Exempting Sales Tax for Business Inputs for Oil and Gas and Electrical Generation

In the Public Utilities, Energy, and Technology Interim Committee, taxpayers scored a major victory as a bill sponsored by Sen. Ron Winterton passed committee and is headed to the 2020 General Session. 

The bill, which is modeled after SB 201 in the 2019 Session, seeks to eliminate the sales tax penalty on business inputs for oil and gas extraction businesses, as well as electrical generation and pipeline transportation. The sales tax exemption would be phased-in over a three-year period. 

Following successes in prior years eliminating sales tax for business inputs for mining, manufacturing, and many other industries, it’s time for these remaining important industries to be treated equally. Oil, gas, and electrical generation are the few industries in Utah still paying sales taxes on their business inputs. 

While the benefit of the exemption would be felt across the state, the Uintah Basin would experience tremendous growth. 

The Uintah Basin currently produces 80,000 barrels a day. The fiscal note anticipated a doubling of that amount. However, with a railroad built into the area for additional shipping, the Basin could produce 400,000 barrels a day following the implementation of the exemption. 

According to the Legislative Fiscal Analyst Office, jobs created in FY 2024 could be as high as 3,900 depending on private investment as companies relocate to the Basin and other areas of the state. Additionally, $527 million in additional GDP in the state. 

We continue to strongly advocate for the bill heading into 2020, and anticipate its passage. 

Cell Phone Fee Examined as Utah Ranks 5th Highest in the Nation for Cell Phone Taxes

Cell phone taxes make up about 21.7 percent of the average customer’s bill, according to the national Tax Foundation. Utah ranks far higher than the nationwide average, at 25.6%. This puts Utah 5th highest in the nation. 

Illinois has the highest wireless taxes in the country at 31.2 percent, followed by Washington at 28.8 percent, Nebraska at 28.1 percent, New York at 27.7 percent, and Utah at 25.6 percent.

Wireless customers are expected to pay more than $17 billion in taxes, fees, and government surcharges to all levels of government in 2019, which is $1 billion more than 2018. 

The Tax Foundation says that a significant portion of the increase in cell phone tax burden is due to a 36% increase in the Federal Universal Service Fund (FUSF). The FUSF is under FCC jurisdiction and uses the money to subsidize telecommunications services in rural or high-cost areas. The FCC has also recently decided to use funds to fund broadband deployment.

Utah also has a Universal Service Fund (UUSF), which costs users $0.60 cents per line per month. Similar to the FUSF, the UUSF also uses the revenues to provide telecommunications services, including the expansion of broadband to high-cost areas. 

Earlier this year, the Public Service Commission, which oversees the UUSF and implements the rate, increased the amount to the $0.60 from $0.36 per line per month following the Division of Public Utilities report the UUSF’s annual costs will average $21,648,861 from 2019 through 2021, arguing that the UUSF is running a deficit. 

However, there are some questions about how the UUSF is being used, and whether the uncapped amount is appropriate, considering more and more people are purchasing cell phones and using them as the primary device for communication. 

This is what the Public Utilities, Energy, and Technology Interim Committee is trying to uncouple during its November interim meeting. While no formal action was taken on how to better regulate or what to do with the UUSF, it appears action will be taken in the 2020 Session. Stay tuned.