While sales tax is a tax we pay the most often as we go about our daily lives, it is often the least understood tax. Rarely will a receipt have all the information about the various parts of the sales tax that is being paid, and even more rarely do people take the time to notice. Just as Shrek described “ogres being like onions” – with many layers, taxpayers might be surprised at the many layers piled onto the sales tax.

Sales tax is a consumption tax, and an important criteria of imposing the tax is that it only be imposed on final consumption of a product or service. Sales tax is more economically efficient than many competing forms of taxation, especially the income tax, because it only falls on present consumption, not saving or investment. The sales tax scales well with the ability to pay, because it grows with consumption which makes it more discretionary than many other forms of taxation. Also, consumption taxes form a more stable tax base, which keeps tax rates lower and helps avoid the tendency to raise rates when tax bases are more volatile (for example: income taxes).

Sales tax should also not be applied to business inputs (the various inputs that go into making products and services). That only creates destructive tax pyramiding that gets loaded onto final costs that consumers pay. Utah has done a great job of pulling back these taxes over the last several decades and that effort is one reason why Utah has been ranked as the #1 economy in the nation for so long. 

As the map shows, Utah has a “middle of the pack” sales tax rate (state and local) when compared to other states, ranking #21 out of 50.

There is a long list of various local sales taxes that are piled on to any transaction in Utah. Depending on what city the purchase is made, the total sales tax can vary from as low as the 6% range up to the 8% range in some areas. For example, if you buy a burger in Salt Lake City, here are the various levels of sales tax you would pay:

  • State Sales Tax  – 4.85%*
  • Local Sales Tax – 1.00%
  • County Sales Tax – 0.25%
  • Mass Transit Tax – 0.30%
  • Additional Mass Transit Tax – 0.25%
  • County Option Transportation Tax – 0.25%
  • Transportation Infrastructure Tax – 0.25%
  • Botanical, Cultural, Zoo Tax – 0.10%
  • Correctional Facility (Prison) Tax – 0.50% 

Total Sales Tax – 7.75%

*The state rate was 4.75% until voters increased it to 4.85% when they passed Medicaid expansion.

If all of those layers aren’t irritating enough, also remember that if you buy that burger at a restaurant, you pay an additional 1.0% “restaurant tax”. Go figure. 

There is a reduced state sales tax on groceries (unprepared food). So, if instead of buying a burger you are buying groceries, your total sales tax looks like this:

  • State Sales Tax  – 1.75%
  • Local Sales Tax – 1.00%
  • County Sales Tax – 0.25%

Total Sales Tax – 3.0%

Once the state sales tax on food is removed by the constitutional amendment in 2024, the total sales tax on food will be reduced to only the local portions of 1.25%.

However, anything in your cart that is not unprepared food or food ingredients (for example: laundry detergent, paper towels, etc.) would still be taxed at the full total rate above at 7.75% in the case of Salt Lake City.

If you are curious as to what the total sales tax rate is in your city, you can find the current chart HERE.

In a typical legislative session, there are usually proposals to add various sales tax layers to the already existing onion. For example, in the 2023 session there was a bill that would extend the ability for local governments to enact another additional sales tax. Despite opposition to the bill by your Utah Taxpayers Association, the bill was passed on the last day of the session.
Also, in a typical legislative session, there are usually multiple attempts to exempt various transactions or carve outs from sales tax that have nothing to do with removing sales tax from business inputs. The Utah Taxpayers Association opposes these efforts for one very good reason – the tax base should not be used as a Christmas tree to hand out gifts to what is politically popular. Otherwise, as you slide down that slippery slope, eventually there will be no tax base left. For example, just in the 2023 legislative session, bills of this type would have removed over $120 million per year from the tax base by exempting various types of transactions. With that kind of pace, the tax base would quickly erode and force the sales tax higher on every other transaction in Utah.