Section R15-5-128. Electric Power Transmission and Distribution

A.      Gross receipts from the sale of machinery, equipment, or trans- mission lines for direct use in a transmission system are deductible from the tax base. Gross receipts from the sale of machinery, equipment, or lines for use in a distribution system are taxable.

B.       Machinery and equipment used to facilitate the production of voltage up to and including 34,500 volts shall be considered part of a distribution system.

1.        Gross receipts from the sale of such equipment are sub- ject to transaction privilege tax.

2.        If tangible personal property was purchased as exempt, subsequent nonexempt use shall subject the gross pur- chase price to use tax according to statutory provisions.

C.      Machinery and equipment used to facilitate the production of voltage above 34,500 volts shall be categorized as part of a transmission or distribution system based on the following definitions.

1.        “Transmission system” means:

a.         All land, conversion structures, and equipment employed at a primary source of supply to change the voltage or frequency of electricity for the pur- pose of its more efficient or convenient transmis- sion;

b.        All land, structures, lines, switching and conversion stations, high tension apparatus and their control and protective equipment between a generating or receiving point and the entrance to a distribution center or wholesale point; and

c.         All lines and equipment whose primary purpose is to augment, integrate, or tie together the sources of power supply.

2.        “Distribution system” means all land, structures, conver- sion equipment, lines, line transformers, and other facili- ties employed between the primary source of supply and of delivery to customers, which are not includible in a transmission system whether or not such land, structures,

and facilities are operated as part of a transmission sys- tem or as part of a distribution system. Stations which change electricity from transmission to distribution volt- age shall be classified as distribution stations.

3.        “Primary source of supply” means a generating station or point of receipt in the case of purchased power.

4.        Dual-use equipment shall be designated as follows:

a.         If poles or towers support both transmission and dis- tribution conductors, the poles, towers, anchors, guys, and rights-of-way shall be classified as a trans- mission system. The conductors, crossarms, braces, grounds, tiewire, insulators, and other similar tangi- ble personal property shall be classified as transmis- sion or distribution facilities, according to the purpose for which they are used.

b.        If underground conduit contains both transmission and distribution conductors, the underground con- duit and the right-of-way shall be classified as a dis- tribution system. The conductors shall be classified as transmission or distribution facilities according to the purpose for which they are used.

c.         Based on statutory provisions, transformers and con- trol equipment utilized operationally at transmission substation sites are considered to be a part of a trans- mission system and, therefore, are exempt from transaction privilege and use tax.

D.      Machinery, equipment, or transmission lines for direct use in a transmission system are only those which are recorded as being part of a transmission system in accordance with the definitions in subsection (C).

1.        Gross receipts from the sale of such equipment are exempt from the tax.

2.        If such machinery and equipment is removed from inven- tory to be used as part of a distribution system, the pur- chase price is subject to use tax.

Historical Note

Adopted effective August 9, 1993 (Supp. 93-3).