DAR File No. 27269

Tax Commission, Auditing

R865-13G-10

Exemption for Collective Purchase of Motor Fuels by State and Local Government Agencies Pursuant to Utah Code Ann. Section 59-13-201

NOTICE OF PROPOSED RULE

DAR File No.: 27269
Filed: 07/01/2004, 04:16
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

S.B. 133 (2004) amended Section 59-13-201 to repeal the requirement that in order to qualify for the fuel tax exemption, a government agency must purchase fuel in a quantity of 750 gallons or more. All government purchases of fuel, regardless of the quantity of fuel purchased, now qualify for the exemption. (DAR NOTE: S.B. 133 is found at UT L 2004 Ch 237, and was effective 05/03/2004.)

Summary of the rule or change:

The proposed amendment deletes language referring to the 750-gallon purchase requirement for government agencies to purchase fuel tax exempt (since that requirement is no longer in statute); and indicates that the exemption shall be administered in the form of a refund if the government agency purchases the fuel after the fuel tax has been paid.

State statutory or constitutional authorization for this rule:

Section 59-13-201

Anticipated cost or savings to:

the state budget:

Insignificant decrease--Prior to the passage of S.B. 133, a government entity that purchased less than 750 gallons of fuel for its bulk tanks was required to pay fuel tax on that purchase. The law then allowed the government entity to apply for a refund of the fuel taxes paid. Accordingly, the state had the use of the money until the entity applied for the refund. Under the new law, the government entity no longer has to pay the fuel tax and then apply for the refund. Thus, the state will no longer have the use of the entity's funds for the period between the time the entity pays the fuel taxes and the time the entity receives its refund for fuel taxes paid.

local governments:

None--Fuel taxes are state taxes and do not apply to local government.

other persons:

Insignificant increase--A government entity will no longer be required to remit fuel tax on bulk purchases of less than 750 gallons and then apply for a refund of those taxes. Thus, a government entity will not lose the use of the monies while it waits for the refund of the fuel taxes paid.

Compliance costs for affected persons:

None--A government entity that purchases fuel for its bulk tanks will no longer be required to pay fuel tax on a purchase of less than 750 gallons, and then apply for a refund of the fuel taxes paid.

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

There will be no fiscal impact on businesses.

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

Direct questions regarding this rule to:

Cheryl Lee at the above address, by phone at 801-297-3900, by FAX at 801-297-3919, or by Internet E-mail at clee@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:

08/16/2004

This rule may become effective on:

08/17/2004

Authorized by:

Pam Hendrickson, Commissioner

RULE TEXT

R865. Tax Commission, Auditing.

R865-13G. Motor Fuel Tax.

R865-13G-10. Exemption For [Collective ]Purchase of Motor Fuels by State and Local Government Agencies Pursuant to Utah Code Ann. Section 59-13-201.

[A. Definitions:

1. "Sale" means the passing of title from the seller to the buyer for a price (see Utah Code Ann. Section 70A-2-106(1)).

2. "Delivery" means the physical transfer of the goods from seller to buyer, directly or through a carrier. Tender of delivery requires that the seller put and hold conforming goods at the buyer's disposition and give the buyer any notification reasonably necessary to enable him to take delivery (see Utah Code Ann. Section 70A-2-503(1)).

B. In order for collective purchases to qualify for the 750 gallon exemption, transactions must comply with the conditions of at least one of the four cases below.

1. Multiple government agencies exclusively sharing a tank, which is leased or owned by one or more of those agencies, may be classified as exempt if one of the following conditions are met:

a. If title to the fuel passes as it enters the tank, then any deliveries into the tank of 750 gallons or more billed to a single government agency will qualify for exemption.

b. If title to the fuel passes as it leaves the tank, then the provisions of B.2. must be met for the exemption to apply.

2. Purchases by a government agency from an automated metering system activated by a card or key qualify for exemption if the purchases are billed in quantities of 750 gallons or more and the time period over which the purchases were made is stated on the invoice. The government agency must have control of, rights to, and be the only agency billed for all fuel metered on each card or key assigned to it in order for the arrangement to be tax exempt.

3. Deliveries to more than one bulk storage facility owned or leased by a government agency qualify for exemption if the total amount of fuel delivered within 48 hours is 750 gallons or more. The location, amount, and date of each delivery must be shown on the invoice. As an example, 500 gallons may be delivered to a school district's shop, and another 500 gallons to its bulk storage facility out of town. The total 1000 gallons is exempt from taxation if the deliveries are made within 48 hours of each other and are billed as a single sale.

4. Bulk deliveries made from a truck with a delivery capacity of less than 750 gallons can qualify for the exemption if the total fuel delivered by the truck to the governmental agency within 48 hours is 750 or more gallons, regardless of the number of trips taken to deliver the fuel. The invoice must indicate the number and date of deliveries.

C.]A. Sales to an Indian tribe for its exclusive use, acting in its tribal capacity, are exempt from taxation[ if the requirements of this rule are met]. Sales to individual tribal members, to Indian businesses operating on or off tribal territory, or to other nontribal organizations for personal use, retail sales purposes, or distribution to third parties do not qualify for the exemption for sales to Indian tribes.

[D.]B. Licensed distributors may claim the exemption on [qualifying ]sales to government agencies by taking the deduction on their motor fuel tax return for the month in which the sales occurred.[ In the case of qualifying collective purchases which span more than one month, the deduction is claimed in the month in which the sale is invoiced.]

1. Nonlicensed distributors making qualifying sales to government agencies must obtain credit for the exemption through the return of the licensed distributor supplying them with the fuel for the sales.

2. Each sale claimed as a deduction must be supported with a copy of the sales invoice attached to the return. The sales invoice must be in proper form and must contain sufficient information to substantiate the exemption status of the sale according to this rule.

C. The fuel tax exemption for motor fuel sold to the United States, this state, or a political subdivision of this state shall be administered in the form of a refund if the government entity purchases the motor fuel after the tax imposed by Title 59, Chapter 13, Part 2 was paid. For refund procedures, see rule R865-13G-13.

KEY: taxation, motor fuel, gasoline, environment

2004

Notice of Continuation April 3, 2002

59-13-201

ADDITIONAL INFORMATION

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For questions regarding the content or application of this rule, please contact Cheryl Lee at the above address, by phone at 801-297-3900, by FAX at 801-297-3919, or by Internet E-mail at clee@utah.gov

For questions about the rulemaking process, please contact the Division of Administrative Rules (801-538-3764). Please Note: The Division of Administrative Rules is NOT able to answer questions about the content or application of these administrative rules.