Sales-Tax-Report-201.. - Utah Taxpayers Association

Utah Taxpayers Association
June 2015
Sales Taxes in Utah The sales tax is one of the most easily understood yet often forgotten taxes. A simple percentage of the price of goods and services is a concept every taxpayer can understand, but almost always ignores when making a purchase. We all intuitively know that the final price we pay for something will be slightly higher than the sticker price. But did you know there are many different sales tax rates? Do you know how many of these different rates go into the final tax you pay and which rates apply to which purchases? As a Utahn, you are potentially subject to 28 different sales taxes. Fortunately, not all of these sales taxes apply at once on a single transaction. However, most of your day-­‐to-­‐day transactions include as many as six different sales taxes. When you make any taxable purchase, you’ll either pay the “Combined Sales and Use” tax rate or the “Grocery Food” tax rate. On some transactions subject to the “Combined Sales and Use” tax rate, such as renting a car or staying in a hotel, you may also pay an additional “Transient Room” tax, “Prepared Food” tax, or the “Short Term Leasing” tax. Where does sales tax revenue go? The sales tax was first introduced in Utah in 1933. Today, the sales and use tax is by far the largest source of revenue to the General Fund, generating $1.66 billion in unrestricted funds in FY 2014. As a general tax, sales tax revenues are best used for general government purposes. At the state level, sales taxes primarily fund social services, executive offices and the criminal justice system, infrastructure, general government and higher education. Currently, a large amount of sales tax revenue is earmarked for special purposes. In FY 2014, an additional $452 million was earmarked for specific projects in natural resource protection, water, wastewater, transportation and other projects. For example, sales tax earmarks currently represent about 30% of Utah’s transportation fund. The practice of earmarking sales tax revenue diverts general government funds away from general government purposes and towards specific projects, where user fees would be a more appropriate revenue source. At the local level, sales taxes are allocated to governments according to 50% population and 50% point of sale, meaning where the transaction occurred. As at the state level, local sales taxes are used for general government operations and purposes. www.utahtaxpayers.org
June 2015
Utah Taxpayers Association
How is the sales tax sausage made? The rates highlighted in bold are applied statewide and the rest are available as options that some localities impose. All sales transactions in Utah are taxed at a minimum of 5.95%, but depending on where you live and what you’re buying, the rate may climb as high as 16.35%! Some of these sales taxes require voter approval before implementation, but others can be imposed by city or county councils or are statutorily mandated by the legislature. What goes into the Combined Sales and Use tax rate? State Sales and Use Tax Local Sales and Use Tax Mass Transit Tax Additional Mass Transit Tax Mass Transit Fixed Guideway County Option Transportation Supplemental State Sales and Use Tax County Airport, Highway, Public Transit Rural Hospital Tax County Botanical, Cultural, Zoo Tax (ZAP/RAP taxes) Municipality Botanical, Cultural, Zoo Tax (ZAP/RAP taxes) Highways Tax County Option Sales Tax Town Option Tax City or Town Option Tax Resort Community Tax Additional Resort Community Tax 4.7% 1% up to .8% .25% .3% .25% .05% .1% or .25% 1% .1% .1% .3% .25% 1% .2% up to 1.1% .5% … the Grocery Food tax rate? Statewide, the sales tax on food and food ingredients is 3%, but technically, the tax is broken down into three separate parts. State 1.75% Local 1% County Option .25% … the Transient Room tax rate? County Transient Room Tax Municipal Transient Room Tax Additional Municipal Transient Room Tax Tourism Transient Room Tax up to 4.25% 1% .5% .5% … the Short Term Leasing tax rate? Motor Vehicle Rental Tax Tourism Short-­‐Term Leasing Tax Tourism Short Term Leasing Population Tax 2.5% 3% 4% … the Prepared Food tax rate? Tourism Restaurant Tax 1% By law, some of these taxes may not be imposed simultaneously. For example, if a county imposes a ZAP t ax, individual cities within that county cannot impose a city level ZAP tax. 2
www.utahtaxpayers.org
Utah Taxpayers Association
June 2015
