Utah sales and use tax guide

Sales tax is a tax paid to a governing body (state or local) on the sale of certain goods and services. Utah first adopted a general state sales tax in 1933, and since that time, the rate has risen to 4.85%. On top of the state sales tax, local jurisdictions and special districts may impose additional taxes that vary by location. Currently, combined sales tax rates in Utah generally range from about 4.85% to approximately 8.25%, depending on the location of the sale.

As a business owner selling taxable goods or services, you act as an agent of the state of Utah by collecting tax from purchasers and passing it along to the appropriate tax authority. Sales and use tax in Utah is administered by the Utah State Tax Commission.

Any sales tax collected from customers belongs to the state of Utah, not you. It’s your responsibility to manage the taxes you collect to remain in compliance with state and local laws. Failure to do so can lead to penalties and interest charges.

When you need to collect Utah sales tax

In Utah, sales tax is levied on the sale of tangible goods and some services. The tax is collected by the seller and remitted to state tax authorities. The seller acts as a de facto collector.

To help you determine whether you need to collect sales tax in Utah, start by answering these three questions:

1. Do you have nexus in Utah?
2. Are you selling taxable goods or services to Utah residents?
3. Are your customers subject to Utah sales tax on the transaction?

If the answer to all three questions is yes, you’re required to register with the state tax authority, collect the correct amount of sales tax per sale, file returns, and remit to the state.

Failure to collect Utah sales tax

If you meet the criteria for collecting sales tax and choose not to, you’ll be held responsible for the tax due, plus applicable penalties and interest.

It’s extremely important to set up tax collection at the point of sale — it’s near impossible to collect sales tax from customers after a transaction is complete.

The need to collect sales tax in Utah is predicated on having a significant connection with the state. This is a concept known as nexus. Nexus is a Latin word that means “to bind or tie,” and it’s the deciding factor for whether the state has the legal authority to require your business to collect, file, and remit sales tax.

Nexus triggers

Sales tax nexus in all states used to be limited to physical presence: A state could require a business to register and collect and remit sales tax only if it had a physical presence in the state, such as employees or an office, retail store, or warehouse.

In June 2018, the Supreme Court of the United States overruled the physical presence rule with its decision in South Dakota v. Wayfair, Inc. States are now free to tax businesses based on their economic and virtual connections to the state, or economic nexus.

While physical presence still triggers a sales tax collection obligation in Utah, it’s now possible for out-of-state sellers to have sales tax nexus with Utah.

Out-of-state sellers

Out-of-state sellers with no physical presence in a state may establish sales tax nexus in the following ways:

Affiliate nexus: Having a relationship with in-state businesses or representatives that help facilitate sales or maintain a market in Utah.

Click-through nexus: Having an agreement to reward a person(s) in the state for directly or indirectly referring potential purchasers of goods through an internet link, website, or otherwise. At this time, Utah has not enacted a click-through nexus law.

Economic nexus: Having a certain amount of economic activity in the state. Remote sellers must register with the state then collect and remit Utah sales tax if the remote seller meets either of the following criteria during the previous or current calendar year:

• Gross revenue from the sale of taxable or exempt tangible personal property, electronically transferred property, or services in Utah of more than $100,000; or

• 200 or more separate transactions of taxable or exempt tangible personal property, electronically transferred property, or services in the state

Inventory in the state: Storing property for sale in the state. This includes merchandise owned by Fulfillment by Amazon (FBA) merchants and stored in Utah in a warehouse owned or operated by Amazon.

Marketplace sales: Making sales through a marketplace. Marketplace facilitators are generally responsible for collecting and remitting Utah sales tax on sales made through their platforms when Utah economic nexus thresholds are met.

Trade shows: Attending conventions or trade shows in Utah. You may establish nexus if you attend trade shows or conduct business activities in Utah beyond a limited threshold period or frequency.

If you have sales tax nexus in Utah, you’re required to register with the Tax Commission and to charge, collect, and remit the appropriate tax to the state.

For more information, see the Utah State Tax Commission: Out-of-State (Remote) Sellers webpage.

Trailing nexus

Sales tax obligations may continue even after a retailer ceases activities that created nexus in a state. This is sometimes referred to as trailing nexus, though Utah does not formally define this concept in statute.

