Utah could collect another $60 million in online sales tax revenue after a key U.S. Supreme Court decision, but most of that money is expected go to an already promised tax break for manufacturers, officials said Thursday.
The revenue would come on top of about $140 million the state takes in from online businesses like Airbnb and Amazon that already agreed to pay last year. A special legislative session could soon be called where lawmakers would hammer out exactly how sales tax will be collected.
For consumers, the change means paying about 5 to 8 percent more for things they buy online, like the sales tax charged on items bought in bricks-and-mortar stores.
State leaders had long bemoaned the loss of sales-tax revenue as people started buying more online and cheered the U.S. Supreme Court ruling last month.
“We’re a fiscally conservative state, yet we believe these taxes should be collected because we don’t want to prefer online, out-of-state sellers over bricks and mortar sellers,” said Republican Sen. Howard Stephenson. “We believe all sellers should be treated equally and we shouldn’t be choosing winners and losers.”
With that in mind, lawmakers earlier this year earmarked $55 million of any online sales tax collected in Utah for a tax break for manufacturers. After that, any cash leftover could go toward lowering the overall sales tax.
The changes come after the U.S. Supreme Court overruled a pair of decades-old decisions that said if a business was shipping a customer’s purchase to a state where the business didn’t have a physical presence such as a warehouse or office, the business didn’t have to collect sales tax for the state.
People were supposed to pay sales tax to the state themselves, but most didn’t realize they owed it and few paid. In Utah, the portion was about 1 percent.
Though Utah was working on the online sales tax issue long before the decision came down, some questions remain. One is how the state will deal with online platforms like the handmade-marketplace Etsy, which doesn’t sell things directly but gives people an online platform to make their own sales.
Though Utah exempts people whose sales total less than $100,000 a year, Utah State Tax Commission Chair John Valentine said the platform question is still being debated around the country.