Utah considers big sales tax changes.

To raise revenue for transportation projects, the Utah Senate would increase the state sales and use tax rate by 0.15 percent to 4.85 percent. Senate Bill 136 would also give localities more freedom to impose local option sales taxes for transportation.

To help offset a proposed sales tax rate reduction on groceries, the Utah House is considering a state sales tax rate increase. House Bill 148 would eliminate the 1.7 percent sales tax on unprepared food (groceries) and raise the general rate to 4.92 percent. The proposed bill would not affect local sales taxes on food.

Increase state sales tax rate for transportation

A county, city, or town would be able “to impose certain local option sales and use taxes without submitting the question to the county’s, city’s, or town’s registered voters” under SB 136. The measure would also allow certain cities to impose a transportation local option sales and use tax of 0.10 percent “if the county … has not imposed a sales and use tax under this section.” If the city or town imposes that tax, the county could subsequently “impose a sales and use tax for that portion of the county within that city or town at a rate of 0.15 percent.”

The bill would also increase the state sales and use tax rate and dedicate revenue from the additional 0.15 percent to transportation.

According to the bill’s fiscal note, it could generate $49.6 million in FY 2019 for the state, and $60.3 million in FY 2020. Local governments with a large transportation district that opt to increase their local sales and use tax rate stand to gain an additional $129 million for transportation projects in FY 2023.

Senate Bill 136 sponsor Senator Wayne Harper is co-chairman of the Transportation Governance and Funding Task Force. According to Harper, the measure “really needs to pass because it creates the form and the structure for how the state deals with transportation over the next 40 years.”

Yet the bill is facing an uphill battle. The state has a healthy surplus and is expecting additional revenue to be generated from federal tax changes. With money in reserve, a state sales tax rate increase is a hard sell.

Increase state sales tax rate to eliminate tax on food

HB 148 would increase the general state sales and use tax rate to 4.92 percent. In exchange, it would eliminate the state sales and use tax on food and food ingredients, which is currently 1.75 percent.

Additionally, the measure would eliminate candy from the definition of food and food ingredients. The bill defines “candy” as “a preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts, or other ingredients or flavorings in the form of bars, drops, or pieces.” Candy does not include any preparation containing flour, or any preparation requiring refrigeration.

Bill sponsor Representative Tim Quinn predicts state sales tax revenue would not change under the bill. However, food would become more affordable for low-income Utahns. On the other hand, opponents of the measure note the cost of most items would increase under HB 148, which would be a hardship for people on low or fixed incomes. The bill is currently being held in the House Docket Clerk.

The Utah Legislature has considered changing the sales tax rate on food and food ingredients in the past. Just last year, it looked at increasing the rate on food.

Learn more about sales and use tax in Utah here.