Senate advances broad sales and use tax overhaul, creating safe-harbor for remote sellers

Substitute Senate Bill 172, a comprehensive sales and use tax package, passed the Utah Senate to the third-reading calendar on Feb. 22 after extended floor debate.

Sponsor Senator Hilliard said the measure is designed to simplify collection by out-of-state sellers and protect Utah’s sales-tax base. He described a voluntary single-rate option for remote vendors and a phased enforcement mechanism if federal or judicial rules change: “The task force's charge is to look at this whole process,” he said, urging the body to give the policy further study.

The bill would let out-of-state sellers voluntarily collect and remit a single statewide rate (described on the floor as roughly 5.75 percent) and receive limited protection from retroactive differential assessments if they acted in good faith. Hilliard told colleagues that a key change would treat the local 1¢ collection differently: that penny would be redistributed based on population rather than a point-of-sale formula for voluntary filers.

Senator Stevenson supported the safe-harbor approach while noting the need for careful drafting; speaking to the good-faith language he said an out‑of‑state vendor that “agrees to pay, and to collect and pay sales taxes to Utah, … [is] immune from having to pay the differential” for the period it voluntarily remits the tax.

Opponents voiced concerns about interstate-commerce implications and enforcement. Senator Howell asked how the state’s moratorium and federal rules would interact with the measure; Senator Milstein and others pressed for clarity on current revenue collected voluntarily (floor estimates cited roughly $300,000 declared on income-tax returns and a separate estimate of $10,000,000 annually on voluntary collection by the tax commission). Senators also debated whether the bill signals a push to tax Internet sales absent congressional action.

Supporters said a simplified option could expand voluntary compliance and protect general-fund revenues that support education and other programs. The sponsor said any new growth in remote-sales revenue would be placed in a restricted reserve for possible legislative decisions—including proposals floated on the floor such as removing the sales tax on food.

The Senate called the question and advanced the bill to third reading by roll call.

The next steps: the bill will be refined in committee and on third reading; the sponsor indicated he expected technical amendments on language and implementation after continued work with the tax commission and stakeholders.