

July
10, 1992

XXXXX

Re:
Qualifying Purchases, Pollution Control Facility

Dear
XXXXX:

This
letter is in response to your recent request for an advisory opinion on what
constitutes "qualifying purchases" for use in a certified pollution
control facility.

The
Tax Commission policy is to refer such requests to the division most qualified
to analyze the request and make recommendations concerning it. As such, your
request was referred to the Tax Commission's Auditing Division for their
analysis and recommendations. The division's recommendations are as follows:

1.
Qualifying purchases are all purchases of pollution control equipment which
have been certified by the Division of Air Quality. Replacement equipment and
parts to repair certified pollution control equipment qualify for the
exemption.

2.
Consumable supplies, chemicals and cleaning materials do not qualify for sales
or use tax exemption. Filtration equipment or supplies qualify only if they are
reusable. Soda ash used to neutralize acidic gases is a consumable supply and
does not qualify for exemption.

3.
Sales Tax Rule R865-19-35S provides an exemption for fuels and electricity for
use in agriculture, manufacturing and mining.
XXXXX is not a manufacturer; therefore, the purchase of power to run
pollution control equipment is taxable.

Based
upon the facts presented in your letter, we are in agreement with the Auditing
Division's recommendations. Obviously, if there are deviations from these
facts, this opinion may be negated.

If
you do not agree with this determination, you may appeal to the Tax Commission
for a formal hearing. The results of that hearing would constitute a
declaratory judgment and be appealable to the Utah State Supreme Court. A
Notice of Appeal Rights and a copy of the Utah Taxpayer Bill of Rights are
attached.

For
the Commission

Joe
B. Pacheco

Commissioner

Utah
State Tax Commission

160
East 3rd South

Salt
Lake City, UT 84134

RE:
Request Advisory Opinion On "Qualified Purchases"

XXXXX
is a hazardous waste incineration facility. The plant is located in XXXXX
County, about fifty miles east of XXXXX. On XXXXX, 1992 the site received its
certification for "Sales and/or Use Tax Exemption for Pollution Control
Facility". The Certificate was received from the Utah Division of Air
Quality for selected parts of the plant.

The
Utah Administrative Code R865-19-83S, paragraph 1A states, "After the
facility is certified, qualifying purchases should be made without paying tax
by providing an exemption certificate to the vendor." Please clarify what
is a "qualifying purchase?"

Does
a "qualifying purchase" include equipment replacements and materials
required to operate and maintain equipment that the Division of Air Quality has
certified? Examples include: replacement pumps and spray nozzles for the spray
dryer (used to cool down gases before cleaning and discharge), filtration
equipment for the baghouse, soda ash (used to neutralize acidic gases) and the
cost of power to run the pollution control equipment.

I
have discussed this question with the Division of Air Quality and various
individuals within the State Tax Commission. There is a difference of opinion
about what the intent and scope of the "qualified purchase" clause
refers to once the facility has been certified. Clarification of this would be
most helpful.

Sincerely,

XXXXX

Controller