It’s not yet known exactly how much revenue the state and local governments will reap from Utah’s sales tax deal with Amazon.com, but local leaders are eager to start seeing the dollar signs.
That’s because they view it as revenue they should have been collecting all along — meaning when they do get the returns, the revenue should either level out their tax bases or manifest back to the taxpayer in a varying range of services.
Lincoln Shurtz, government affairs director for the Utah Association of Counties, said local governments for years have been pushing the Legislature to expand internet sales collections to all companies that do a significant amount of business in Utah. Amazon’s deal, he said, is a “great first step” in repairing a deteriorating tax base thanks to an “economy shifting online.”
“It’s capturing what should have been paid — unrealized revenue that should have been coming to cities and counties in the first place,” Shurtz said. “So clearly it will be helpful in paying for basic services, education, road funding and infrastructure.”
An estimated $200 million in state sales tax and another $100 million in local sales taxes go uncollected each year from online purchases made by Utahns.
It’s still not clear how much of a dent Utah’s deal with Amazon will make in that revenue gap because state tax officials have not yet shared an estimate. But it’s expected that the internet giant — one of the nation’s most popular online shopping sites — could collect millions.
“No one knows the amount of money cities will see,” said Roger Tew, senior policy analyst with the Utah League of Cities and Towns. “But it is the biggest online retailer that did not have a nexus with Utah.”
According to a recent study for the American Booksellers Association, Amazon sold nearly $428 million in retail goods in Utah last year but did not have to pay $28.6 million in sales taxes.
The study also estimated that Amazon’s sales in Utah represent the equivalent of nearly 300 retail storefronts and more than 2,500 retail jobs, and the combined loss of sales and property taxes costs each household nearly $35.
At a recent meeting with the Utah League of Cities and Towns, Utah State Tax Commission Chairman John Valentine told a room full of local mayors and city council members what he could about the deal with Amazon and what wasn’t bound by a confidentiality agreement.
Valentine said the sales tax collection will begin Jan. 1 and will include taxes for state and local entities — including transit districts.
Just like any other vendor, he said, Amazon will keep 1.31 percent of the sales tax it collects from Utah customers. The rest will go to taxing entities, with rates varying by zip code.
“It will be up to the local governments to decide what to do with the money,” Valentine said in an interview after his presentation. “You’re going to have more in the general fund to be able to fund potholes, maybe reduce property taxes, collect garbage or pay police officers.”
Tew said it will vary across local jurisdictions what elected leaders decide to do with the revenue, but for “people who want public services, this should be viewed as good news.”
“It’s a broader addition to a tax base that frankly needs to be maintained,” he said. “If your base gets smaller, you have to raise rates. Nobody wants to do that.”
In Utah’s largest county, Salt Lake County Mayor Ben McAdams said he’s “very interested” in knowing what kind of impact the Amazon deal will have on the county’s general fund.
“We’re not really expecting it to be such a large sum of money that it will be a game changer for our budget,” McAdams said. “But I think it will give us the opportunity to invest in some basic services that we haven’t been able to.”
For example, he said, that funding could be allocated to a range of priorities, from parks and trails, to upgrades to the county’s information technology mainframe.
“As we’ve lost tax power to online sales, we’ve had to scrape by and kick the can down the road,” McAdams said. “It costs money to plow the streets and run basic services of government, so hopefully this will help keep taxes down.”
The Utah Transit Authority will also likely benefit considerably from the Amazon deal, new UTA President and CEO Jerry Benson said during a recent meeting with the Deseret News and KSL editorial boards.
“I’m really anxious to see an estimate,” Benson said. “I think it will be significant.”
Whatever the amount, the funding will follow priorities the UTA board recently established for new revenue, including increasing bus service throughout the Wasatch Front, he said.