Re: Summary of 2001 Sales Tax Legislation and Additional Sales Tax Information

This Tax Bulletin contains a summary of bills passed in the 2001 General Legislative Session, and additional sales tax information.

HB 78 Sales and Use Tax - Sales Relating to Schools (Effective 7/1/01)

Extends the sales tax exemption for sales relating to schools to include amounts charged for admissions to school-related events and activities, but only if those amounts are NOT passed through to someone other than a school, school district, or nonprofit entity authorized by a school board to organize and direct a competitive secondary school activity.

HB 110 Sales Tax Refund for Qualified Emergency Food Agencies (Effective 7/1/01)

Allows an association of governments created under the Interlocal Cooperation Act to claim a sales tax refund as a qualified emergency food agency. The legislation also provides that a qualified emergency food agency may use the sales tax refund only for providing food directly to low-income persons, or warehousing and distributing food to agencies providing food to low-income persons.

HB 115 Waste Tire Recycling Fee (Effective 7/1/01)

Increases the recycling fee collected on each sale of a new tire by a retailer from $.85 per tire to $1 per tire.

HB 126 Amendments to Sales and Use Tax Exemption for Meals (Effective 7/1/01)

Extends the sales and use tax exemption for sales of meals served by an institution of higher education if the meals are not available to the general public to include meals that are prepaid as part of a student meal plan offered by the institution of higher education.

HB 261 Sales and Use Tax Exemption - Scrap Recyclers (Effective 7/1/01)

Provides a sales and use tax exemption for sales to a scrap recycler of natural gas, electricity, heat, coal, fuel oil, or other fuels for industrial use. In order to qualify for the exemption, the scrap recycler must utilize, from a fixed location, machinery or equipment to process at least one of the following items into prepared grades of processed materials for use in new products: iron, steel, nonferrous metal, paper, glass, plastic, textile, or rubber. Finally, new products manufactured by the recycler must be products that would otherwise have been manufactured with nonrecycled materials.

SB 174 Sales and Use Tax - Exemption for Semiconductor Fabricating or Processing (Effective 7/1/01)

Provides for a sales and use tax exemption for a sale or lease of semiconductor fabricating or processing materials for the period beginning July 1, 2001 and ending June 30, 2004. Exempt amounts must be reported to the Tax Commission by the purchaser or lessee. Exempt amounts that are not reported to the Tax Commission are subject to penalty.

Semiconductor fabricating or processing materials are defined as tangible personal property used or consumed primarily in the process of manufacturing, fabricating, or maintaining an environment suitable for a semiconductor. Semiconductor fabricating or processing materials include a chemical, catalyst, or other material used to: (1) produce a chemical or physical change in a semiconductor; (2) remove impurities from a semiconductor; or (3) improve the marketable condition of a semiconductor.

The exemption for the sale or lease of semiconductor fabricating or processing materials applies regardless of whether the materials actually come into contact with a semiconductor, or ultimately become incorporated into real property.

Finally, the exemption is phased in as follows: (1) for the period beginning July 1, 2001 and ending June 30, 2002, 10% of the qualifying purchase is exempt; (2) for the period beginning July 1, 2002 and ending June 30, 2003, 50% of the qualifying purchase is exempt; and (3) for the period beginning July 1, 2003 and ending June 30, 2004, 100% of the qualifying purchase is exempt.

2000 SB 172 Sales and Use Tax Modifications (Effective 7/1/01)

Provides that a vendor that does not have nexus with Utah ("remote vendor"), and therefore no duty to collect Utah sales tax, may collect Utah sales tax on a voluntary basis. A remote vendor that voluntarily collects Utah sales tax is not required to collect the tax at the rate imposed at the location of the purchaser, but may collect the tax at the lowest common combined sales and use tax rate, currently 5.75%.

Prior to the effective date of this legislation, if a remote vendor collected tax at a rate other than the rate imposed at the location of the purchaser, the purchaser was required to accrue and remit to the Tax Commission the difference between the tax collected by the remote vendor and the tax that would otherwise have been due at the purchaser's location. Effective July 1, 2001, however, a purchaser is not liable for any tax above the tax collected by a remote vendor at the lowest common combined rate. However, if the remote vendor does not voluntarily collect the tax, the purchaser must still accrue the use tax at the rate imposed at the purchaser's location.

Senate Bill 172 also provides that, effective July 1, 2001, local sales tax revenue collected from remote vendors that is in excess of local sales tax revenue collected from all remote vendors in the fiscal year ending June 30, 2001, shall be deposited into a restricted account. The remainder of the local sales tax revenues collected from remote vendors shall be distributed to counties, cities, and towns on the basis of population.

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This section updated 6-22-01
Collection of Sales Tax by Jeep, Snowmobile, and Boat Tour Operators, River Runners, and Outfitters 

In reviewing the sales tax obligations of jeep, snowmobile, and boat tour operators, river runners, outfitters, and other vendors providing similar services, the Tax Commission provides the following update to Bulletin 8-95. These updated guidelines, which supersede instructions given in Tax Bulletin 8-95, are effective July 1, 2001.

1. If payment for the service occurs in Utah and some of the service occurs in Utah, the service provider is required to collect Utah sales tax on the entire amount of the transaction.

2. If payment for the service occurs outside Utah and the entire service occurs in Utah, the service provider is required to collect Utah sales tax on the entire amount of the transaction.

3. If payment for the service occurs outside Utah and some of the service (other than booking or ticketing) occurs outside Utah, the service provider is not required to collect Utah sales tax on the transaction.