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What revenue streams can Utah cities use? Sales tax, resort/transient-room, energy and telco taxes explained
Summary
ULCT presenters ran through municipal revenue options: sales tax (local 1% produced about $1 billion to cities in FY2025), resort-community and transient-room taxes for tourist towns, municipal energy and telecommunications taxes, and the limits created where counties have preempted arts-and-zoo levies.
At a Utah League of Cities and Towns training, Carrie Nakamura walked municipal officials through the patchwork of revenue options available to cities and towns and how availability varies by jurisdiction.
"Sales tax in Utah is a tax on most goods and selected services," Nakamura said, noting the local option 1% generated roughly $1 billion for Utah cities and towns in fiscal year 2025. She said total local sales-tax rates in Utah currently range from about 6.35% to 9.85% and that sales taxes often make up 40–50% of municipal revenue.
The presenters used audience interaction to explain which taxes municipalities can impose: income tax and payroll tax are not available to local governments in Utah; sales tax, transient-room tax, municipal energy tax, telecommunications tax and certain local-option transit or highway rates are available to municipalities in different combinations.
Important specifics covered:
- Transient-room tax: Up to 1% on lodging and similar accommodations; Carrie said 137 of Utah's 255 cities and towns collected it in 2025 and that short-term rentals (Airbnb-style listings) can be subject to the tax.
- Resort-community tax: Jurisdictions with transient-room capacity greater than or equal to 66% of permanent population may impose a resort-community tax (up to 1.1%), which in small resort towns can provide 20–30% of general-fund revenue.
- Municipal energy tax (formerly a franchise tax): Exclusive to cities and towns (counties cannot impose it), up to 6% of electric and gas bills; roughly 108 municipalities were collecting it in 2025 and remittance goes to the imposing municipality.
- Telecommunications tax: When imposed it is 3.5% of the telecommunications portion of a bill and typically applies to cell-phone service; about 168 municipalities collected it in 2025.
Nakamura cautioned that some taxes are preempted at the county level: arts-and-zoo taxes may be levied by municipalities only if the county does not already assess that tax. She also flagged distribution rules for local-option sales tax (50% point-of-sale, 50% population) and noted that a homelessness mitigation fund and a small food-bank allocation reduce the population share before distribution.
Roger added that resort-community qualifications can change as local demographics and facilities change, so a city that qualifies today may fall out of eligibility if lodging inventory or permanent population shifts.
The training included revenue examples from small communities (Dutch John, Tropic, Boulder, Orderville) to show how dependent some resort towns are on transient and resort taxes. Presenters directed attendees to follow-up materials and the League's forthcoming guidance for detailed local calculations.
