Understanding Utah Sales and Use Taxes
Understanding and complying with the sales tax requirements in the states in which you do business is absolutely essential. More states are taxing services, as well as retail sales, so no business owner can afford to be in the dark. In addition, you may find that you are liable for use taxes for products purchased out of state. This article answers some of the basic questions regarding sales tax in Utah.
In Utah a tax is levied on the purchaser for the amount paid or charged for:
- retail sales of tangible personal property
- amounts paid to common carriers or telephone or telegraph corporations
- gas, electricity, heat, coal, fuel oil, or other fuels sold or furnished for commercial or residential use
- admissions or user fees for entertainment, recreation, cultural, or athletic activities
- services for repairs, renovations, or installation of tangible personal property
- cleaning or washing of tangible personal property
- hotel or trailer court accommodations and services for less than 30 consecutive days
- laundry and dry cleaning services
- leases and rentals of tangible personal property
- tangible personal property stored, used or consumed in Utah
- prepaid telephone calling cards
Leases. In Utah if the sale of the tangible personal property is subject to sales tax, the rental or lease of the same property is also a taxable sale. The lessor must compute sales or use tax on amounts received or charged according to the rental or lease agreement.
Sales and use tax rate. The general Utah state sales and use tax rate 4.7 percent. However, food and food ingredients are taxed at 1.75 percent. Food and food ingredients are substances in liquid, concentrated, solid, dried, or dehydrated form that are sold for ingestion or chewing by humans and consumed for the substance's taste or nutritional value. Tobacco products, alcoholic beverages, and prepared foods are excluded from the reduced rate.
Special rates apply in other cases, such as transient room rates and resort rates. Also, make sure you contact your local governments in Utah because they are allowed to assess a local sales and use tax.
Purchases Must Pay; Seller Must Collect Tax
In Utah the purchaser is liable for paying the sales tax, but vendors are responsible for collecting the tax and remitting it to the state.
Obtaining Tax Permits in Utah
In Utah you need a separate license for each place of business, but even if you operate more than one place of business you need only complete one application. You must file the application with the Utah Tax Commission.
Utah has many specific items that are exempt from sales tax — for example, certain prescription medications are exempt from Utah sales tax. Resale exemptions and blanket exemptions are two of the most important exceptions to sale tax liability. You'll want to check and see if you are exempt from the sales tax.
An exemption certificate may be issued by a purchaser of a nontaxable item. The exemption certificate may be based on the type of transaction (such as a resale exemption) or on the item itself.
Products Purchased for Resale Are Not Taxed
In Utah when you purchase property for resale in the regular course of business, either in its original form or as an ingredient or component part of a manufactured or compounded product, it is exempt from sales tax.
Resale exemption certificate. In Utah you may use the Multistate Tax Commission's uniform sales and use tax certificate or a copy of the sample exemption certificate form furnished by the Utah Tax Commission.
The resale exemption certificate must include the following information:
- the purchaser's signature
- the purchaser's name and address
- the purchaser's sales tax license number
- a description of the types of tangible personal property and services being purchased for resale
Blanket Resale Certificates May Be Accepted
Sellers may accept blanket certificates from a purchaser who repeatedly purchases the same type of property or services for processing or resale. However, blanket certificates may not be used to purchase property or services not covered by a blanket certificate. Sellers must periodically inquire whether the information on a blanket certificate is accurate and complete. If a seller has not accepted a blanket certificate in good faith, liability for the tax does not shift from the seller to the purchaser.
Physical Presence Triggers Tax Liability
Utah has a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if you have physical presence within Utah. To determine if you have physical presence, ask yourself the following:
- Do I have retail facilities, a warehouse, or any office space in Utah? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
- Do my employees or I enter Utah for purposes of taking and transmitting orders from Utah? If your employee or independent contractor goes into Utah to take or transmit orders, your business may have physical presence in Utah. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
- Do my delivery vehicles frequently enter Utah for purposes of delivering property? Frequent deliveries in Utah by your trucks will give you physical presence in Utah.
Use Tax Imposed on Out of State Purchases
The use tax is an excise tax on the storage, use, or other consumption of tangible personal property in Utah on which no sales tax was paid. The use tax is a complementary tax that applies when the Utah sales tax does not. If sales or use tax has been paid in another state equal to or in excess of the Utah tax property brought into the state is not subject to tax in Utah.
The person storing, using, or consuming tangible personal property within the state is liable for the use tax.
Claiming Refund for Excess Tax Payments
In Utah a credit is allowed on your current sales tax return for tax remitted on the sale of goods that are later returned. Refund claims must be filed within three years from the date of overpayment.