This is an archived article that was published on sltrib.com in 2016, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
Beginning Jan. 1, purchases on Amazon.com are going to cost Utah customers more.
That's because the state Tax Commission has negotiated a deal with the online retail giant to begin collecting state and local sales tax on all purchases. How much more you'll pay depends on where you live because of the complex layering of sales-tax rates.
That means a Salt Lake City resident will pay a 6.85 percent tax. But if you live in Fillmore, you'll pay 5.95 percent. A resident of Alta will pay the most 8.35 percent, followed by Moab's rate, 8.1 percent. Those are the same rates for in-person purchases at the local hardware store or car dealer.
Gov. Gary Herbert's office hailed the agreement as a significant step in collecting taxes already owed online, which his office estimates at $200 million.
The deal will mean millions of dollars in revenue to the state and local governments but no one is ready to put a number on the windfall.
"Everyone's eager to know what it might mean in terms of specific dollars. We have not been apprised of the specific dollars," said Paul Edwards, Herbert's spokesman. "It's more than $50, and it's not the full $200 million of owed but unpaid sales-and-use tax that has been estimated and probably doesn't come close to that."
That said, added Edwards, "It's a big retailer. Everyone is anxious to see how this helps with state finances. But right now we would just be speculating."
None of the anticipated revenue was included in the governor's proposed $16 billion budget released Wednesday.
Tax Commission spokesman Charlie Roberts said his agency won't be able to put a number on the agreement for several months, until it has seen a couple of quarters of collections.
Amazon is the only online retailer that has struck an agreement to voluntarily collect and remit taxes for Utah. But the state did make a deal earlier in the year with Airbnb, an online vacation and short-term-housing rental company. That business has been paying sales and transient-room taxes on Utah rental properties since October, Roberts said.
So what is Amazon getting out of the deal?
The same 1.31 percent handling fee that in-state retailers get, said Roberts.
"They're treated just like everybody else."
Jonathan Johnson, Overstock.com's chairman of the board, who is a vocal opponent of state attempts to require mandatory tax collection on remote sales, suggests that there is more to the deal than is being acknowledged.
"As for Amazon's 'voluntary' tax collection, I would question if there's another shoe to drop on this story. Historically, Amazon has cut a tax deal only when they plan to create a physical presence in a state and they have extracted tax incentives from a state. So I'm suspicious. It would surprise me if the governor's office isn't giving Amazon a large tax subsidy."
Johnson challenged Herbert for the Republican nomination for governor this year, forcing the incumbent into a primary, which the challenger lost.
The Governor's Office of Economic Development told The Salt Lake Tribune it had no information to share after the agency was asked about whether it was working on a deal to bring Amazon to the state.
Amazon did not respond to a request for comment about its agreement to begin collecting taxes from Utah customers.
State Sen. Curt Bramble, a CPA who is an expert on tax law, said he is pleased, but not surprised at Amazon's decision to begin voluntary payment and attributed it to litigation in several states that has yielded promising initial rulings.
"Now they're starting to see court cases moving in favor of the states, so you're seeing companies coming forward and making voluntary agreements," said Bramble, R-Provo.
The court cases are attempting to challenge the nearly 25-year-old U.S. Supreme Court ruling that said states cannot require a business to collect sales taxes unless it has a physical presence and operations within the state.
Additionally, efforts are underway in Congress and in the state Legislature to push online-sales-tax laws including forthcoming proposals from Bramble that would require companies to collect such taxes from Utah customers if they did over a certain amount of business in the state.
"It's really a game of chicken now with online retailers. They'd really like to maintain the status quo because they have a whether it's 6 percent or 7 percent or 10 percent they have an advantage on the cost of their products if they don't have to collect sales tax at the time of purchase, and they're fighting passionately to keep that, and I understand that."
At the same time, he said, some online retailers are starting to realize that a uniform federal law would be preferable to a patchwork quilt of state laws that would be a compliance nightmare.
Elected Utah leaders stress that attempting to collect online sales taxes is not a tax hike because current law requires reporting and payment of those levies on state income-tax returns.
In reality, a tiny number of residents do so.
As a general rule, Utahns really do want to obey the law," said Edwards, the governor's spokesman. "There are a lot of people just unaware that that's a requirement."
Edwards acknowledges, though, that there is a learning curve as more online retailers begin collecting taxes. "Educating the public on this is a must. It needs to be done in a straightforward way, but making compliance simpler is going to be better for all involved."
It's also a matter of fairness for retailers who have stores in Utah and must collect and remit taxes.
Bramble, who has been pushing collection of online sales tax for years, says people understand the issue when it's explained to them, and they don't view it as a tax hike. He uses this analogy:
"If a citizen doesn't report $100,000 on their income-tax return and then they get assessed in an audit, is that a tax increase?"
A sample of sales tax rates
Alta • 8.35 percent
Moab • 8.1 percent
Escalante • 8.05 percent
Park City • 7.95 percent
Brian Head • 7.95 percent
Kanab • 7.95 percent
Panguitch •7.95 percent
Pickleville • 7.8 percent
Garden City • 7.8 percent
Ogden • 7.1 percent
Beaver • 6.95 percent
All Salt Lake County cities, except Alta • 6.85 percent
Provo • 6.85 percent
Orem • 6.85 percent
Layton • 6.85 percent
Bountiful • 6.85 percent
Logan • 6.6 percent
Tooele • 6.6 percent
Price • 6.6 percent
Vernal • 6.55 percent
Brigham City • 6.5 percent
St. George • 6.35 percent
Nephi • 6.25 percent
Heber City • 6.25 percent
Fillmore • 5.95 percent
Richfield • 5.95 percent
Source: Utah Tax Commission