Half a billion dollars. That’s the amount Utah estimates it forgoes every year in sales tax due to the state’s abundance of exemptions.
From vending machines to car washes to heavy machinery for refineries — Utah has about 170 exemptions on the books. Some have even been there since the 1930s.
Tax reform is a top priority for lawmakers and the governor as the state looks to modernize its tax code and boost its coffers.
Lawmakers on the Revenue and Taxation Interim Committee are taking a closer look at sales tax exemptions in particular as they prepare to write legislation next session.
In one exchange during their most recent meeting, a skeptical Rep. Douglas Sager, R-Tooele, asked legislative policy analyst Leif Elder why Utah still spares airline food from sales tax.
“I guess that would just be food here in Utah sold to airlines,” said Elder.
“On flights, I know they don’t feed you anymore,” replied Rep. Sager. “So I’m just curious.”
When another lawmaker asked how frequently exemptions are reviewed, Elder said the state hadn’t done any in nearly a decade.
“These exemptions were at one time examined by the Tax Review Commission on a five to seven year cycle,” said Elder. “That requirement I believe was removed in 2006 or 2007, so that no longer takes place.”
A big obstacle, according to Elder, is that many businesses are not required to collect or report data on their exempted sales.
That means the state can’t accurately determine the fiscal impact of many of these tax breaks, and by extension, their purpose or goal.
In a report, the Legislative Fiscal Analyst recommends re-instituting a three-to-five year review cycle for exemptions.