Does Utah sales/use tax apply to imported manufacturing machinery sold to a Utah manufacturer, and to replacement parts for that machinery?

Plain-English summary

A sales office that represented foreign machinery manufacturers wrote to the Utah State Tax Commission with two questions: first, whether sales tax had to be collected on imported machinery sold to a Utah business that would use it to manufacture the customer's products, and second, whether tax would apply to replacement parts for that machinery, which the company was considering stocking in Georgia and shipping to customers in various states as needed.

The Commission's response addressed the underlying taxability of the equipment and parts, not the multi-state collection question the taxpayer also raised. It confirmed that Utah's manufacturing exemption (§ 59-12-104(15) and Rule R865-19S-85) can cover sales of manufacturing machinery and equipment used in a new or expanding manufacturing facility. But two conditions apply: the seller is still responsible for collecting tax on the sale unless the buyer provides a completed exemption certificate (Form TC-721, per Rule R865-19S-23), and replacement parts for the machinery do not qualify for the exemption at all -- they're taxable regardless of whether the original machine itself was exempt.

What this means for you

Machinery sellers and manufacturers' sales representatives

If you sell manufacturing equipment into Utah, the exemption for new-or-expanding manufacturing operations doesn't automatically excuse you from collecting tax -- you need a properly completed exemption certificate (Form TC-721) from the buyer before you can treat the sale as exempt. Without that paperwork, the burden is on you as the seller to collect.

Businesses selling replacement/spare parts for exempt machinery

Don't assume that because the original machine qualified for the manufacturing exemption, replacement parts for it automatically qualify too. This ruling states plainly that replacement parts do not qualify for the exemption, so ordinary sales tax rules apply to them even when they're parts for otherwise-exempt equipment.

Accountants and tax professionals

Note what this ruling does not answer: the taxpayer specifically asked about its obligations if it stocked replacement parts in Georgia and sold to customers in multiple states, which raises separate multi-state nexus and sourcing questions. The Commission's response is silent on that -- it only addresses whether the machinery and parts themselves are exempt from Utah tax when sold to a Utah customer, not where or how the seller must collect for out-of-state sales.

Common questions

Q: Is manufacturing machinery sold into Utah exempt from sales tax?
A: It can be, if it's for a new or expanding manufacturing facility under § 59-12-104(15) and Rule R865-19S-85 -- but the seller must still collect tax unless the buyer gives a completed exemption certificate (Form TC-721).

Q: Are replacement parts for exempt manufacturing machinery also exempt?
A: No. This ruling states replacement parts do not qualify for the manufacturing exemption, regardless of whether the machine they're for was exempt.

Q: Does this ruling cover sales tax collection obligations for parts sold to customers in other states?
A: No -- the Commission's response didn't address that part of the taxpayer's question. It only ruled on whether the machinery and parts qualify for Utah's manufacturing exemption.

Q: Does this ruling apply to my machinery or parts sale?
A: Not automatically. It's a private letter ruling binding only on the Commission for the taxpayer and facts described, and it's a 1995-era ruling citing statute numbering that has since changed. Consult a Utah tax professional and verify current law.

Citations and references

Statutes and rules (1995-era numbering -- since renumbered/amended):

• Utah Code Ann. § 59-12-104(15) (1995) (manufacturing machinery/equipment exemption for new or expanding operations)
• Utah Admin. Rule R865-19S-85 (manufacturing exemption details)
• Utah Admin. Rule R865-19S-23 (exemption certificate requirement, Form TC-721)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original page: https://files.tax.utah.gov/tax/commission/ruling/95-003.htm

Original ruling text

[95-003]

Response March 13, 1995

Request

Dear Sirs;

This is to inquire about the collection of sales taxes in your state.

We are a sales office, representing foreign machinery companies and
would like to know your state's policy on collecting sales taxes on machinery that
may be imported to a business in your state.
This machinery would be used to manufacture our customer's products.

We also might consider stocking replacement parts for these machines in
Georgia and selling them to customers in various states as needed.

Would a sales tax need to be collected on either.

Please advise.

Thank you very much for your help.

Very truly yours,

XXXXX

TO: XXXXX

FROM: XXXXX, Secretary

DATE: January 9, 1995

SUBJECT:Request for Advisory Opinion - No. 95-003DJ

Attached is a request for an advisory opinion from XXXXX of XXXXX. Will you please review the request of XXXXX
for an advisory opinion regarding the collection of sales taxes on machinery
that may be imported to a business in Utah.

Please prepare the response for signature by the Commission as per the
guidelines established by them.

Thank you.

XXXXX

TO: ALICE SHEARER, Commissioner

FROM: XXXXX, Executive Director

DATE: March 8, 1995

RE: Advisory Opinion
for XXXXX - XXXXX - Sales or Use Tax Application to Sales of Manufacturing
Machinery and Replacement parts for such Machinery

Auditing
Division has prepared an advisory opinion for XXXXX of XXXXX. I have reviewed this opinion and am
forwarding it to you for your review and signature.

Thank you!

XXXXX

Re: Advisory Opinion - - Sales
or Use Tax Application to Sales of Manufacturing Machinery and Replacement
Parts for such Machinery

Dear XXXXX

You requested an advisory opinion as to whether the sale of
manufacturing, machinery or replacement parts for such machinery is subject to
the Utah sales or use tax.

1. Utah Code Annotated Section 59-12-104(15)
   and Administrative Rule R865-19S-85 (copies attached) allow and describe sales
   and use tax exemption for certain sales of manufacturing equipment and
   machinery for new or expanding manufacturing facilities.

2. Your responsibility as
   seller, however, is to collect the tax unless your customer provides you with a
   completed exemption certificate as required under Rule R865-19S-23 (copy
   attached). A blank exemption
   certificate, Form TC-721, is attached for your review.

3. Please note that replacement
   parts will not qualify for the exemption.

This opinion is based upon the facts presented in your letter. Obviously, if there are deviations from
these facts, this opinion may be negated.

If you do not agree with this determination, you may appeal to the Tax
Commission for a formal hearing. The
results of that hearing would constitute a declaratory judgement and be
appealable to the Utah State Supreme Court.
A Notice of Appeal Rights and a copy of the Utah Taxpayer Bill of Rights
are attached.

For The Commission,

Alice Shearer

Commissioner