Digital media is regarded by the Utah State Tax Commission as tangible personal property, just like a real book or DVD. As a result, Utah sales tax applies to any digital media, including e-books, movies, and music, that is sold or downloaded. Digital media, however, is regarded as a non-taxable service if it is offered as a subscription service.
A state that mandates a business to collect and remit sales tax is said to have a nexus with the firm. When a company maintains a physical location in Utah, such as a shop, warehouse, or office, it establishes a Utah nexus. Nexus can also be proven if a company has employees or independent contractors operating in Utah or has regular commerce with Utah residents.
In Utah, maintenance contracts are often regarded as non-taxable services. However, the agreement can be liable to sales tax if tangible personal goods, such as modifications or replacement parts, are included.
A cloud-based software distribution paradigm called Software as a Service (SaaS) allows users to access software that is hosted by a third party provider online. Utah is one of the 22 states that now tax software as a service. However, the taxability of SaaS can differ by state, therefore it’s crucial to speak with a tax expert to learn about the tax regulations in each state. What does economic nexus mean in terms of sales tax?
Regardless of physical presence, a state may require a business to collect and pay sales tax based on the number of sales or transactions conducted in the state. This is known as having “economic nexus” for tax purposes. This means that regardless of whether a company has a physical presence in the state, they must collect and remit sales tax if their sales in the state exceed a particular threshold. 2019 saw the implementation of Utah’s economic nexus for sales tax, which mandates that out-of-state vendors collect and remit sales tax if they conduct 200 or more transactions in Utah or make more than $100,000 in sales.
Despite the fact that Utah normally taxes digital media, there are some exceptions for subscription services. It’s crucial to comprehend Utah’s nexus laws as well as how SaaS and maintenance contracts are taxed there. Businesses should also be aware of their economic nexus for sales tax and follow Utah’s sales tax regulations to prevent fines and interest.
In Utah, the 2020 sales tax rate is 4.85%. However, additional local sales taxes can also be applicable depending on where you are in the state.
Equipment used in manufacturing is normally taxable in Utah. To be sure, some firms and pieces of equipment qualify for exemptions and deductions. For more information and advice, it is advised to speak with a tax expert or the Utah State Tax Commission.