Whether you’re starting a new business in Utah or your expanding your market area to serve the state, you need to learn about Utah’s sales tax before you begin making taxable sales there. Although Utah is a member of the Streamlined Sales and Use Tax Agreement (SSUTA), you’ll still need to know whether or not you’re considered to have a sales tax nexus there, what specific types of transactions are taxable in the state, and what rates to charge your Utah customers depending on where they’re located.
The state sales tax rate in Utah is 4.7%, but local and other special tax rates are added on in just about every municipality. At a minimum that means the effective rate you will charge your customers will be 5.95% after the addition of a 1% general local sales tax and a 0.25% county option sales tax.
There are quite a few other categories that local jurisdictions can use to add to the total sales tax as well, and these include mass transit, county option transportation, highways, rural hospitals, transportation infrastructure, supplemental, and others. Different areas use different combinations of these categories depending on their specific circumstances, and so the effective rate can vary considerably from one part of the state to another. Moab has the highest combined rate in the state at 8.60%.
Utah is a destination based state, which means that the appropriate rate to charge your customers is that at the point where they take possession of their purchase. So, if you have a physical store, you will charge the rate in effect at that location to anyone who comes in, regardless of where in the state they live. However, if you’re shipping goods, either from in-state or out-of-state, the applicable rate will be that of the final delivery destination.
You are not obligated to collect and remit sales tax on purchases by customers in Utah unless you have a nexus, or significant business presence, in the state. Utah defines a nexus condition for sales tax purposes as:
You may also have a nexus if you sell the same or a very similar line of products as a related seller under the same or a very similar business name, or you use the place of business of a related seller to advertise, promote, or assist in making sales, and you:
There is not currently an Amazon fulfillment center in Utah, so if you utilize fulfillment by Amazon, you don’t have to worry about your goods being stored in a warehouse in Utah and thus triggering nexus for you at the moment. However, the company recently announced plans to build a fulfillment center in the Salt Lake City area, and once that facility is completed, the nexus provisions would apply to any goods stored there.
Even if you’re not required to collect Utah sales tax on sales made to customers in the state, you may do so voluntarily. As an added incentive for this type of voluntary collection, the state allows out-of-state vendors without nexus in Utah, but who have registered to collect and remit Utah state sales tax, to keep 18% of the sales tax revenue they collect on their sales into the state as long as they file returns electronically, either through the Tax Commission website or through the SSUTA’s simplified electronic return (SER).
Most sales of tangible personal property are subject to sales tax in Utah, with some specific exceptions. Many services are taxable as well, with medical and janitorial services being notable exceptions in that category. Tangible goods exempt from sales tax include:
Groceries are taxed at a lower statewide rate of 3%, while prepared food is taxed at the full applicable sales tax rate. Utah also specifies that prewritten software, whether delivered on physical media or downloaded, is taxable, as are digital or electronic goods. Custom software is not taxable, regardless of the method of delivery. Shipping and handling charges are not considered part of the purchase price of an item, and so are not taxable as long as they’re listed separately on the receipt or invoice.
If you do have a sales tax nexus in Utah, and if what you’re selling is taxable, you’ll have to register with the state to receive a sales tax number to use in filing your sales tax returns. You can do this through the OneStop Business Registration service on the state website, or by downloading and submitting a paper form. If you do use the online service, you’ll receive a temporary sales tax number that you can begin using immediately.
Because Utah is a member of the SSUTA, you can also register to collect sales tax through the SSUTA website. If you choose to go this route, however, you will have to register with all member states at once, and so this may or may not be a good option for you depending on how many states you’re currently operating in.
The state mails personalized tax return forms to every business with a sales tax number unless you specifically request that they do not. You can use this form to file your returns, or you can file online, and regardless of your filing method, you can pay online as well.
Your filing frequency will be assigned by the state when you register for you sales tax number, and it will be based on your previous or projected sales. The options are:
Businesses with an annual sales tax liability of $96,000 or more also have to file monthly, but with the added requirement that payments be made through electronic funds transfer (EFT).
All Utah sales tax returns are due on the last day of the month following the close of the period in question. For annual filers, that means a due date of January 31st of the next year.
|January – March (Q1)||April 30|
|April – June (Q2)||July 31|
|July – September (Q3)||October 31|
|October – December (Q4)||January 31|
If the due date falls on a weekend or holiday, returns and payments will be due on the next business day. Utah does require the filing of a return whether or not any tax is due.
Failure to file your returns or pay in a timely manner will result in a penalty of $20 or 10% of the total tax due, whichever is larger. If your bill remains unpaid after 90 days from the original due date, another $20 or 10% penalty will be added on. Interest also accrues starting on the day your return is due, and it must be paid in full as well in order for your account to return to a satisfactory condition.
Whether you do business primarily in Utah or you operate in a number of states, keeping track of when you have to charge sales tax on purchases and at what rate can be a significant burden. Each state has different requirements concerning what exactly is taxable, and the myriad different local rates add to an already daunting task. It’s necessary that you stay on top of all of these details, however, and that’s where TaxTools can provide your company with tremendous benefit.
TaxTools manages all of your sales tax related records and returns, allowing you to file and pay quickly and easily. It keeps track of all of your sales and can produce up-to-date reports whenever you need them, including location data and any other information required by the state. It also stays abreast of changes to local and state tax rates and regulations so that you can be sure you’re always compliant, and it integrates smoothly with all ecommerce platforms.
So, if you’re ready to see how TaxTools can help streamline your business processes and remove some stress from your daily operations, click here to sign up