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State & Local Taxes

Lesson 2 – Three Primary Taxes, Sales and Use Tax

During the depression of the 1930s, revenues from property tax assessments declined significantly. States needed a new source of revenue to meet their obligations and the "Emergency Revenue Act of 1933" was enacted by the Utah Legislature. This act imposed a tax on the sales of goods and certain services within the state, which generated large sums of revenue. The great influx of revenue prompted the Legislature to retain the tax after the depression. The act was subsequently renamed the Sales Tax Act.

In 1937, the Legislature recognized the need to prevent loss of sales tax revenue when residents purchased goods from out of state for use in Utah. Consequently the Use Tax Act was enacted. Use tax is a complement to sales tax and only applies if sales tax is not applicable.

The distinguishing factor in determining whether sales or use tax applies is the location of the inventory from which an item is purchased. If the item is purchased from an inventory located in Utah, sales tax applies. If the item is purchased from an inventory located outside Utah, use tax applies.

In 1987, the Utah Legislature restructured the law to combine the Sales Tax Act and the Use Tax Act under one act, the Sales and Use Tax Act. Combining the acts did not result in any significant changes in the law. The definitions and exemptions found in the act apply to both sales and use tax.

In subsequent years, the Legislature expanded the Act to include other related taxes and fees. Where sales-related taxes are not part of the act, specific statutory language requires the tax or fee to be collected and distributed in accordance with the general sales and use taxes found in the Sales and Use Tax Act.

The inclusion of sales-related taxes provided counties, cities, and towns; with added sources of revenue to meet growing financial needs. By voter approval, local governments may impose additional taxes to benefit their communities. Therefore, tax rates vary throughout the state.

At the present time, sales and use tax is the largest single source of revenue for the State of Utah.

The Tax Commission maintains a complete list of taxes and related taxes that have been imposed by local governments.  Tax rates can change quarterly; therefore, the online list is updated quarterly. Current and prior tax rates are posted on the Tax Commission’s web page at Utah Sales and Use Tax Rates.

Combined Tax Rate

All taxes in the combined tax rate are reported and paid on a sales tax return. The Tax Commission collects and distributes all of these taxes to state and local governments. While the combined tax rate is different for cities and counties throughout Utah, every location imposes the state and local tax rates. The remaining portion of the combined tax rate for a locality depends on which of the following taxes a government entity or voters have approved:

1. State Tax Rate. The state rate is 4.75 percent for non-food items, 2.75 percent for food and food ingredients. The state tax applies to all locations throughout the state.
2. Local Tax Rate. The local rate, imposed by counties, is 1 percent and applies to all locations throughout the state.
3. Mass Transit Tax Rate. This tax rate is .25 percent and applies to all locations that voted to impose the tax to fund public transportation.
4. Additional Mass Transit Tax Rate. Voters in Davis, Salt Lake, and Weber Counties elected to increase their mass transit tax by .25 percent to fund light rail.
5. Rural Health Care Facilities Tax Rate. The rate is up to 1 percent and applies to all cities and counties that voted to impose the tax to fund rural hospitals and nursing care facilities owned by a city or county.
6. Botanical, Cultural, Recreational, and Zoological Tax Rate. A tax rate of .10 percent applies to all counties that voted to impose the tax to fund recreational facilities and botanical, cultural, and zoological organizations. If a county does not impose the tax, cities within that county may vote to impose the tax.
7. Highways Tax Rate. A tax rate of .25 percent applies to all counties that voted to impose the tax to fund highway maintenance or public transit. Counties that have the mass transit tax cannot impose this tax.
8. County Option Tax Rate. A tax rate of .25 percent used as a source of revenue to fund and support county governments.
9. Town Option Tax Rate. Towns that qualify under Utah Code may impose a town option tax of up to 1 percent. At present, only Snowville imposes this tax.
10. Resort Communities Tax. A tax rate up to 1percent applies to cities or towns where the transient room capacity is greater then or equal to 66 percent of the permanent census population.
11. Additional Resort Community Tax Rate. An additional .05 percent resort tax may be imposed if voters approve.

The following example shows the combined sales and use tax rate for Alta, a resort community in Salt Lake County:

Sales-Related Taxes

Other sales-related taxes may be imposed whenever sales and use tax applies, but related taxes are reported and paid on separate tax returns. Local governments may also elect to collect these taxes directly.

Sales and use tax revenue for related taxes comes from amounts paid for temporary lodging, short-term rental of motor vehicles, food and beverages for immediate consumption, and from the sales transacted within a resort community.

Sales-Related Tax Rates

Waste Tire Recycling Fee

A $1 fee (not a tax) on the retail sale of each new tire up to and including 24.5" rim diameters. The fee was adopted by the Legislature to encourage recycling of waste tire products for environmental issues.