Utah Looks to Make Internet Sales Tax Attractive
- Mar 6, 2013 | Gail Cole
UPDATE, 3.29.13: Utah House Bill 300 has been signed into law. It will take effect January 1, 2014.
UPDATE, 4.17.13: Utah House Bill 226 has been defeated.
Utah lawmakers don't want to wait to see if the Marketplace Fairness Act of 2013 will survive to become law. Instead, they've proposed their own online sales tax bill, and it is chugging its way towards passage. Yet without federal legislation allowing states to require remote sellers to collect and remit sales tax, it could be difficult for Utah to actually impose a new law on unwilling vendors. Case in point: Georgia now requires Amazon to collect and remit taxes on behalf of the state, but as of yet, the online behemoth hasn't done so. The Washington-based company has reportedly entered into negotiations with Georgia over the issue.
In fact, Utah already has remote sales tax legislation. It is a member of Streamlined Sales Tax, which was created to "provide a road map for states who want to simplify and modernize sales and use tax administration in the member states in order to substantially reduce the burden of tax compliance." As of this writing, there are 22 full member states and 1,881 active accounts (businesses) registered with SST; and according to the SST website, "Once registered the seller must collect and remit sales and use taxes for all taxable sales into the member states... ."
Sales and Use Tax Amendments
Utah's recently proposed legislation would amend existing law. S.B. 226, Sales and Use Tax Amendments, "creates a rebuttal presumption that certain sellers who do not have a physical presence in the state … are required to pay or collect and remit state and local sales and use taxes if those sellers have business relationships with a seller who does have a physical presence in the state."
Such relationships include "sellers who are members of the same controlled group of corporations, if the in-state seller performs certain functions for the out-of-state seller, such as functions related to delivery, installation, assembly, or maintenance, or conducting another activity that is significantly associated with the out-of-state seller's ability to establish and maintain a market in the state."
There are caveats. Sales tax must only be collected if:
- The "total taxable sales from all of the seller's sales of tangible personal property, services, and products transferred electronically, for the preceding 12 months … exceeds $10,000;" and
- The "seller's total taxable sales of tangible personal property, services, and products transferred electronically, for the preceding 12 months, to purchasers in the state, exceed $125,000."
S.B. 226 passed out of the Senate Revenue and Taxation Committee unanimously on February 26, and now awaits action in the full Senate. If signed into law, the bill would take effect on July 1, 2013.
Meanwhile, Representative Steve Eliason (R-Sandy) has proposed Utah H.B. 300, Retention of Sales and Use Tax Collections by Certain Remote Sellers. It would authorize "certain remote sellers who voluntarily collect a sales and use tax to retain certain sales and use taxes the remote sellers would otherwise remit to the State Tax Commission." The bill originally proposed allowing retailers to retain "50% of any amounts the seller would otherwise remit to the commission." That amount was amended to 18%.
The Salt Lake Tribune calls H.B. 300 a "multimillion carrot to online retailers," and it's hard to argue with that. Rep. Eliason points out that, "even with the incentive, it would be a windfall for the state -- to the tune of about $31 million annually." Furthermore, such an incentive isn't unheard of in Utah, where brick-and-mortar stores may keep "1.31% of sales tax collection to compensate them for the trouble."
H.B. passed the House and received a favorable report from the Senate Review and Taxation Committee. It now awaits action in the full Senate. If signed into law, it would take effect January 1, 2014.
If the Marketplace Fairness Act of 2013 survives, any incentive created by H.B. 300 would be abolished.
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