WHICH GOODS AND SERVICES ARE TAXABLE?
Determining whether or not the products or services your company sells are taxable in Utah is the first step in sales tax compliance.
Traditional Goods or Services
Goods that are subject to sales tax in Utah include physical property, like furniture, home appliances, and motor vehicles.
Prescription medicine and gasoline are both tax-exempt.
Utah charges a 3%, reduced rate on the purchase of groceries.
Some services in Utah are subject to sales tax. For a detailed list of taxable services view this PDF from the Utah State Tax Division website.
Digital Goods or Services
A digital good or service is anything electronically delivered, such as an album downloaded from iTunes or a film purchased from Amazon.
Utah requires businesses to collect sales tax on the sale of digital goods or services.
HOW TO REGISTER FOR UTAH SALES TAX
If you determined that you need to charge sales tax on some or all of the goods and services your business sells, your next step is to register for a sellers permit. This allows your business to collect sales tax on behalf of your local and state governments.
In order to register, you will need the following information:
- The business entity type (Corporation; Limited Liability Company; Sole Proprietorship; etc.)
- The proposed name of your business.
- Date the new business is going to start in Utah.
- Date of the first payroll in Utah.
- Names; addresses; phone numbers; FEIN's and SSN's or TIN's of proprietors; partners; corporate officers; LLC members and Registered Agent. Electronic signatures required.
- The business location(s).
- Brief description of the business activity.
- Name and telephone number of person submitting the registration.
- Forms of payment (Visa; MasterCard; electronic check).
- For Foreign Business Entities (Business entities located outside of Utah): You will need to provide a Certification of Good Standing/Existence from the State of Incorporation dated no earlier than ninety (90) days.
Save Money with a Resale Certificate
With a resale certificate, also known as a reseller's permit, your business does not have to pay sales tax when purchasing goods for resale.
Download the Resale Certificate through the Utah State Tax Commission DOWNLOAD RESALE CERTIFICATE
Instruction: Present the certificate to the seller at the time of purchase.
COLLECTING SALES TAX
After getting your seller's permit and launching your business, you will need to determine how much sales tax you need to charge different customers. To avoid fines and the risk of costly audits, it's important for business owners to collect the correct rate of sales tax.
When calculating sales tax, you'll need to consider the following kinds of sales:
- Store Sales
- Shipping In-State
- Out-of-State Sales
For traditional business owners selling goods or services on site, calculating sales tax is easy: all sales are taxed at the rate based on the location of the store.
Here's an example of what this scenario looks like:
Mary owns and manages a bookstore in West Jordan, Utah. Since books are taxable in the state of Utah, Mary charges her customers a flat-rate sales tax of 6.850% on all sales. This includes Utah’s state sales tax rate of 4.700%, Salt Lake County’s sales tax rate of 1.350%, and Mary’s local district tax rate of 0.800%. (include county, local and city taxes only if applicable)
The state of Utah follows what is known as a origin-based sales tax policy. This means that long-distance sales within Utah are taxed according to the address of the seller. This policy applies to state, county, and city sales taxes.
Consider the following example:
Steve runs his own business selling electronics on eBay out of his home in Provo, Utah. A customer living in Salt Lake City finds Steve’s eBay page and purchases a $350 pair of headphones. When calculating the sales tax for this purchase, Steve applies the 4.700% state tax rate for Utah, plus 0.800% for Utah County’s tax rate, 1.100% for Provo’s city tax rate, and 0.250% for his local tax district. At a total sales tax rate of 6.850%, the total cost is $373.98 ($23.98 sales tax).
Utah businesses only need to pay sales tax on out-of-state sales if they have nexus in other states. Nexus means that the business has a physical presence in another state.
Common types of nexus include:
- A physical location, such as an office, store, or warehouse
- An employee who works remotely or who is a traveling sales representative
- A marketing affiliate
- Drop-shipping from a third party seller.
- A temporary physical location, including festival and fair booths.
FILE YOUR SALES TAX RETURN
Now that you’ve registered for your Utah seller's permit and know how to charge the right amount of sales tax to all of your customers, you are all set to file your sales tax return. Just be sure to keep up with all filing deadlines to avoid penalties and fines.
Recommended: Hiring a business accountant can help your business file tax returns as well as issue payroll and manage bookkeeping. Schedule a consultation with a business accountant today to save thousands of dollars on your taxes.
How to File
Utah requires businesses to file sales tax returns and submit sales tax payments online.
How Often Should You File?
How often you need to file depends upon the total amount of sales tax your business collects.
- Annual filing: If your business collects less than $1,000 in sales tax per year then your business should elect to file returns on an annual basis.
- Quarterly filing: If your business collects between $1,000 and $50,000 in sales tax per year then your business should elect to file returns on a quarterly basis.
- Monthly filing: If your business collects more than $50,000 in sales tax per year then your business should file returns on a monthly basis.
Note: Utah requires you to file a sales tax return even if you have no sales tax to report.
All Utah sales tax return deadlines fall on the last day of the month, unless it is a weekend or federal holiday, in which case the deadline is moved back to the next business day.
Annual filing: January 31, 2020
- Q1 (Jan. - Mar.): Due April 30
- Q2 (April - June): Due July 31
- Q3 (July - Sept.): Due October 31
- Q4 (Oct. - Dec.): Due January 31
Monthly filing: The last day of the following month, or the next business day, e.g. April 30 for the month of March, or May 31 for the month of April.
Penalties for Late Filing
Utah charges a late filing penalty of 10% per month or partial month up to a maximum of 20% of the tax that is reported on the tax return.
The state assesses the unpaid tax with a compounded interest rate of 2% per year.