The City Council recently approved a 0.5 percent increase to the City’s portion of sales tax. This increase will generate about $33 million a year in ongoing funding and is the first part of a funding strategy to address the City’s critical needs.

Specifics on how the additional revenue will be allocated were determined during the annual budget process – through extensive discussion and public input. The budget for this new revenue and project implementation can be tracked through the Funding Our Future Dashboard.

About the City’s Sales Tax Increase

When legislators decided to build the new State prison in northwest Salt Lake City, they provided the City with a rare opportunity to raise its portion of sales tax by 0.5 percent (or a penny for every $2) to help compensate for the impacts. This option was made available in 2015, but the City waited to implement the change until it could be thoroughly researched and plans were developed.

Quick Facts about Sales Tax

  • Sales tax is paid on most purchases made in the City with the exception of groceries (unprepared foods) and large purchases (like cars and boats).
  • In Salt Lake City, about 60 percent of sales tax revenue is paid by non-residents including office workers, visitors and tourists.
  • Because sales taxes are paid by residents and nonresidents alike, the burden is shared more equitably by everyone who uses City services.
  • Sales tax revenue provides flexibility in spending since it can be used for a wide variety of ongoing needs (like public safety and street maintenance) and isn’t restricted to specific categories or projects like a General Obligation Bond or impact fees.

Frequently Asked Questions

Q: Who will pay the increased sales tax?
A: Anyone who spends money in Salt Lake City. This means that, instead of residents carrying the majority of the burden, about 60 percent of this revenue is paid by nonresidents – office workers, visitors, tourists.

Q: What purchases are exempt from the additional sales tax?
A: Groceries and large purchases (cars, boats, etc.)

Grocery items such as fruits, vegetables, pantry basics and more will not increase in cost as a result of a sales tax increase. To help clarify how food is taxed, here is an example: the meal you eat in a restaurant will be taxed, but if you buy those same ingredients and cook at home, you’re not paying increased sales tax. See this chart for a detailed breakdown.

Per State Tax Code, Large items like boats and cars are also exempt.

Q: How does Salt Lake City’s sales tax compare to other cities?
A: Currently, Salt Lake City’s new sales tax rate (effective August 2018) will be 7.35%. Comparatively, the current sales tax rate in Murray and South Salt Lake is 7.10% and includes groceries and large purchases. Park City has a tax rate of 8.45% and Moab’s tax rate is 8.60%. The sales tax rate in Sandy City and Provo is 6.85%.

Q: Will the sales tax increase negatively impact retail businesses?
A: The City is very sensitive to the sales tax increases impact on retail business. However, leaders also recognize that good roads and better transit options for customers, affordable housing for employees and increased public safety all have positive impacts for the future of retail and economic development in Salt Lake City.

In preparation for the process to increase the City’s portion of sales tax, the Salt Lake City Finance Department met with two nearby cities, Murray and South Salt Lake, to discuss their recent sales tax increases and what impact, if any, those increases had on business revenues. Their studies of sales before and after the sales tax increase noted no negative impacts as a result of the increase.

Q: How will the sales tax increase effect lower- and fixed-income residents?
A: Sales taxes are considered a regressive tax, meaning that the relative effect on fixed- and lower-income families is greater than those earning higher incomes. It is important to note that the sales tax is not applicable to groceries or large purchases like cars and the sales tax will help fund transit and affordable housing – two important considerations that benefit those on lower- and fixed-incomes.

Q: How can residents track how revenue from the increase is being spent?
A: Revenue generated through the sales tax increase is being treated as a separate budget item; setting a precedent of use by future administrations. Residents can track how revenue is being spent on the Funding Our Future Dashboard.

Q: When can the City increase or decrease their portion of sales tax?
A: City leaders can only change the amount of sales tax with State legislative approval. In 2015, when legislators decided to relocate the State prison to northwest Salt Lake City, they provided the City with the rare opportunity to raise its portion of sales tax by 0.5 percent (as part of HB454).

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