Utah, often referred to as the Beehive State, is a confluence of pioneering spirit and contemporary commerce. Grasping the specific rules and nuances of sales tax in Utah is crucial for maneuvering its complex business terrain.
This guide breaks down everything you need to know about Utah’s sales tax, from determining the right sales tax rates to understanding exemptions and filing processes. By the end of this comprehensive guide, you’ll be equipped to handle Utah’s sales tax with confidence and ease.
Sales Tax Nexus in Utah
When a business creates either a physical or economic nexus, it is required to collect sales tax in Utah.
Physical Nexus
A physical nexus means having a significant physical presence or engaging in enough activities within a state to require collecting and paying sales tax. The factors that determine a physical nexus in Utah include:
- Physical Location: This includes having an office, a place for distribution, sales, or showcasing products, a warehouse or storage facility, or any other place where you conduct business.
- Inventory in the State: This covers situations where you store your products within the state, even if it’s done through a third-party fulfillment center or 3PL (like Amazon FBA) or an online marketplace.
- Affiliate Nexus: You can establish a physical nexus if your affiliates, whether online or in-person, are connected to a Utah-based seller and sell similar products with similar names. Nexus can also be triggered if the Utah-based seller promotes the out-of-state seller’s sales to Utah buyers, or if either the out-of-state or Utah-based seller owns more than 10% of the other, or if the affiliate wholly owns the seller, it can establish an affiliate nexus.
- Regularly delivering property in Utah other than by a common carrier or U.S. mail or leasing or servicing property located in Utah.
- Regularly Soliciting Orders: If you often ask for business in Utah, it’s like setting up shop there. But if all you’re doing is online ads, sending emails and mailers, or making phone calls—that doesn’t count. You’re free from these specific tax rules if you’re just spreading the word from afar.
Economic Nexus
States have established regulations to collect sales tax from out-of-state sellers who meet certain revenue and/or transaction thresholds. This rule is known as economic nexus.
Beginning January 1, 2019, the threshold for economic nexus in Utah is $100,000 in gross revenue or 200 transactions in the previous or current calendar year’s sales.
While the nexus criteria mentioned above generally apply to most businesses, additional methods exist for establishing sales tax nexus. To access a comprehensive list of these rules, please refer to the governing laws for sales tax nexus requirements in Utah.
Utah Sales Tax on Goods and Services
One of the first things you need to know is whether the goods you’re selling or services you’re offering are taxable in Utah.
Tangible Products
Almost all goods are taxable in Utah, including:
- Cosmetics
- Electronics
- Furniture
- Jewelry
- Automobiles
- Home Goods,
- Groceries – In Utah, there’s a reduced 3% sales tax on grocery food, made up of 1.75% from the state, 1% from local areas, and 0.25% from the county, while sales of prepared food are taxed at a full rate.
- Clothing
The goods that are exempt from sales tax are:
- Medical devices
- Newspapers
- Prescription drugs
- Prosthetic devices
- Electricity and fuel for industrial use
- Semiconductor fabricating, processing, research, or development materials
Services
In Utah, the majority of service-based transactions, such as professional services, advertising, and beauty services, are not subject to sales tax.
However, there are specific situations where certain services are taxable. For instance:
- Laundry and dry-cleaning services, if the buyer does not perform the labor
- Assisted cleaning or washing of tangible personal property, if the buyer does not perform the cleaning or washing labor
- Use of assisted amusement devices when the buyer does not operate the device or ride.
- In-state telecom services
For a full list, check the Utah Department of Revenue.
Software-As-A-Service (SaaS)/Digital Products
SaaS is taxable in the state of Utah.
Digital products (i.e., ebooks, downloadable video content, mobile apps) are also taxable.
Shipping/Handling
Shipping and handling charges in the state of Utah are taxable. If the shipping and handling charge is separately stated on the invoice to the customer, the delivery charge is not subject to sales or use tax.
Sales Tax Permits and Licenses in Utah
Now that you’ve got a handle on when sales tax nexus applies and which products are taxable in Utah, the next important step is getting your Utah Seller’s Permit, also known as a sales tax permit.
Seller’s Permit
You can register for a Utah sales tax permit online at the Taxpayer Access Point.
Ensure you have specific information on hand when registering for a seller’s permit, including, but not limited to:
- Business Identification Information (name, address, phone number, email address)
- Business Entity Structure (sole proprietorship, partnership, corporation, LLC, etc.)
- Federal Employer Identification Number (EIN or FEIN)
- Owner/Partner/Officer Information
- Business Activity Details (description of products or services sold, sales volume, date of the first sale, or the expected date to start dates)
Registration fee
There is no fee to register for a sales tax permit.
Renewal
In Utah, you don’t have to renew your sales tax permit.
Resale Certificate
A resale certificate is a document that allows businesses to buy products without paying sales tax on them, as long as they plan to resell those items to customers, who will then pay the tax. As a seller, you can also accept resale certificates from others looking to buy for resale.