Fulfillment by Amazon (FBA)

If you’re an active Amazon seller and you use Fulfillment by Amazon (FBA), you need to know where your inventory is stored and if its presence in a state will trigger nexus. FBA sellers can also download an Inventory Event Detail Report from Amazon Seller Central to identify inventory stored in Utah.

If you sell taxable goods to Utah residents and have inventory stored in the state, you likely have nexus and an obligation to collect and remit tax. To begin to understand your unique nexus obligations, check out our free economic nexus tool or consult with a trusted tax advisor.

Sourcing sales tax in Utah: which rate to collect

In some states, sales tax rates, rules, and regulations are based on the location of the seller and the origin of the sale (origin-based sourcing). In others, sales tax is based on the location of the buyer and the destination of the sale (destination-based sourcing).

Utah is a destination-based sales tax state. This means sales tax is generally calculated based on the ship-to address where the buyer receives the goods.

After determining you have sales tax nexus in Utah, you need to register with the proper state authority and collect, file, and remit sales tax to the state. We get a lot of questions about this and recognize it may be the most difficult hurdle for businesses to overcome. Avalara Licensing can help you obtain your Utah business license and sales tax registration.

How to register for a Utah seller’s permit

You can register for a Utah seller’s permit online through the Utah State Tax Commission. To apply, you’ll need to provide the Tax Commission with certain information about your business, including but not limited to:

• Business name, address, and contact information
• Federal EIN number
• Date business activities began or will begin
• Projected monthly sales
• Projected monthly taxable sales
• Products to be sold

Cost of registering for a Utah seller’s permit

There is currently no cost to register for a sales and use tax license in Utah.

Acquiring a registered business

You must register with the Utah State Tax Commission if you acquire an existing business in Utah. The state requires all registered businesses to have the current business owner’s name and contact information on file.

Streamlined Sales Tax (SST)

The Streamlined Sales and Use Tax Agreement (SSUTA), or Streamlined Sales Tax (SST), is an effort by multiple states to simplify the administration and cost of sales and use tax for remote sellers. Remote sellers can register in multiple states at the same time through the Streamlined Sales Tax Registration System (SSTRS).

Utah is currently a full member of the SST.

Once you’ve successfully registered to collect Utah sales tax, you’ll need to apply the correct rate to all taxable sales, remit sales tax, file timely returns with the Utah State Tax Commission, and keep excellent records. Here’s what you need to know to keep everything organized and in check.

How you collect Utah sales tax is influenced by how you sell your goods:

Brick-and-mortar store: Have a physical store? Brick-and-mortar point-of-sale solutions allow users to set the sales tax rate associated with the store location. New tax groups can then be created to allow for specific product tax rules.

Hosted store: Hosted store solutions like Shopify and Squarespace offer integrated sales tax rate determination and collection. Hosted stores offer sellers a dashboard environment where Utah sales tax collection can be managed.

Marketplace: Marketplaces like Amazon and Etsy offer integrated sales tax rate determination and collection, usually for a fee. As with hosted stores, you can set things up from your seller dashboard and let your marketplace provider do most of the heavy lifting.

Mobile point of sale: Mobile POS systems like Square rely on GPS to determine sale location. The appropriate tax rate is then determined and applied to the order. Specific tax rules can be set within the system to allow for specific product tax rules.

Utah sales tax collection can be automated to make your life much easier. Avalara AvaTax seamlessly integrates with the business systems you already use to deliver sales and use tax calculations in real time.

Tax-exempt goods

Some goods are exempt from sales tax under Utah law. Examples include some agriculture supplies, prescription drugs, and medical supplies.

We recommend businesses review the laws and rules put forth by the Utah State Tax Commission to stay up to date on which goods are taxable and which are exempt, and under what conditions.

Some customers are exempt from paying sales tax under Utah law. Examples include government agencies, some nonprofit organizations, and merchants purchasing goods for resale.

Sellers are required to obtain and retain a valid exemption or resale certificate for each exempt transaction.

Misplacing a sales tax exemption/resale certificate

Utah sales tax exemption and resale certificates are worth far more than the paper they’re written on. If you’re audited and cannot validate an exempt transaction, the Utah State Tax Commission may hold you responsible for the uncollected sales tax. In some cases, late fees and interest will be applied and can result in large, unexpected bills.

Sales tax holidays

Sales tax holidays exempt specific products from sales and use tax for a limited period, usually a weekend or a week. Several states offer sales tax holidays every year.

Utah does not currently offer sales tax holidays.

