Tax Commission, Auditing

Section R865-19S-122

Sales and Use Tax Exemptions for Certain Purchases by a Web Search Portal Establishment Pursuant to Utah Code Ann. Section 59-12-104

Notice of Proposed Rule

(Amendment)

DAR File No.: 33857
Filed: 07/20/2010 11:31:21 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

This proposed section is necessary to implement S.B. 61 from the 2010 Legislative Session. (DAR NOTE: S.B. 61 is found at Chapter 209, Laws of Utah 2010, and was effective 07/01/2010.)

Summary of the rule or change:

This proposed section defines the terms "establishment", "machinery and equipment", and "new or expanding establishment"; and provides guidance for when the exemption for web search portal purchases applies that is consistent with the criteria for the sales tax exemption for a manufacturing facility.

State statutory or constitutional authorization for this rule:

• Section 59-12-104

Anticipated cost or savings to:

the state budget:

None--Any revenue impacts were considered in S.B. 61 (2010).

local governments:

None--Any revenue impacts were considered in S.B. 61 (2010).

small businesses:

None--Any revenue impacts were considered in S.B. 61 (2010).

persons other than small businesses, businesses, or local governmental entities:

None--Any revenue impacts were considered in S.B. 61 (2010).

Compliance costs for affected persons:

None--This is a newly created sales tax exemption for web search portals.

Comments by the department head on the fiscal impact the rule may have on businesses:

None anticipated.

Michael Cragun, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Tax Commission
Auditing
210 N 1950 W
SALT LAKE CITY, UT 84134

Direct questions regarding this rule to:

• Michael Cragun at the above address, by phone at 801-297-3907, by FAX at 801-297-3919, or by Internet E-mail at mcragun@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

09/14/2010

This rule may become effective on:

09/21/2010

Authorized by:

R. Bruce Johnson, Tax Commission Chair

R865. Tax Commission, Auditing.

R865-19S. Sales and Use Tax.

R865-19S-122. Sales and Use Tax Exemptions for Certain Purchases by a Web Search Portal Establishment Pursuant to Utah Code Ann. Section 59-12-104.

(1) Definitions.

(a) "Establishment" means a unit of operations, that is generally at a single physical location in Utah, where qualifying activities are performed. If a business operates in more than one location (e.g., branch or satellite offices), each physical location is considered separately from any other locations operated by the same business.

(b) "Machinery and equipment" means electronic or mechanical devices having an economic life of three or more years including any accessory that controls the operation of the machinery and equipment.

(c) "New or expanding establishment" means:

(i)(A) the creation of a new web search portal establishment in this state; or

(B) the expansion of an existing Utah web search portal establishment if the expanded establishment increases services or is substantially different in nature, character, or purpose from the existing Utah web search portal establishment.

(ii) The operator of a web search portal establishment who closes operations at one location in this state and reopens the same establishment at a new location does not qualify as a new or expanding establishment without demonstrating that the move meets the conditions set forth in Subsection (1)(c)(i).

(2) The exemption for certain purchases by a web search portal establishment does not apply to purchases of items of tangible personal property that become part of the real property.

(3) Purchases of qualifying machinery and equipment are treated as purchases of tangible personal property under R865-19S-58, even if the item is affixed to real property upon installation.

(4) Machinery and equipment used for non-qualifying activities are eligible for the exemption if the machinery and equipment are primarily used in qualifying activities.

(5) The entity claiming the exemption shall retain records to support the claim that the machinery and equipment are qualified for exemption from sales and use tax under the provisions of this rule and Section 59-12-104.

 

KEY: charities, tax exemptions, religious activities, sales tax

Date of Enactment or Last Substantive Amendment: [September 17, 2009]2010

Notice of Continuation: March 13, 2007

Authorizing, and Implemented or Interpreted Law: 59-12-104