Due to the United States Supreme Court decision in South Dakota v. Wayfair, since January 1, 2019, sales tax from online purchases has been collected and remitted for purchases made in Utah. In addition to that, sellers on platforms such as Amazon that are independent of Amazon and just using Amazon as a facilitator, are required as of October 1, 2019 to collect and remit sales tax based on new Utah legislation.
We now have a full three quarters of data that has been collected by the Utah State Tax Commission that helps to estimate how much additional revenue Utah is picking up due to the collection of sales tax on online purchases. The updated ranges are now $9.7 – $14.4 million for the first quarter, $13.4 – $19.9 million for the second quarter and $14.5 – $22.1 million for the third quarter of 2019. The Tax Commission is using ranges of numbers instead of specific numbers since they are estimating revenue from new tax filers coming in since January 1, 2019.
Your Utah Taxpayers Association has examined the last five years of quarterly sales tax data from the Tax Commission to quantify how the various quarters differ. Using historical data, on average, the second quarter revenue comes in 5.44% higher than the first quarter, the third quarter at 10.46% higher, and the fourth quarter at 12.40% above the first quarter. Based on the first three quarters of data and those historical trends, the new revenue from remote sellers is trending stronger than expected. The current annualized figure comes to approximately $67 million.
Policymakers have been operating on a consensus that approximately 40% of online sales fall into the category of “marketplace sellers” that were addressed in more recent legislation. So, since the first three quarters of the year do not include the “missing” marketplace seller revenue that starts on Oct 1, 2019, the $67 million represents 60% of what should be the annual number we might expect. Doing the math gives a number of approximately $111.66 million annually. That is noticeably higher than our previous estimate of $71 million that we wrote about earlier in 2019.
This is new revenue of $111 million and growing that will likely be rolling into the State of Utah’s coffers going forward and your Utah Taxpayers Association will be working hard to remind policymakers about it and make sure they keep their commitment that Wayfair revenues will be offset by tax cuts and not used to grow government.