What is Nexus?You'll need to collect sales tax in Utah if you have nexus there. There are two main ways that sellers can be tied to a state when it comes to nexus: physical, or economic.
Physical nexus means having enough tangible presence, or activity in a state to merit paying sales tax in that state.
Economic nexus means passing a states' economic threshold, for total revenue, or the number of transactions in that state.
Calculating Nexus in Utah
Physical nexus is all about having a concrete presence in Utah. This includes:
- Operating a store or office
- Having a warehouse or storage facility
- Employing people in Utah, whether they’re sales reps, agents, or other roles
- Storing inventory in Utah, even if a third party operates the warehouse
Economic nexus is about your sales figures in Utah. You'll have economic nexus if:
- Your gross sales to Utah customers exceed $100,000 during the current or previous calendar year, or
- You engage in 200 or more separate transactions with Utah customers within the same timeframe
Affiliate nexus arises from business relationships within Utah. These can include:
- Companies related to yours, like parent or subsidiary companies
- Businesses with shared ownership
- In-state affiliates driving sales through commission-based referrals
Click-through nexus involves online referrals. In Utah, it applies if:
- You have an arrangement with a Utah affiliate who directs customers to you via a website link, and
- Your sales from these referrals top $10,000 over the past 12 months
Marketplace nexus comes into play when selling through an online marketplace like Amazon or eBay, especially if the marketplace has a presence in Utah. In such cases, the marketplace facilitator typically handles sales tax collection and remittance on your behalf.
Utah imposes a higher tax on vending machine snacks, because apparently, convenience should come at an extra cost.
Sales Tax Registration in Utah
How to Get Your Utah Sales Tax Permit
Registering for a sales tax license in Utah is pretty straightforward:
- Get Your Info Ready: Make sure you have all the necessary details, like your business name, address, Social Security Number or Federal Employer Identification Number (FEIN/EIN), and an estimate of your monthly sales tax.
- Visit the Tax Commission’s Website: Head over to the Utah State Tax Commission's website to get started.
- Create an Account: If you don’t have an account, you'll need to set one up. Just click on “Sign Up” and fill in the required information.
- Apply for a Sales Tax License: Once you're logged in, find the option to “Apply for a New License” and follow the prompts to complete your application.
- Review and Submit: Double-check your application to ensure everything’s correct, then submit it. You’ll get a confirmation number — keep this for your records.
- Wait for Approval: It usually takes up to 14 days to get approved. Once your application is processed, you’ll receive your sales tax license and account number.
- Display Your License: When you receive your license, remember to display it prominently at your business location, as Utah law requires.
Cost of Registering for a Utah Sales Tax License
Good news here — registering for a Utah sales tax license is free. That’s one less expense to worry about as you’re setting up your business.
Federal Tax ID for Utah Sales Tax License
Yes, you’ll need an EIN to register for a sales tax license in Utah. If you don't have one yet, you can apply for it online at the IRS website.
Other Utah Registrations to Consider
Depending on your business, you might need to register with other Utah agencies. This could include:
- The Utah Department of Commerce for business entity registration
- The Utah Department of Workforce Services for unemployment insurance
- The Utah Labor Commission for workers' compensation
Guide to collecting sales tax in Utah
Is Utah an Origin or Destination Sales Tax State?
Utah uses a destination-based approach for sales tax. This means you collect tax based on where your customer receives the goods or services, not where your business is. It ensures the tax goes to the right place where the items are actually used or enjoyed.
What Sales are Subject to Sales Tax in Utah?
In Utah, you'll generally need to collect sales tax on:
- Tangible items like furniture, electronics, and clothing
- Motor vehicles
- Tickets to events or attractions
- Hotel stays
Sales tax also applies to various services, such as:
- Repair and maintenance
- Cleaning services
- Personal care services like haircuts or skincare
Is Software as a Service (SaaS) Taxed in Utah?
Yes, SaaS is taxed in Utah. This includes both remotely delivered software and web-based subscription services.
What is Exempt from Utahne Sales Tax?
Utah offers several sales tax exemptions, including:
- Some groceries and unprepared food items
- Prescription drugs and medical devices
- Sales to qualified charities and nonprofit organizations
- Sales to government agencies
- Agricultural products and farm machinery
Who is Eligible for Utah Sales Tax Exemptions?
To get a sales tax exemption in Utah, the buyer should be:
- A registered nonprofit or charity
- Holding a valid exemption certificate from the Utah State Tax Commission
- Purchasing items for use in tax-exempt activities, like education or religious purposes
What To Do If Your Customer is Exempt from Sales Tax in Utah?
For tax-exempt sales, you need to:
- Get a completed Utah Sales Tax Exemption Certificate (Form TC-721) from the customer.
- Make sure the certificate details are correct.
- Keep the certificate on file for at least three years, as Utah law requires.
What if You Lose a Utah Sales Tax Exemption Certificate?
If you lose an exemption certificate, reach out to the customer for a new one. Keeping accurate records is crucial, especially if you're audited.
In Utah, dance admissions are tax-free as long as the dancing isn't "abnormal." What does that mean?
Steps for Filing a Utah Sales Tax Return
Your filing frequency in Utah depends on your sales tax collection:
- Monthly Filing with Mandatory Prepayment: If you collect over $96,001 annually, you file and pay monthly. Due by the last day of the month after your reporting period.
- Monthly Filing: For annual collections between $50,001 and $96,000. Also due monthly by the last day of the following month.
- Quarterly Filing: If you collect between $1,001 and $50,000 annually, you file and pay quarterly. This is due by the last day of the month after the quarter ends.
- Annual Filing: For those collecting less than $1,000 annually, file and pay yearly by January 31 of the following year.
What If a Filing Date Falls on a Weekend or Holiday?
If your filing date lands on a weekend or holiday, you get a bit more time. The deadline moves to the next business day.
How to File a Utah Sales Tax Return
Filing your Utah sales tax return is easy:
- Prepare Your Records: Make sure you have all your sales data, including total sales and the sales tax collected.
- Log in to Utah TAP: Visit the Utah State Tax Commission website and log in to your account.
- Select Your Tax Return: Once logged in, find the "File a Return" link, and pick the correct sales tax return for your period.
- Fill Out the Return: Enter your total sales, taxable sales, and collected sales tax. Don't forget any deductions like tax exemptions or resales.
- Review and Submit: Double-check your return, submit it, and save the confirmation number.
- Make Your Payment: Pay any owed sales tax through TAP, either electronically or by mail with a check or money order.
Penalties for Late Filing in Utah
Avoid these penalties by filing on time:
- Late Filing Penalty: 10% of the unpaid tax or $20, whichever is higher.
- Late Payment Penalty: 1% of the unpaid tax per month.
- Interest: 1.5% per month on the unpaid tax.
Sales Tax Incentives in Utah
Utah offers various sales tax incentives, especially for businesses in clean energy, manufacturing, and R&D. These can be in the form of exemptions, credits, or refunds.
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