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Get ready to start paying taxes on your online purchases, Utah

Posted at 9:02 AM, Jul 12, 2018
and last updated 2018-07-12 20:44:49-04

SALT LAKE CITY -- Governor Gary Herbert may call a special session next week that could include a fast-tracked bill to allow the state to collect online sales tax.

Rep. Steve Eliason, R-Sandy, made the announcement at the beginning of the Utah State Legislature's Revenue & Tax Interim Committee.

The bill is being drafted right now. It would allow Utah to require online retailers to collect sales tax. It's in reflection of a recent U.S. Supreme Court ruling that gives states the power to collect sales taxes from retailers outside their borders.

"Taxpayers should have the certainty of being able to look to the law," said Utah State Tax Commissioner Rebecca Rockwell.

If the bill passes, tax collection would be mandatory beginning Jan. 1, 2019.

Gov. Herbert has complained the state is losing more than $200 million in sales tax from online purchases. But FOX 13 reported in May the Utah State Tax Commission had been quietly inking deals with numerous online retailers to get them to collect taxes. At a meeting Wednesday, it was revealed that companies who struck those deals got an 18% tax break.

Tax commissioners told the committee that about $60 million remains to be collected.

The proposed bill would require online retailers to collect sales tax. People are already supposed to be paying it, but aren't.

"Approximately 1.3 percent of our returns filed every year contain a use tax return," said Utah State Tax Commission Chairman John Valentine. "I think the members of the tax commission were paying it and that’s it."

The proposed new law will carve out an exemption for some of the smaller online retailers. If someone sells less than 200 items a year or makes less than $100,000 then they aren't required to collect sales tax. An issue is online platforms like Etsy, who trade in "micro-businesses."

"Etsy is an example of a selling platform where you use a platform but Etsy is not making the sale. The question is, does Etsy now collect for everyone who uses on their platform? Or do the individual taxpayers use it?" Valentine said.

Lawmakers have yet to address it, he added.

Etsy declined to comment specifically on the Utah legislation, but referred FOX 13 to a statement it made after the U.S. Supreme Court ruling. In it, the company expressed disappointment with the decision by the Court and urged congress to address impacts to micro-businesses.

Some of the money Utah will get back from online sales tax collection is already spoken for. Lawmakers have offered a $55 million manufacturing tax credit. Sen. Howard Stephenson, R-Draper, said it was his preference to also see a general sales tax cut. But House Minority Whip Joel Briscoe, D-Salt Lake City, was skeptical that would happen.

"Did we commit that we would reduce sales tax?" he asked.

"As I was recall there was no commitment at all," Sen. Stephenson replied.

"Just the general concept that we would," Rep. Briscoe said.