61 Pa. Code § 32.34 - Public utilities
(a)
Equipment, machinery, parts and foundations therefor, and supplies used
directly in rendering public utility service. The purchase or use by a
public utility of tangible personal property or services performed thereon to
be predominantly used directly by it in producing, delivering or rendering of a
public utility service or constructing, reconstructing, remodeling, repairing
or maintaining facilities directly used in the service is exempt from tax,
whether or not the facilities constitute real estate. However, for purposes of
this exemption, real estate does not include buildings, roads or similar
facilities. Effective March 4, 1971, foundations for exempt machinery or
equipment became subject to tax and remained taxable until February 9, 1981.
Effective February 7, 1981, foundations used to support equipment, machinery
and parts used directly in rendering a public utility service are exempt from
tax. The term "foundations" includes sand, gravel, crushed rock, concrete or
similar material used as bedding or surrounding pipe used directly in rendering
a public utility sanitary sewer or water service. Purchases of any vehicles
required to be registered under
75 Pa.C.S. §§
101-9909 (relating to Vehicle Code), except
those vehicles used directly by a public utility engaged in business as a
common carrier as well as supplies and repair parts for the vehicles, is
subject to tax.
(1)
Direct
use. In determining whether a particular structure or article is used
directly in producing, delivering or rendering a public utility service,
consideration shall be given to the following:
(i) The physical proximity of the items while
in use and the proximity of time of their use to the production, rendition and
delivery of the utility service.
(ii) The causal relationship between the use
of the item and the production, delivery and rendition of the utility
service.
(iii) The character of the
item, as to whether it is in the nature of a general improvement to the
premises that would serve various users or is particularly designed or
constructed for public utility use. The fact that particular property may be
considered essential to the rendering of a public utility service because its
use is required either by law or practical necessity does not, of itself, mean
that the property is used directly by a public utility.
(2)
Property directly used;
predominant use. The purchase or use by a public utility of property
in the following categories, when predominantly used directly in rendering a
public utility service, shall be exempt from tax. Where a single unit of the
property is put to use in two different activities, one of which is a direct
use and the other of which is not, the property shall not be exempt from tax
unless the public utility makes use of the property more than 50% of the time
directly in public utility operations.
(i)
General. Machinery, equipment, parts and foundations therefor,
and supplies which are used in the actual producing, delivering, or rendering
of a public utility service shall be considered to be directly used in public
utility operations. Repair parts which are installed and become an integral
part of the property is also exempt from tax.
(ii)
Pollution control
devices. Equipment, machinery and supplies designed and used to
control, abate or prevent air, water or noise pollution generated in the
rendering of the public utility services shall be deemed to be directly used in
the rendition of a public utility service and, therefore, is not subject to
tax. In order for property to qualify as exempt pollution control devices, it
shall not be necessary that the pollutants be recycled or used in any
manner.
(iii)
Realty
construction; materials, tools and equipment. Construction materials,
tools and equipment used to construct, reconstruct, remodel, repair or maintain
facilities which are used directly in the production, delivery or rendition of
a public utility service shall be deemed to be directly used and therefore
shall be exempt from tax. However, tools and equipment used to maintain the
facilities shall be exempt only if installed as a part of the
facility.
(iv)
Research. Property which is used directly in research
activities by a public utility shall be exempt from tax, provided that the
object of the research is the production of a new or improved product or
utility service or method of producing a product or utility service. The
exemption does not apply to property used in market research or in other
research which is conducted with the objective of improving administrative
efficiency.
(3)
Property not directly used. Property in the following
categories is not directly used in public utility operations and the purchase
or use of the property is subject to tax:
(i)
Real estate. Construction materials, tools and equipment used
to construct, reconstruct, remodel, repair or maintain facilities not used
directly in the production, delivery or rendition of a public utility service
is subject to tax. The purchase or use of property for use in construction,
reconstructing, remodeling, repairing or maintaining a building, road or
similar facility, regardless of its purpose, is subject to tax. The term
building does not include machinery and equipment and parts therefor, whether
the property is designated as real estate or not. Structures such as railroad
watchmen's shacks, bus terminals, warehouses and toolsheds are considered
buildings. However, the machinery and equipment as signal towers, water and
fuel tanks, and railroad tracks are not considered buildings.
(ii)
Maintenance; tools and
equipment. Tools and equipment used but not installed in the
maintenance of facilities directly used in the production, delivery or
rendition of a public utility service shall be subject to tax. Tools and
equipment used in the maintenance of nonexempt facilities shall be subject to
tax whether or not they are installed so as to become a component
thereof.
(iii)
Managerial,
sales or other nonoperational activities. Property used in managerial,
sales or other nonoperational activities is not directly used in the
production, delivery or rendition of a public utility service and is therefore
subject to tax. This category includes, but is not limited to, property used in
any of the following activities:
(A)
Management and administration. Office furniture, supplies and
equipment, textbooks and other educational materials, books and records, and
other property used by a public utility in recordkeeping and other
administrative and managerial work, irrespective of the point of use, is
subject to tax. The property includes, but is not limited to, supplies used to
record the quality and quantity of work in production or goods in storage, the
flow of work, the results of inspection or to instruct workers in routing work
or other production activities.
(B)
Selling and marketing. Property used in advertising, marketing
or selling public utility services or products is not within the scope of the
public utility exemption.
(C)
Public utility exhibitions. Property used in the exhibition of
public utility products or services is subject to tax.
(D)
Safety and fire
prevention. Property used to prevent or fight fires and equipment and
supplies used for programs as safety, accident prevention or fire prevention is
subject to tax, even though the equipment or property is required by law,
except for drugs, medicines and medical supplies exempted by section 204(17) of
the TRC (72 P. S. §
7204(17)).
(E)
Employe use. Property
used for the personal comfort, convenience or use of employes, is subject to
tax. Protective equipment, such as face masks, helmets, gloves, coveralls,
goggles, and the like, worn by production personnel is exempt from
tax.
(F)
Space heating,
cooling, ventilation and illumination. Property, including machinery
and equipment, fuel or power used to ventilate buildings, lighting for general
illumination, air conditioning and other space cooling, space heating and
similar property, is subject to tax unless it is established that the use of
the property bears an active causal relationship to the production, delivery or
rendition of a public utility service.
(G)
Activities prior to production,
delivery or rendition of services. Property used to transport
personnel or to collect, convey or transport other property, and storage
facilities or devices used to store or hold property prior to its use in the
production, delivery or rendition of a public utility service is subject to
tax. Property used to transport, store or hold the actual product which is
delivered as a public utility service is directly used and therefore is not
subject to tax.
(H)
Property used during production, delivery or rendition of
services. Property used in managerial, sales or other nonoperational
activities is subject to tax even though it is used during the production
operation. Illustrations of the property include safety, heating and
ventilation equipment, and planking or grating for crosswalks or
platforms.
(I)
Activities
subsequent to production, delivery or rendition of services. Property
used to transport or convey personnel or property following the production,
delivery or rendition of a public utility service and storage facilities or
devices used for that purpose, are not used directly by a public utility and is
subject to tax.
(J)
Waste
disposal. Property used in waste handling and disposal of pollutants
is not deemed to be directly used and is subject to tax unless the property
qualifies for exemption under subsection (a)(2)(ii). For purposes of this
subsection, ash handling equipment used by a public utility electrical
generation station is not considered as property used in waste
disposal.
(b)
Use of exemption
certificates. When a public utility purchases exempt property under
this section, the public utility shall prepare and deliver to the vendor a
properly executed exemption certificate.
Notes
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