Utah Sales Tax
If you're a business that collects sales tax in Utah, you must file and remit those taxes to the state. Your filing frequency depends on whether your business has a significant connection to the state, a concept known as "nexus."
Utah Sales Tax is 4.85%, and local, county, and town options can increase the overall rate to a higher level. Other types of taxes include mass transit, rural hospital, transportation infrastructure, supplemental, and arts & zoo tax. Until recently, states could require a business to register, collect, and remit sales tax only if it had physical presence in the state. But in June 2018, the United States Supreme Court overruled this rule in a South Dakota v. Wayfair decision. This decision allowed states to base their sales tax collection rules on economic connections rather than physical presence. This is known as economic nexus.
How Does Sales Tax Work in Utah?
As a business owner in Utah, you must pay sales tax on taxable goods and services sold. You must also remit the tax to the state and file returns. Always use a sales tax calculator to ensure you pay the correct amount. A good calculator will determine the tax rate for each location and provide a breakdown of state, county, and city taxes to help you understand your total sales tax liability.
To collect Utah sales tax, you must have nexus in the state. Nexus is defined as a commercial connection, such as a store, office, warehouse, distribution center, storage space, you, an employee or representative, or any other physical presence in the state. Generally, the threshold for having nexus is $100,000 in gross revenue or 200 separate transactions.
Whether you sell through a brick-and-mortar store, a hosted point-of-sale solution, or a marketplace, you must register with the Utah State Tax Commission to collect sales tax. Once you’re registered, you must apply the correct tax rate to each transaction and keep excellent records. Returns and payments are due the last day of the month following the end of the filing period.
Utah Sales Tax Exemption
Some goods and services are exempt from sales tax in Utah, including food and clothing items. However, staying current on state sales tax laws changes is important. You should also consider implementing an automated sales tax solution to simplify your compliance activities. Utah does offer sales tax exemptions on certain items and purchases. Here’s a quick overview:
Food: Most groceries and unprepared food items are exempt.
Prescription drugs: Prescription drugs and medical devices are exempt.
Educational materials: Textbooks, school supplies, and certain educational software are exempt.
Religious and charitable purchases: Purchases made by religious or charitable organizations for qualifying purposes can be exempt, with limitations.
Industrial fuel: Natural gas, electricity, and other fuels used predominantly for industrial purposes are exempt.
Other Exemptions
- Certain services: Services like haircuts, dry cleaning, and car washes are generally exempt.
- Manufacturing equipment: Machinery and equipment used directly in manufacturing are exempt.
- Agricultural supplies: Farm equipment, seeds, and other agricultural supplies are exempt.
- Government purchases: Purchases made by state and local governments for government purposes are exempt.
