Revised September 2, 2008

Utah State Tax Commission

General Sales and Use Tax Workshop

Table of Contents

 

Types of Exemptions

Utah law provides specific exemptions from sales and use tax. Some exemptions require the use of an exemption certificate, TC-721, Exemption Certificate or TC-721G, Exemption Certificate for Governments and Schools. See Utah Code §59-12-104 for more information.

There are three types of sales tax exemptions based on:

  1. Entity
  2. Use
  3. Product

If the exemption is product based, an exemption certificate is not required.

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Exemption Certificates

When an exemption certificate is required, the seller gets standard exemption information electronically or on form TC-721, Exemption Certificate or TC-721G, Exemption Certificate for Government and Schools. If captured electronically, the same information on form TC-721 must be kept.

A buyer only needs to provide a signature if using a paper exemption certificate.

A buyer must meet exemption conditions before completing a certificate to buy items tax-free. The buyer must use funds from the business to purchase the items and those items must be used in the normal course of business. Sellers keep the certificates in their records to document the exemption.

Sellers accept exemption certificates at face value. The seller is not liable for improperly claimed exemptions unless the seller participates in improperly claiming an exemption.
Sellers may keep exemption certificates on file for customers’ future purchases. A buyer must notify the seller if a certificate on file is canceled, modified, or limited for the exemptions claimed.

Businesses that buy items tax-free under exemption provisions and later use some of the items for non-exempt purposes must report and pay sales and use tax on the cost of those items.
If a purchaser can’t separate the goods that qualify for exemption from items the purchaser will use and consume, everything should be purchased tax-free. Admin. Rule R865-19S-23.

For example, a restaurant owner purchases food ingredients tax-free for meals for resale, but also provides free meals to employees. In this instance, the owner would report and pay use tax on meals the employees consumed.

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Entity-Based Exemptions

An entity-based exemption is determined by who purchases or sells the product. An exemption certificate is required.

Some common exemptions are:

  • Sales to a public transit district, or a subcontractor of a public transit district, if the tangible personal property is clearly identified and installed or converted to real property owned by the public transit district.
  • Sales to United States and Utah government agencies. Sales of construction materials to most Utah government agencies are exempt only if installed by the agencies’ employees. Construction materials purchased by or on behalf of public elementary and secondary schools are exempt from sales tax. The construction materials must be clearly identified and segregated, and must be installed or converted into real property owned by the school. See Admin. Rule R865-19S-23 for information relating to documentation of sales to government agencies.

To qualify as a tax exempt sale made to a U.S. or Utah government agency, the purchase must be made with the government entity’s funds. A purchase does not qualify for this exemption if a government agency employee pays for the purchase with personal funds, even if the employee is reimbursed for the purchase by the government agency. Government employees traveling on official business are exempt from sales tax if they present:

U.S. Department of the Interior (DOI) bureaus that centrally bill travel expenses include: Bureau of Indian Affairs, Bureau of Reclamation, U.S. Geological Survey, Minerals Management Service, Office of Special Trust, Office of Surface Mining, Office of the Secretary and National Business Center.

If employees of these DOI bureaus incur travel expenses in Utah, the transactions may be exempt from sales tax. To qualify as tax exempt, the employee must use the DOI MasterCard issued by Bank of America with beginning numbers of 5568 16. In addition, the DOI credit card is embossed with the employee’s name, U.S. Department of the Interior, and the DOI tax exempt ID number.

The sales tax exemption for purchases by Utah state and local government entities does NOT apply to purchases by a state other than Utah or to purchases by any local government entity located outside of Utah. Utah government purchases of items are tax exempt if made with a Utah state purchasing card or paid with a Utah state check. Purchasing cards are issued by US Bank. The cards display the Utah state seal, include the words “State of Utah Tax Exempt” and are imprinted with the individual purchaser’s name and Utah state agency. While sellers must maintain evidence that a purchase qualifies for the sales tax exemption as a sale to the federal or Utah State government, this requirement is satisfied if the seller keeps a record of the qualifying credit card number, a copy of the government entity check, purchase order, or voucher, or a properly completed and signed form TC-721G, Exemption Certificate for Governments and Schools.

  • Sales made to or by
    • an area agency on aging; or
    • a senior citizen center owned by a county, city or town; and
    • sales made by a senior citizen center that contracts with an area agency on aging.
  • Certain enrolled members of Native American tribes (including the tribe itself) may purchase tax-free if:
    • the member has a tribal card showing a Federal Bureau Number;
    • the sale is to an enrolled tribal member and delivery is taken on the member’s own reservation (in the case of the Ute Indian Tribe, the sale must be made on or delivery must be made to tribal trust lands within the Uintah and Ouray reservations); and
    • in the case of sales to the tribe itself, a purchase order, exemption certificate, or similar evidence of tribal identity must be presented.