You’re registered with the Utah State Tax Commission and you’ve begun collecting sales tax. Remember, those tax dollars don’t belong to you. As an agent of the state of Utah, your role is that of intermediary to transfer tax dollars from consumers to the tax authorities.

How to file

Once you’ve collected sales tax, you’re required to remit it to the Utah State Tax Commission by a certain date. The Tax Commission will then distribute it appropriately.

Filing a Utah sales tax return is a two-step process comprised of submitting the required sales data (filing a return) and remitting the collected tax dollars (if any) to the Tax Commission. The filing process forces you to detail your total sales in the state, the amount of sales tax collected, and the location of each sale.

Online filing is required and may be done using the Utah Taxpayer Access Point (TAP).

Filing frequency

The Utah State Tax Commission will assign you a filing frequency. Typically, this is determined by the size or sales volume of your business, with larger businesses filing more frequently. Smaller businesses may request monthly filing, rather than annual or quarterly filing. See the filing due dates section for more information.

Utah sales tax returns and payments must be remitted at the same time; both have the same due date.

Online filing

You may file directly with the Tax Commission by visiting their site and entering your transaction data manually. This is a free service, but preparing Utah sales tax returns can be time-consuming — especially for larger sellers.

Using a third party to file returns

To save time and avoid costly errors, many businesses outsource their sales and use tax filing to an accountant, bookkeeper, or sales tax automation software like AvaTax. This is a normal business practice that can save business owners time and help them steer clear of costly mistakes due to inexperience and a lack of deep knowledge about Utah sales tax code.

Filing when there are no sales

Once you have a Utah seller’s permit, you’re required to file returns at the completion of each assigned collection period regardless of whether any sales tax was collected. When no sales tax was collected, you must file a “zero return.”

Failure to submit a zero return can result in penalties and interest charges.

Closing a business

The Tax Commission requires all businesses to “close their books” by filing a final sales tax return. This also holds true for business owners selling or otherwise transferring ownership of their business.

Timely filing discount

Some taxpayers may qualify for a small timely filing discount if returns and payments are submitted on time. Currently, the Utah State Tax Commission offers a 1.31% discount for monthly sales tax filers that meet the filing and payment requirements.

For more information on current rate and eligibility requirements, see the Utah State Tax Commission - Sales and Use Tax General Information (Pub 25) webpage.

It’s important to know the due dates associated with the filing frequency assigned to your business by the Utah State Tax Commission. This way you’ll be prepared and can plan accordingly. Failure to file by the assigned date can lead to late fines and interest charges.

The Tax Commission requires all sales tax filing to be completed by the last day of the month following the taxable period. Below, we’ve grouped Utah sales tax filing due dates by filing frequency for your convenience. Due dates falling on a weekend or holiday are adjusted to the following business day.

Filing a Utah sales tax return late may result in a late filing penalty as well as interest on any outstanding tax due. For more information, refer to our section on penalties and interest.

In the event a Utah sales tax filing deadline was missed due to circumstances beyond your control (e.g., weather, accident), the Tax Commission may grant you an extension. However, you may be asked to provide evidence supporting your claim.

Hopefully you don’t need to worry about this section because you’re filing and remitting Utah sales tax on time and without incident. However, in the real world, mistakes happen.

If you miss a sales tax filing deadline, follow the saying, “better late than never,” and file your return as soon as possible. Failure to file returns and remit collected tax on time may result in penalties and interest charges, and the longer you wait to file, the greater the penalty and the greater the interest.

If you’re in the process of acquiring a business, it’s strongly recommended that you contact the Tax Commission and inquire about the current status of the potential acquisition. Once you’ve purchased the business, you’ll be held responsible for all outstanding Utah sales and use tax liability.

If you’re collecting sales tax from Utah residents, you’ll need to consider how to handle taxes on shipping and handling charges.

Taxable and exempt shipping charges

Utah sales tax may apply to charges for shipping, handling, delivery, freight, and postage. If shipping is included in the price of a taxable sale, the shipping is taxable as well. If the shipping is separately stated from the sales price, the shipping charges are tax exempt. Shipping on exempt sales is nontaxable, regardless of whether it’s included in the price or separately stated.

There are exceptions to almost every rule with sales tax, and the same is true for shipping and handling charges. Specific questions on shipping in Utah and sales tax should be taken directly to a tax professional familiar with Utah tax laws.

For additional information, see the Utah Sales and Use Tax FAQ.