Property Rights

Reforming the Annual Tax on Business Supplies

For the past couple years, Libertas Institute has been working on reforming the annual tax on business supplies, otherwise known as the tangible personal property tax.

When a Utah business buys new equipment, machinery, or office furniture it doesn’t just pay tax on those items at the point of sale. Utah law also requires businesses to pay an additional tax every year on this already-purchased property.

This means counting up every desk, chair, computer, machine, etc. And if the government doesn’t think you did it quite right, you’ll probably be audited.

Often times the amount of tax revenue generated from taxing one business is less than the cost it took to collect the tax in the first place.

While the effort to get rid of this tax stalled this year due to a broader discussion on tax reform, Representative Karianne Lisonbee was able to get passed several important incremental reforms via House Bill 231:

  • Exempts out any piece of property that is not critical to the operation of the business (think of something like a microwave) if its acquisition cost was less than $150.
  • Raises the threshold for complete exemption from $10,000 in aggregate property value to $15,000, therefore allowing more small businesses to be tax exempt.
  • Allows businesses to cease reporting to the county clerk if after 5 consecutive years the business can show that it has been exempt from the tax (this is retroactive to years previous to 2018).

These changes provide some tax relief to all kinds of businesses that are burdened by these onerous audits and reports, including home-based businesses, mom-and-pop shops, start-ups in their infancy, short-term rentals, etc.

Instead of counting up tables and chairs, businesses should be allowed to focus on delivering the best product or service for their customers. HB 231 helps remove a few of these hurdles for small businesses and help them thrive. Utah needs to continue down this path in future years—and we’ll be making sure that happens.

To learn more about this issue, you can find our policy brief here.