February 12, 1992
Hon. Carl D. Edwards, Jr.
VanAntwerp, Monge, Jones & Edwards
1416 Winchester Avenue
Ashland, Kentucky 41101
Dear Mr. Edwards:
You have asked the Attorney General for an opinion regarding the applicability of the utility gross receipts license tax for schools to the purchase of water by a brick manufacturing company.
You state that the brick manufacturer holds a resale exemption certificate issued for sales tax purposes. The manufacturer believes that it may be entitled to a resale exemption for its purchase of water.
The utility gross receipts license tax for schools is a direct tax on the provider of utilities; it is not a tax on the consumer. OAG 84-70. The pertinent text of the statute, KRS 160.613, says:
(1) There is hereby authorized a utility gross receipts license tax for schools not to exceed three per cent (3%) of the gross receipts derived from the furnishing, within the county, of telephonic and telegraphic communications services, electric power, water, and natural, artificial, and mixed gas. Gross receipts includes all amounts received in money, credits, property, or other money's worth in any form, as consideration for the furnishing of the above utilities, except that gross receipts shall not include amounts received for furnishing energy or energy-producing fuels, used in the course of manufacturing, processing, mining, or refining to the extent that the cost of the energy or energy-producing fuels used exceeds three per cent (3%) of the cost of production, and shall not include amounts received for furnishing any of the above utilities which are to be resold.
While the statute does contain an exemption for utilities that are resold, it is obvious that the exemption applies only to utility purchases that are resold as utilities, in which event the reseller becomes liable for the tax as a supplier of the utility. OAG 76-269. In the case of the brick manufacturer, presumably the water purchases represent the cost of a raw material necessary for production. Although the water may be a component of the finished bricks, nobody buys bricks to get the water out of them. Therefore the manufacturer may not be deemed to be reselling the water utility, and consequently its water purchases are taxable.
Ross T. Carter
Assistant Attorney General