SALT LAKE CITY — Starting Jan. 1, out-of-state online retailers affected by a recent U.S. Supreme Court ruling will have to collect sales taxes on purchases made by Utahns under a bill that could be considered in a special legislative session.
Members of the Utah Legislature's Revenue and Taxation Interim Committee did not take action Thursday on the bill setting the date for collecting an estimated $80 million in state and local sales taxes from companies selling products online in Utah.
Sen. Howard Stephenson, R-Draper, the committee's co-chairman, said he wants changes made to the bill to ensure the revenues will be put aside to pay for a tax break for manufacturers passed last session.
That tax break carries about a $55 million price tag, but Stephenson said lawmakers would also be able to consider lowering the state's 4.7 percent tax rate with the additional funds.
Stephenson reminded the committee that Utah lawmakers have been strong supporters of treating retailers the same when it comes to having to remit sales taxes.
"We're a fiscally conservative state, yet we believe these taxes should be collected because we don't want to prefer online, out-of-state sellers over bricks-and-mortar sellers," he said.
The bill will likely come before the committee at its next meeting on Wednesday, the Legislature's regular monthly interim meeting day. A special session may also be called on Wednesday by Gov. Gary Herbert to deal with several issues.
The governor has until Monday to issue an agenda, known as a call, for a Wednesday session, but it is not clear that the online sales tax issue would be included.
Another proposed bill, dealing with a $6 million in earned income tax credit for about 25,000 Utahns participating in intergenerational poverty programs, received a less than enthusiastic endorsement from the committee.
The 8-4 vote to recommend the legislation came after several committee members, including Sen. Deidre Henderson, R-Spanish Fork, said the money should be spent instead on a child credit to help offset the impact of recent federal tax changes.
The $1.5 trillion tax bill passed by Congress late last year is expected to mean a bigger state income tax bill for Utah's large families, due to the elimination of personal exemptions valued at $4,050 per taxpayer, spouse and dependent in 2017.
"We failed miserably last session to address that," Henderson said.
During the 2018 Legislature, Utah lawmakers acknowledged an $80 million windfall for state income tax collections as a result of the federal changes and lowered the state income tax rate from 5 percent to 4.95 percent.
Both Stephenson and the committee's other co-chairman, Rep. Steve Eliason, R-Sandy, said spreading $6 million among all of Utah's families wouldn't go very far toward easing the effects.
But Rep. Dan McKay, R-Riverton, pressed the committee to start drafting a bill to help families who'll be paying more in state income taxes as a result of the new federal tax law.
"We've done great things for corporations today," McKay said, referring to other proposals backed by the committee that he said came at the expense of families. "I'm hoping the quiet in this room is a sense of guilt."
While the committee did review proposed legislation focused on banks as well as foreign income, much of their attention was on the June ruling by the Supreme Court on online sales taxes.
The high court's 5-4 opinion overturned decades-old decisions that said companies that didn't have a physical presence in a state didn't have to collect sales taxes from customers there.
Utah is already collecting more than half of the estimated $200 million in online sales taxes from out-of-state companies thanks to voluntary compliance, Utah State Tax Commission Chairman John Valentine told the committee.9 comments on this story
Valentine said the commission has been "aggressively pursuing" voluntary agreements. Companies that have deals with the state include Amazon, which announced last year a distribution center is being built in Utah.
Now that the high court has ruled that companies can be required to collect sales taxes, Valentine said there could be an additional $58.6 million collected in state sales taxes and another $21.5 million in local sales taxes.
Utahns already are obligated to pay any sales taxes not collected by out-of-state retailers, but few submit what they owe along with their annual state income tax filings.