Sales & Use Tax Blog

Utah Sales Tax Reform Update

As 2020 beings, Utah residents are still trying to understand the impact of the Utah sales tax reform Bill. This Bill was approved by the Legislature on December 12, 2019 and was signed by Governor Gary Herbert on December 19, 2019, just days before the calendar turned to a new decade. This Bill, in essence, provides a net tax cut to Utah residents, but it is not quite that simple.

The Bill cuts Utah income taxes by approximately $630M, by reducing the rate from 4.95% to 4.66%. The Bill also increases Utah sales tax by approximately $470M by both expanding the tax base to include new categories of taxable sales as well as repealing some existing sales tax exemptions. For example, the Utah sales tax reform now taxes unprepared food or groceries and additional services such as ride-sharing (think Uber & Lyft), pet boarding & daycare, cleaning services, parking and towing. It also has eliminated the sales tax exemption on locomotive fuel, ski-life electricity and other items and has enacted new excise taxes on fuel, which will work similarly to sales taxes.

The new effort at Utah sales tax reform comes after months of town hall meetings, and a failed prior effort at tax reform in May 2019. The December 2019 Bill has not been a universal crowd-pleaser as much criticism has been raised by both Utah residents and legislators. Some feel that the reform hurts low-income Utah residents and yet others feel that the Utah sales tax reform did not go far enough in taxing services that comprise more of the modern-day economy.

Governor Herbert said he understands the concerns of the opponents of the Bill and plans to publish a list of answers to frequently asked questions regarding the changes to Utah’s tax laws. It is possible that the new Utah tax reform Bill could be repealed. In fact, most of Utah’s gubernatorial candidates are on record supporting these repeal efforts. Additionally, Utah Republican leaders have already made it clear that the 2020 General Legislative Session will include additional changes to how the funds generated from these changes are earmarked. A movement is also afoot to have a referendum on the tax reform added to the November 2020 ballot. In order to do so, 115,000 signatures supporting the referendum need to be secured statewide by the Jan. 21st deadline.

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