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Sales Tax Exemption
Water Pollution Control Facilities
Certain pollution control facilities are exempt from sales tax (See R865-19S-83. Pollution-Control Facilities Pursuant to Utah Code Ann. Section 59-12-104.) These facilities are defined as any land, structure, building, installation, excavation, machinery, equipment, device, etc., if the primary purpose of the construction or installation is to prevent, control, or reduce air or water pollution. The following information outlines rules and procedures used by the state to determine if a facility qualifies for the exemption. A fee will be charged (currently $90/hour, in accordance with the state fee schedule) for the time required to review the application.
- Flowchart for processing sales tax exemptions for pollution control facilities.
- An application form must be used for certification applications. Download, send an Email, or contact us for a hard copy.
- State statutes are 19-2-123 through 19-2-127.
- The Water Quality rule is R317-12.
- Water Pollution Control Facilities - see definition in state statute 19-2-102.(11) for Pollution Control Facility (PCFs) having been reviewed and approved by the Executive Secretary.
- Materials, equipment, structures, land and services used for the construction/installation of the PCFs are eligible for certification if their "primary purpose" is for reduction, elimination or prevention of air pollution.
- The statute requires that construction/installation of control facilities to have commenced or firm contract for such to have been entered into before certification can be issued. (Application may be filed after firm construction contract has been entered or construction has commenced.)
- The materials, services, processes, etc. of normal/continuing operations or maintenance of control facilities are not eligible for sales tax exemption.
- The State Tax Commission must be consulted with prior to a certification being issued. See the attached consultation procedures.
- R317-12-3 states the certification must be accomplished no later than 120 days after the date of filing. The date of filing is the date of receipt of the final information requested by the Division, i.e., 120 days after the application is complete.
- The DWQ certifies the PCF, not the cost(s) associated with it.
- The potential eligibility of sales tax exemption will be included in the Pre-NOI checklist and indicated to the client in the Pre-NOI meeting.
Test Used by DWQ
- There must be a water pollutant contained in the stream entering this water PCF to be reduced or eliminated.
- There must be a quantifiable demonstrated (test data, modeling results, calculations, etc.) reduction or prevention of water pollution as a result of the operation of the water PCF. The demonstration documentation should be furnished by the applicant.
- The "before construction/installation etc. of the PCF" scenario should be compared to the "after construction/installation etc. of the PCF" scenario, i.e., is there a net reduction of pollution in the before and after scenarios? This determination can be modified if there is a net decrease of more critical pollutants.
- The material, equipment, services, structures, land, etc. directly associated with the proper functioning of the water PCF can be considered for certification. (This is different than General Background and Guidance shown above.)
Procedures For Tax Commission Consultation Between the Utah State Tax Commission and Department of Environmental Quality For Certification of Air and Water Pollution Control Facilities
Scope of Tax Commission Consultation
Utah Code 19-2-125 provides that the Air Quality and Water Quality Boards consult with the Utah State Tax Commission (USTC) prior to certifying a pollution control facility. USTC will not duplicate the detailed analysis of Department of Environmental Quality (DEQ) engineers. It is also the Tax Commission's intent to not delay the certification process. Therefore, these procedures provide that USTC be made aware, early in the process, what facilities are being considered for pollution control certification. Early awareness provides opportunities for input during the approval process rather than waiting until after DEQ has made a determination and perhaps causing unnecessary delays in certification. USTC awareness of facilities under consideration and of approximate control facility costs are helpful in assuring compliance with state tax laws.
In summary, DEQ will generally make two formal contacts with USTC—the first at the time of original application to DEQ and the second, when the application is complete. The assumption is that the initial application is often not complete and DEQ requests additional information. It is intended that should substantial changes occur between the initial and final applications, DEQ will inform USTC. It is not necessary that USTC be copied for every piece of correspondence and communication between DEQ and the applicant.
When DEQ receives an application for certification, DEQ will forward the application cover sheet to the USTC Operations Division Deputy Director. The purpose of the cover sheet is to provide USTC with initial information needed for their consulting purposes. The cover sheet will contain, at minimum, the following items:
- Name of company
- Location of pollution control facility(ies)
- Each pollution control facility's estimated or actual total costs
- Contract date or construction/installation start date and estimated completion date, if project not completed
- Contractor(s) of the pollution control facility(ies)
- The Deputy Director will provide cover sheet copies to a committee composed of one representative each from the Commission, Operations, Audit, and Property Tax. This committee will meet once a month or as needed to discuss pending applications. Based upon such discussion, USTC will raise any concerns with DEQ prior to the completed application submission (see 3 below).
- Often, DEQ determines the initial applications are incomplete and requests the applicant to provide additional information. When all information has been received by DEQ and the application is considered complete, DEQ will send a complete application to the Operations Division Deputy Director. If a determination of certifiability on a part of the original application is made by DEQ prior to an application being complete, e.g., the applicant is resubmitting an application form to include only a limited number of items upon which there are no questions by DEQ concerning certifiability, DEQ will forward the new cover sheet to USTC at that time.
- The special committee of Tax Commission people will review the updated/complete application. If there are concerns or questions with any part of the application or proposed certification, USTC will contact the appropriate division in DEQ within 30 days to discuss their questions or concerns before a final certification is issued by DEQ. Regardless of USTC's position on the certification, USTC will provide a written response to DEQ within the 30 days. The Operations Division Deputy Director will draft the response for the USTC Executive Director's approval.
- If USTC's response is needed more quickly than allowing a full 30 days or if more review time is needed, DEQ and USTC will negotiate a response time.
- If for any reason a determination of non-certifiability is changed by DEQ after notification to USTC, then DEQ will again notify USTC to allow any further comment by USTC.
- If a DEQ determination of non-certifiability is formally appealed by the applicant to the Air Quality Board or the Water Quality Board, DEQ will notify USTC that an appeal is pending and that the initial determination by DEQ could be changed by the Board. DEQ will notify USTC of any appeal hearings scheduled before their Boards.
- When a certification is issued by DEQ to an applicant, it will include instructions (supplied by USTC) on what information and/or documentation they must provide to USTC when applying for the sales tax refund.
- 19-2-102. Definitions
- 19-2-123. Tax Relief to Encourage Investment in Facilities—Sales and Use Tax Exemption
- 19-2-124. Application for Certification of Pollution Control Facility
- 19-2-125. Action on Application for Certification
- 19-2-126. Revocation of Certification—Grounds—Procedure
- 19-2-127. Rules for Administering Certification for Tax Relief
John Cook (801) 536-4343