Utahns support the idea of a tax on Internet sales but only if it replaces the sales tax on food or reduces the overall sales tax rate, according to a study conducted by Brigham Young University graduate students. A full report of the students' findings will be presented to the Governor's Tax Review Commission April 14.
Although only 23 percent of Utahns supported collecting the use tax on Internet sales, 65 percent said they liked the idea if it would result in lowering Utah's sales tax rate and 74 percent said they liked the idea if it would eliminate the current sales tax on food. All figures have a margin of error of +/- 5 percent. The sales tax on food currently produces approximately $160 million in state revenue. It is not clear if taxing goods on the Internet would produce sufficient revenue to offset the loss of revenue from food sales.
The study showed that 37 percent of Utahns have purchased items online within the past year, while54 percent said they plan to purchase online sometime in the future. Last year, the average Utahn purchased between 2.3 and 14.9 items via the Internet, valued between $342 and $2,009. As illustrated by this dramatic range, the uncertainty in predicting Internet sales could make forecasting state tax revenues from the Internet very difficult.
The students' research shows that purchases on the Internet are correlated with higher income. Without an Internet tax, a greater proportion of sales tax revenue in the future will come from individuals with lower household income.
The study was conducted by four BYU students completing their first year of the Marriott School's master of public administration program. The students, Allison Griffiths, Derik Leavitt, Becky Nesbit and Arie Van De Graaff, profiled the use of e-commerce in Utah, focusing specifically on Gov. Leavitt's proposal to replace the sales tax on food with an Internet sales tax. The results are based on a random telephone survey of409 people along the Wasatch Front and throughout Utah.
"More Utahns were online than we expected," Nesbit said. "About 60 percent have home Internet access, while close to 80 percent have some sort of Internet access — a much greater number than found in any recent studies."
For more information about the study contact the Marriott School at (801) 378-1512. How much is an idea worth? The Marriott School's Center for Entrepreneurship thinks its worth $5,000 in cash — the award for this year's Business Plan Competition winner. All Brigham Young University students are invited to submit business plan ideas before 5 p.m. on Monday, 12 March in 610 TNRB. How much is an idea worth? The Marriott School's Center for Entrepreneurship thinks its worth $5,000 in cash — the award for this year's Business Plan Competition winner. All Brigham Young University students are invited to submit business plan ideas before 5 p.m. on Monday, 12 March in 610 TNRB.
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Writer: Peter Carr (801) 378-1512