Sales of tangible personal property made off the reservation to enrolled members of the tribe are taxable. They are exempt from tax only if delivery is made to the reservation by the seller or a licensed common carrier.

  • Foreign diplomats – Certain foreign diplomatic employees are exempt from sales tax to varying degrees. These diplomatic personnel are issued tax exemption cards by the U.S. Department of State. The cards are color-striped, indicating the type and/or amount of sales tax exemption. Cardholders with a green stripe are not exempt from taxes on hotel rooms. Sellers must keep a photocopy of the card for evidence of exemption. The cards are not valid to make exempt purchases of telephone service or other utility services; the U.S. Department of State issues special exemption certificates for such purposes.
  • Feed, seed, baling ties, etc. sold to commercial agricultural producers.
  • Sales of tangible personal property used or consumed primarily and directly in farming operations. Charges for labor and/or parts (including lubricating oil, antifreeze or other supplies) used to repair or maintain off-road machinery and equipment used primarily and directly in agricultural production are also exempt.
  • Sale or lease of semiconductor fabricating, processing, research or development materials.
  • Sales relating to schools and fundraising.
  • Sales to religious or charitable institutions. The exemptions for purchases is allowed as follows:
    1. The exemption is taken at the point of sale if the purchase is $1,000 or more.
    2. If the purchase is less than $1,000, the exemption is taken by submitting form TC-62N to claim a refund from the Tax Commission.
    3. If the sale is made by a public utility to a religious or charitable institution, the exemption must be taken at the point of sale.
    4. If a contract exists between the seller and the religious or charitable institution, the exemption may be taken at the point of sale regardless of the dollar amount of the sale.

To be eligible for the exemption, the organization must be recognized as exempt under Section 501(c)(3) of the Internal Revenue Code and have a sales tax exemption number from the Tax Commission. Submit form TC-160 to get a tax exemption number.

  • Sales of construction materials to a religious or charitable institution or to a contractor purchasing on behalf of a religious or charitable institution.
  • Aircraft and boat tour operators, river runners and similar services:
    • Amounts paid or charged for helicopter, airplane, or other aircraft tours that enter into airspace designated by the Federal Aviation Administration as a federal airway during the tour.
    • Amounts paid or charged for boat tours, scenic cruises, or other similar activities on the waters of the state if the waters on which the tour, cruise, or other similar activity operates are used, by themselves or in connection with other waters, as highways for interstate commerce.

For more information, see Admin Rule R865-19S-113.

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Use-Based Exemptions

A use-based exemption is determined by the buyer’s use of the product. An exemption certificate is required.

The following are exempt:

  • Sales of certain vehicles for exclusive use outside of Utah.
  • Property purchased in the regular course of business for resale in this state, either in its original form or as an ingredient or component part of a manufactured or compounded product.
  • Sales for resale or lease. In addition, the lease of tangible personal property is exempt if it meets all of the following conditions:
    • the property is part of a sale-leaseback transaction;
    • sales or use tax was paid on the initial purchase of the property; and
    • the leased property will be capitalized and the lease payments will be accounted for as payments made under a financing arrangement.


  • Purchases of tangible personal property upon which a sales and use tax was paid to another state are exempt, except if the tax paid was lower than Utah’s rate. If lower than Utah’s rate, the purchaser must pay the difference. No adjustment or credit is allowed if the tax paid was greater than Utah’s rate.
  • Purchases or leases of machinery and equipment and repair or replacement parts with an economic life of three or more years that are used by a cogeneration facility as defined in Utah Code §54-2-1, or a qualified manufacturer or scrap recycler described in the Standard Industrial Classification Manual (SIC) classification 2000-3999. Buyers of the qualifying machinery and equipment that fail to report this on the informational line of the Sales and Use Tax Return shall be penalized the lesser of $1,000 or 10 percent of the sales and use tax that would have been imposed if the exemption had not applied.
  • Purchases or leases of machinery, equipment or parts with an economic life of three or more years that are used in a mining production process or in research and development, by a business described in NAICS 212, Mining (except Oil and Gas) or NAICS 213113, Support Activities for Coal Mining.
  • Charges for labor to repair or renovate tangible personal property, if the parts used in the repair or renovation are exempt from sales and use tax.
  • Parts used in the repair or renovation of the following exempt tangible personal property:
    • tools or equipment used exclusively in the performance of an aerospace or electronics industry contract with the United States government;
    • tangible personal property used or consumed primarily and directly in farming operations;
    • snow making equipment, ski slope grooming equipment, and passenger ropeways;
    • hearing aids and hearing aid accessories.
  • Sales of nonreturnable containers, labels, bags, shipping cases, and casing to a manufacturer, processor, wholesaler, or retailer for use in packaging tangible personal property to be sold by the manufacturer, processor, wholesalers, or retailer.
  • Purchases of lists or databases containing names and addresses that are used to send direct mail.
  • Purchases or leases by a telephone service provider of equipment, machinery, or software are exempt if they have a useful economic life of one or more years and are used for the following telecommunication purposes:
    • enabling or facilitating;
    • 911 service;
    • maintenance or repair;
    • switching or routing; or
    • transmission.

