DAR File No. 28114

Tax Commission, Auditing

R865-19S-120

Sales and Use Tax Exemption Relating to Film, Television, and Video Pursuant to Utah Code Ann. Section 59-12-104

NOTICE OF PROPOSED RULE

DAR File No.: 28114
Filed: 07/29/2005, 01:38
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

Section 59-12-104 provides a sales tax exemption for the purchase, lease, or rental of machinery or equipment by certain establishments, if used primarily in the production or post production of film, television, video, or similar media for commercial distribution. This proposed section defines machinery and equipment for purposes of the exemption.

Summary of the rule or change:

This proposed section defines terms for purposes of the sales tax exemption for the purchase, lease, or rental of machinery or equipment primarily used in the production or post production of film, television, and video for commercial distribution; indicates transactions that do not qualify for the exemption.

State statutory or constitutional authorization for this rule:

Section 59-12-104

Anticipated cost or savings to:

the state budget:

None--Any impact was taken into account in S.B. 190 (2004). (DAR NOTE: S.B. 190 is found at UT L 2004 Ch 298, and was effective 07/01/2004.)

local governments:

None--Any impact was taken into account in S.B. 190 (2004).

other persons:

None--Any impact was taken into account in S.B. 190 (2004).

Compliance costs for affected persons:

Entities that meet the criteria for the sales tax exemption will be able to make certain purchases tax exempt.

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

This rule has no fiscal impact since the sales tax exemption was accounted for in the fiscal note for S.B. 190 when it passed in the 2004 Legislative Session. Pam Hendrickson, Tax Commission Chair

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:

09/14/2005

This rule may become effective on:

09/15/2005

Authorized by:

Pam Hendrickson, Commission Chair

RULE TEXT

R865. Tax Commission, Auditing.

R865-19S. Sales and Use Tax.

R865-19S-120. Sales and Use Tax Exemption Relating to Film, Television, and Video Pursuant to Utah Code Ann. Section 59-12-104.

(1) The provisions of this rule apply to the sales and use tax exemption authorized under Section 59-12-104 for the purchase, lease, or rental of machinery or equipment by certain establishments related to film, television, and video if those purchases, leases, or rentals are primarily used in the production or postproduction of film, television, video, or similar media for commercial distribution.

(2) "Machinery or equipment" means tangible personal property eligible for capitalization under accounting standards.

(3)(a) "Tangible personal property eligible for capitalization under accounting standards" means tangible personal property with an economic life greater than one year.

(b) "Tangible personal property eligible for capitalization under accounting standards" does not include tangible personal property with an economic life of one year or less, even if that property is capitalized on the establishment's financial records.

(c) There is a rebuttable presumption that an item of tangible personal property is not eligible for capitalization if that property is not shown as a capitalized asset on the financial records of the establishment.

(4) Transactions that do not qualify for the sales tax exemption referred to in Subsection (1) include purchases, leases, or rentals of:

(a) land;

(b) buildings;

(c) raw materials;

(d) supplies;

(e) film;

(f) services;

(g) transportation;

(h) gas, electricity, and other fuels;

(i) admissions or user fees; and

(j) accommodations.

(5) If a transaction is composed of machinery or equipment and items that are not machinery or equipment, the items that are not machinery or equipment are exempt from sales and use tax if the items are:

(a) an incidental component of a transaction that is a purchase, lease, or rental of machinery or equipment; and

(b) not billed as a separate component of the transaction.

(6)(a) Except as provided in Subsection (6)(b), an item used for administrative purposes does not qualify for the exemption.

(b) Notwithstanding Subsection (6)(a), if an item is used both in the production or postproduction process and for administrative purposes, the item qualifies for the exemption if the primary use of the item is in the production or postproduction process.

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

[December 21, 2004]2005

Notice of Continuation April 5, 2002

59-12-104

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.