Boundless Sales Tax Exemptions

I noticed that a law enacted recently in Utah created their 75th sales tax exemption.  That is quite a lot of exemptions. Not to pick on Utah though because most states likely have that many or more. Exemptions usually mean the need for detailed guidance on what exactly that exemption is. Utah's 75th one is for fuel cells, which they have defined in another statute and use that same definition for the exemption (which is better than creating a new definition).

I have a post at SalesTaxSupport.com with more about the exemption and policy considerations for exemptions. I also note that it was not clear why the exemption was added. I was unable to find anything from the sponsor or in the legislative record (another common problem with exemptions - there should be a reason given for why something that was subject to sales tax should no longer be subject to sales tax).

A reader offered the possible explanation that eBay planned to build a fuel cell powered data center in Utah (BloombergBusinessWeek, "EBay's Bet on Fuel Cells Will Influence Data Centers," by Adam Lesser, 10/31/12). Not sure if the timing of that with the new exemption that started April 1, 2013 is right, but it seems likely that to further encourage use of fuel cells that reduce emissions and air pollution, the sales tax exemption was added.

As I often note in my posts, sales tax should not apply to business purchases in order to avoid pyramiding of the tax. But, since this policy is not followed by the states (and is difficult to flat out implement since about 1/3 of sales tax revenues comes from business purchases), lawmakers occasionally expand the list of sales tax exemptions, as was just done in Utah, to address isolated, perceived needs.

Please check out the post for further policy discussion on sales tax exemptions.

What do you think?  Should exemptions have stated reasons for them included in the legislative proposal? Should they be forbidden? Should states just work toward exempting all business purchases?