  • Purchases of property (except vehicles) for business use from outside the state where the property is brought into the state after the first use for which the property is designed. This exemption does not apply to leases or rentals.

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Product-Based Exemptions

A product-based exemption is determined by the type of product. Product-based exemptions do not require an exemption certificate.

The following are exempt:

  • Isolated or occasional sales if the sale is made by a person not regularly engaged in the business of selling that type of tangible personal property. The exemption does not apply to sales of tangible personal property for resale or the sale of a vehicle or vessel required to be titled or registered in Utah.
  • The amount paid for a prescription drug. A drug is defined as a compound, substance or preparation that is intended for the diagnosis, cure, mitigation, treatment or prevention of disease or is intended to affect the structure or function of the human body. Food, dietary supplements, alcoholic beverages, and prosthetic devices are not considered drugs. Sales of drugs are exempt from sales and use tax only if the purchaser presents a prescription for the drug.
  • Sales or rentals of durable medical equipment, including parts used to repair the equipment and replacements. Sales or rentals of durable medical equipment are exempt from sales and use tax only if the purchaser presents a prescription for the equipment.
  • Sales or rentals of mobility enhancing equipment that is primarily used to provide or increase the ability to move from one place to another for a person with limited mobility. Sales or rentals of mobility enhancing equipment are exempt from sales and use tax only if the purchaser presents a prescription for the equipment.
  • A prosthetic device, including repair or replacement parts. Corrective eyeglasses, contact lenses, hearing aids or dental prostheses are not prosthetic devices. Sales or rentals of prosthetic devices are exempt from sales and use tax only if the purchaser presents a prescription for the device.
  • Sales of disposable home medical equipment or supplies that cannot withstand repeated use. Sales of disposable home medical equipment or supplies are exempt from sales and use tax only if the purchaser presents a prescription for the equipment or supplies. The equipment and supplies must be eligible for payment under Title XVIII, federal Social Security Act or the state plan for medical assistance under Title XIX, federal Social Security Act.
  • Sales of hearing aids and hearing aid accessories, except batteries, and charges for labor and/or parts used in the repair or renovation of hearing aids and hearing aid accessories. Sales of hearing aid batteries are taxable.
  • Forty-five percent of the sales price of a new manufactured home and 100 percent of the sales price of a used manufactured home.
  • Fees charged for unassisted amusement devices.
  • Sales of unassisted car washes, and unassisted dry cleaning and laundry services.
  • Interstate sales delivered by common carrier or the seller to a point outside of Utah. A copy of the bill of lading, freight bill, form TC-757 or other evidence of out-of-Utah delivery must be kept by the licensed seller or retailer. If the property is delivered in the state of Utah to a consumer, the tax applies, regardless of its removal from Utah. See Admin. Rule R865-19S-44.
  • Motor fuels and special fuels subject to Utah state fuel excise tax.
  • Sales of hay.
  • Exclusive sale of seedling plants, or garden, farm, or other agricultural produce, if sold during the harvest season by the producer, an employee of the producer, or by a member of the producer’s immediate family.
  • Sales of telephone service charged to a prepaid telephone calling card.
  • Sales of newspapers or newspaper subscriptions.
  • Sales of water in a pipe, conduit, ditch, or reservoir.
  • Room and trailer space rentals for 30 consecutive days or more.
  • Sales of currency or coinage that constitute legal tender of the United States or of a foreign nation.
  • Sales of an ingot, bar, medallion, or decorative coin having a gold, silver, or platinum content of 80 percent or more and that does not constitute legal tender of any nation.
  • Admissions to higher education athletic events.
  • Sales of food and food ingredients, prepared food or alcoholic beverages by a church or a charitable institution if the items are not available to the general public.
  • Sales of food and food ingredients, prepared food or alcoholic beverages by an institution of higher education if the items are not available to the general public and are prepaid as part of a student meal plan offered by the institution of higher education.
  • Sales of food and food ingredients, prepared food or alcoholic beverages provided at a medical facility or a nursing facility for inpatient meals. See Admin. Rule R865-19S-61.

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