Below are listed the countywide sales tax rates for each of Utah’s 29 counties. Depending on what city you live in, you may pay a higher rate than what is listed here. These rates represent the minimum rate in a given county without showing any individual city level additional sales taxes. The highest combined sales and use tax rate in Utah is in the town of Alta at 8.35%. The lowest possible combined sales and use tax rate in Utah is 5.95%, which occurs when individual cities don’t impose any additional sales taxes beyond what is imposed at the county and state level. To view the precise sales tax rate you pay (specific to where you live or shop), use the State Tax Commission’s Sales Tax Rate Lookup tool here. Sales Tax Rates in Utah’s Counties Grocery Food Combined Sales and Use Transient Room Prepared Food Short Term Leasing Daggett County 3.00% 6.95% 3.00% 1.00% 2.50% Garfield County 3.00% 6.95% 4.25% 1.00% 2.50% Kane County 3.00% 6.95% 4.25% 1.00% 2.50% Salt Lake County 3.00% 6.85% 4.75% 1.00% 9.50% Weber County 3.00% 6.85% 4.25% 1.00% 9.50% Utah County 3.00% 6.75% 4.25% 1.00% 9.50% Davis County 3.00% 6.50% 4.25% 1.00% 9.50% Cache County 3.00% 6.30% 3.00% 1.00% 2.50% Summit County 3.00% 6.05% 3.00% 1.00% 2.50% Uintah County 3.00% 6.05% 4.25% 1.00% 5.50% Washington County 3.00% 6.05% 4.25% 1.00% 9.50% Beaver County 3.00% 5.95% 4.25% 1.00% 2.50% Box Elder County 3.00% 5.95% 4.25% 1.00% 2.50% Carbon County 3.00% 5.95% 4.25% 1.00% 2.50% Duchesne County 3.00% 5.95% 3.00% 1.00% 5.50% Emery County 3.00% 5.95% 4.25% 1.00% 2.50% Grand County 3.00% 5.95% 4.25% 1.00% 5.50% Iron County 3.00% 5.95% 4.25% 1.00% 2.50% Juab County 3.00% 5.95% 3.00% 1.00% 2.50% Millard County 3.00% 5.95% 3.00% 1.00% 2.50% Morgan County 3.00% 5.95% 3.00% 1.00% 9.50% Piute County 3.00% 5.95% 3.00% -­‐ 2.50% Rich County 3.00% 5.95% 3.00% 1.00% 2.50% San Juan County 3.00% 5.95% 4.25% 1.00% 2.50% Sanpete County 3.00% 5.95% 4.25% 1.00% 2.50% Sevier County 3.00% 5.95% 4.25% 1.00% 9.50% Tooele County 3.00% 5.95% 3.50% 1.00% 2.50% Wasatch County 3.00% 5.95% 4.25% 1.00% 2.50% County Wayne County 3.00% 5.95% 4.25% 1.00% *Piute County is the only county in the state that chose not to adopt the Prepared Food Tax. 2.50% 3
www.utahtaxpayers.org
June 2015
Utah Taxpayers Association
Who doesn’t pay sales tax in Utah? Because sales taxes on business inputs can be a detriment to economic growth, some major industries are exempt from paying the state sales and use tax on certain parts and equipment. Listed below are a few of the current sales tax exemptions in Utah. For a full list of all sales tax exemptions, visit the State Tax Commission’s website here. Economic Development: Airline food and airline parts and equipment Agricultural machinery Electricity sales to ski resorts for lift operation Semi-­‐conductor materials Aerospace tools Renewable energy production facilities Economic Efficiency: Motor and special fuels Short-­‐term lodging consumables Property stored in the state for re-­‐sale Government: State and local government purchases Food stamps and WIC food purchases Textbooks for higher education Social Service, Health, Charitable and Other: Gold bars, ingots and medallions School and fundraising sales Prescription drugs Pollution control equipment Prescribed prosthetic devices Newspaper sales or subscriptions Why are some industries exempt? Sales Tax exemptions can be used as a way of spurring economic development. Because many goods are used as business inputs, meaning Sound tax policy they contribute to the creation of a final product, taxing these goods taxes results in tax pyramiding, or double taxation. Seed corn is exempt from only final sales tax because it is an input to a final product that will be taxed when products it is purchased for consumption. Likewise, some manufacturing inputs – not such as robotic equipment are exempt from sales tax because they inputs to production. contribute towards a final product that will be taxed. Unfortunately, Utah’s sales tax exemption on manufacturing machinery and equipment only applies to manufacturing inputs with an economic life of more than three years. This means that much of the machinery and related parts in manufacturing are still charged sales tax, resulting in double taxation. Utah is the only state in the nation with this unique three-­‐year-­‐life requirement that essentially picks winners and losers. Over time, some industries such as semiconductor manufacturing have received a full business inputs sales tax exemption, but many industries in Utah still pay sales tax on business inputs. This results in a tax pyramid that hurts businesses and consumers. Sound tax policy only taxes final goods and services. What about my online purchases? Out of state retailers are not required to collect Utah state sales tax on online purchases. This means that if you purchase something from a seller without a physical presence in the state, you won’t pay any sales tax. By law, this is when the use tax comes into play and taxpayers are supposed to declare such purchases on their income tax return so that the appropriate tax can be assessed. Because there is no way of accurately tracking or enforcing this requirement, few taxpayers report their online purchases that would normally be assessed a use tax. This has created a major disparity between retailers that are required to assess a sales tax and those that can sell their products tax-­‐free. Sound tax policy relies on a broad tax base and a low rate. This is the most equitable form of taxation. All taxable sales, whether the transaction occurs online or in a physical store, ought to be assessed the sales and use tax equally so that all taxpayers contribute and the overall sales tax rate can be reduced. 4
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