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Utah enacts, and quickly repeals, major tax bill

Feb 06, 2020

On Dec. 18,  Utah Gov. Gary Herbert signed into law S.B. 2001, a tax reform bill that represented the culmination of months of discussion by a special legislative task force and that was enacted following a one-day special session. 

However, after opponents of the bill gathered enough signatures to place it on the November ballot, on Jan. 29, Herbert repealed S.B. 2001 just a few hours later by signing into law H.B. 185

What S.B. 2001 would have done

Billed as a rebalancing of Utah’s tax code, S.B. 2001 would have reduced Utah’s income tax by roughly $630 million by cutting corporate and individual income tax rates from 4.95% to 4.66% and would have shifted Utah toward a greater reliance on its sales tax. Among other things, S.B. 2001 would have made the following changes to Utah’s sales tax code: 

  • Broadened the sales tax base to include unprepared food (groceries) at the full 4.85% rate, previously taxed at a reduced (1.75%) rate, and to tax gasoline purchases at the pump
  • Imposed sales and use tax on various new services, including certain primarily digital services such as dating services, identity theft protection and streaming media; consumption or prewritten computer software; most non-governmental transportation services including ridesharing; and parking and tow truck services
  • Repealed certain sales and use tax exemptions, including amounts paid to access a database if the primary purpose for access is to view/retrieve information on the database; sales of newspapers; and sales of textbooks to higher education courses
  • Increased the car rental tax from 2.5% to 4%
  • Increase the state’s diesel excise tax on commercial drivers

What’s next for Utah

In his State of the State address on Jan. 30, Herbert acknowledged that while “the voice of the people … is the reason that (S.B. 2001) will not be implemented,” he stated that “tax modernization is still needed in order to have sustainable funding for public education, Medicaid, and other critical, core government services” and committed to continuing that discussion with the people of Utah. 

Author(s)

Dan Kidney
Daniel N. Kidney, CPA, JD
Director
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