In Utah, sellers use resale certificates to buy goods from their suppliers that they intend to resell. The issuance of the certificates is always done in good faith that the seller would report tax on the final sale of the items.
You can fill out the TC-21 Exemption Certificate provided by the Utah State Tax Commission after you receive your sales tax permit. You can also fill out the Streamlined Sales and Use Tax Certificate of Exemption if you would like to get sales tax exemption for multiple states simultaneously. If you don’t want the hassle of registering, sign up for our all-inclusive service that includes sales tax registration.
Streamlined Sales Tax (SST)
The Streamlined Sales Tax (SST) is an initiative to simplify and standardize sales tax regulations across multiple states. Utah has been a party to this program since October 1, 2012, meaning it follows the uniform rules and definitions established by SST.
Check with the Utah State Tax Commission for the most current information on Utah’s participation in the Streamlined Sales Tax initiative.
Calculating and Collecting Sales Tax in Utah
Sales Tax Computation
In Utah, sales tax isn’t just one simple rate; it’s a combination of state and local taxes. To figure out the total sales tax for your calculation, you’ll need to add up the rates for the state, county, and city (if applicable) where your transaction occurs. Use TaxHero’s Utah Sales Tax Calculator to compute for sales tax.
Here’s an example. Suppose an out-of-state seller satisfies the economic nexus criteria in Texas and sells to a customer in Salt Lake City, UT, with a ZIP code of 84105. In that case, the seller has to charge the customer a total sales tax, which can be broken down as follows:
 |
SALES TAX FORMULA |
RATE |
| State: |
Utah |
4.85% |
| County: |
Salt Lake |
2.40% |
| District: |
First |
0.00% |
| City: |
Salt Lake |
0.50% |
| Combined Sales Tax Rate = |
7.75% |
|
Origin-based vs. Destination-based
When making in-state sales, it is important to determine if you are located in an origin-based or destination-based state to figure out what rate to charge for sales tax.
Utah is an origin-based state, meaning sales tax is determined based on the buyer’s location. That means for a Utah-based seller, sales tax is generally based on the location of the buyer when selling within the state.
For out-of-state or remote sellers, the sales tax rate is always determined by the buyer’s location. For instance, if you’re selling a product from Texas to a customer in Salt Lake City, Utah, where you have nexus, you’d apply Salt Lake City’s sales tax rate to that sale.
To make life easier, consider using sales tax software or consulting a tax professional, like TaxHero, to ensure accurate tax calculations and collections. Understanding these tax rules helps you stay compliant, whether you’re in-state or out-of-state.
Filing and Remitting Sales Tax Returns in Utah
The next step after collection is filing and remitting your Utah sales tax returns. Filing and remittance can vary in frequency, typically monthly, quarterly, or annually.
- If you owe up to $1,000 in sales tax annually, file monthly.
- For amounts between $1,001 and $50,000, file quarterly.
- Businesses with a sales tax liability of $50,001 to $96,000 should file monthly, with those owing 96,001 and more pay electronically.
It’s crucial to keep accurate records of your sales and tax collections and adhere to the filing schedule set by the state to remain compliant with Utah’s sales tax regulations.
Due Dates
In Utah, the due date falls on the
last day of the following month for monthly and quarterly filers
. For instance, sales tax collected in January is due by February 28th (or 29th if it’s a leap year) for monthly filers.
However, if this day is a holiday, weekend, or in the rare occurrence of a natural disaster, the deadline is typically extended to the next business day. For instance, if you’re a monthly filer and filing sales tax for the month of April, and the May 31st deadline falls on a holiday or weekend, you’ll have until June 1st, the following business day, to submit.
If you’re an annual filer, the due date for remittance falls on January 31 following the reported tax year.
Filing Sales Tax Returns
To file your sales tax return for Utah, a few options are available:
- File online through the Utah Taxpayer Access Point.
- File by mail – Fill out TC62S/M and remit to the Utah State Tax Commission by the due date.
- File with TaxHero – Let TaxHero take care of it so you don’t have to worry about missing a payment or return.
Timely Filing Discount
Some states offer a discount to businesses for collecting, filing, and remitting sales tax on time as an incentive to process sales taxes promptly. Utah’s timely filing discount is 1.31% of the sales tax due.
Sales Tax Holiday
Currently, for 2023-2024, there are no planned sales tax holidays in Utah.
Utah Sales Tax Penalties
Like in most states, sales tax is a big part of how Utah generates revenue. Thus, maintaining compliance with sales tax regulations is of utmost importance. Failure to do so can lead to consequences and sales tax penalties. Therefore, it is crucial always to ensure you are up-to-date in filing, collecting, and remitting sales tax to the state.
Here are the specific penalties for non-compliance with sales tax regulations in Utah:
- Civil penalties amounting to greater of 10% of the total sales tax due or $20;
- On the criminal side, offenses can be classified as second or third-degree felonies, depending on the severity and specific circumstances.
Have any questions? Connect with TaxHero today for a free sales tax consultation about your business in Utah or any state!
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