Glossary of Terms
A direct tax on the purchase of goods and services, typically calculated as a percentage of the purchase price and collected by the seller at the time of the sale. There are both state and local sales taxes in Utah, and Utah imposes a lower rate on food and residential fuel than it does other goods and services. The sales tax is often referred to as a “consumption tax.” Most sales tax revenue is deposited into the general fund.
A companion tax to the sales tax, the use tax is paid by the purchaser when the seller does not collect a sales tax. The use tax is self-reported on annual income tax returns. Most use tax revenue is deposited into the general fund.
A tax imposed on both earned (salaries, wages, tips, commissions) and unearned (interest, dividends) income. Income taxes may be imposed on both individuals and businesses. The Utah Constitution requires all income tax to be spent on public and higher education. Income tax revenue is deposited into the education fund.
A tax on the value of privately-owned property, including real estate (land and buildings) and tangible personal property (most other property other than real estate). In Utah, only local governments impose a property tax.
A tax on the sale or use of specific products or transactions. Examples include Utah’s motor fuel tax (gas and diesel tax) charged per gallon and cigarette tax charged per cigarette.
A tax imposed on the extraction of natural resources within the state. Utah imposes a severance tax on oil, natural gas, metals and minerals.
A business input is a good or service used in the production of another good or provision of another service. Some examples of business inputs include raw materials, finished goods that become a component part of another good, packaging materials, manufacturing labor, administrative labor and professional services such as legal and financial advice.
Tax pyramiding refers to a situation where business inputs are subject to sales tax, and the price of the final product or service is then raised to account for the higher cost of the inputs. If this final product is subject to sales tax and sold to another business to be used as a business input, the process continues and the taxes compound or pyramid.
Services are one of the two basic products in an economy, the other being goods. While goods are tangible products that can be held, services refer to actions performed by a seller or amenities or benefits provided by a seller, where no tangible object is exchanged. Some transactions involve both goods and services. Likewise, the development of goods and services provided electronically, such as software, streaming media and eBooks, has made it more difficult to draw hard lines between goods and services.
Most services are currently excluded from sales tax in Utah. Examples of services that are subject to sales and use tax are repair and cleaning of goods other than homes or other buildings (e.g. car repair and dry cleaning), admissions to events and recreation facilities (e.g. concert tickets and ski passes), car rentals, hotel stays and others.
Education Fund (EF)
A financial account into which all income tax revenue is deposited. The education fund is the main funding source for public and higher education. The Utah Constitution requires all income tax to be spent on public and higher education.
General Fund (GF)
A financial account into which most sales and use tax revenue, and other taxes and fees, are deposited. The general fund is the main funding source for general state government services other than public and higher education.
A financial account into which gas tax revenue and motor vehicle registration fees are deposited. The Utah Constitution requires this revenue to be spent on road and highway related expenses.
Earmarking is the budget practice that allocates tax or other revenue to a specific program or purpose.
The tax base is the value of all the items or activities subject to a tax.
The tax rate is the proportion of the tax base that must be paid in taxes.
The amount owed by a taxpayer, calculated as tax base multiplied by the tax rate minus tax credits.
A reduction in the amount of tax owed by a taxpayer.
A reduction in the tax base upon which tax liability is calculated.
Gross Domestic Product
The total value of goods produced and services provided in a country, or state, during a period of time.
Utah’s state system of higher education consists of public post-high school educational institutions, including public universities and technical colleges.
Utah’s public education system consists primarily of public schools that provide kindergarten through grade 12 instruction.