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Utah Lawmakers Table Proposal to Increase Sales Tax on Food


 Utah Considers Raising Sales Tax on Food.

In Utah, a proposal to increase sales tax on food from 1.75 percent to 4.75  percent has been tabled until there is "less uncertainty surrounding the impacts of the fiscal cliff." A deal to avert the fiscal cliff was reached Wednesday.

Many states rely heavily on sales tax revenues to fund their general budgets. Texas and Washington State depend on sales tax revenues for approximately half of their general funds. In Utah, sales and use taxes generate more than 32% of the general fund.

As a result, when sales decline, so do state revenues. In hard economic times, sales contract and "weak tax collections" lead to budget gaps. The Center on Budget and Policy Priorities notes:

"…slow job growth … restrain[s] the rise in state tax receipts. This is especially true for the sales tax. High unemployment and economic uncertainty, combined with households' diminished wealth due to fallen property values, … depress[es] consumption, keeping sales tax receipts at low levels. "

Utah Senator John Valentine (R-Orem) would like to lessen the volatility of sales tax revenue by raising the state sales tax on groceries to 4.75%, "reversing a cut enacted several years ago." In addition, there would be a slight decrease in the overall sales tax rate on all retail purchases. Valentine's proposal "would not bring any new tax dollars into the state budget, but future revenue would be less prone to fluctuation because of the change." Sales of groceries fluctuate less than sales of big ticket items; people need to eat, but they may not need a new car or boat. (The Salt Lake Tribune).

Wayne Neiderhauser, incoming president of the Utah Senate, has said that "[a] proposal to more than double the state sales tax on food would likely be able to pass the Senate."

While there is "support for the concept," lawmakers are hesitant to make the change while the economy is "still recovering." Until there is more clarity around the economic impact of the fiscal cliff and its resolution, Utah lawmakers will table an increase in the state sales tax on food.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.