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TAX PLAN FOR NON-PROFITS NEEDS WORK

The current legislative session has ended, and Utahns need to evaluate what effect our elected representatives have had on the state this year. One significant piece of legislation, HB 338, will affect most retail businesses and all non-profit corporations, charitable and religious organizations in the state.

As passed through the legislative process, this bill requires that retail businesses must remit all sales tax collected on sales monthly rather than quarterly as has been the case in the past.Legislators have been trying to make this change for many years because it will increase state revenues to the tune of some $4 million per year.

Retailers have opposed this move because it removes a healthy cash float time that has allowed them to earn interest and/or make short-term investments, thus providing ample compensation for the fact that they are the state's de facto tax collectors for sales tax.

Under the new system, legislators have agreed to compensate the retail businesses 1.4 percent of what they collect to cover the ongoing costs of sales tax collection. This has all been studied thoroughly and apparently is acceptable to both the state and the retail concerns.

The other part of the bill unfortunately enjoys less common agreement and seemingly has not been studied thoroughly, nor has the impact it will have on another important business and community sector been considered. Nor has the resultant impact on individual citizens and communities been quantified.

This new law will require all tax-exempt organizations to begin paying the tax that the state (and even this bill) defines them as being exempt from and then apply to the state for a refund of that tax they didn't owe in the first place.

The intent of the move is sound and with good motive, and Rep. Marty Stephens, the sponsor, is to be congratulated for his efforts. Currently, retailers who make tax-exempt sales to non-profit, charitable and religious groups must keep records of these sales, keep track of tax I.D. numbers and pay the tax on any sales made tax-exempt based on a mistaken or inaccurate I.D. or lack of proper records. This creates added cost to doing business for retailers.

Although it is important that for-profit business and the state support the work of the valuable non-profits, charities and religious institutions, retailers should certainly not have to bear an expense for being the state's tax collector or be penalized for making sales to exempt organizations who don't provide proper tax status information.

Non-profit corporations are also important businesses in the state employing thousands of people, utilizing thousands of volunteers and representing a significant economic force to the state's communities.

Non-profit businesses usually operate on a shoe-string. The added bookkeeping requirements for recouping lost revenue caused by paying a tax that an organization has been declared exempt from will simply require organizations least able to afford it to spend more administrative time on bookkeeping and less on direct service delivery.

No compensation for the added expense and lost revenue is suggested or contemplated in this legislation as is provided to the retail concerns.

It is important that both private business sectors affected by this bill be considered fairly and equally. Non-profit organizations certainly would like to see the system improved in order to remove expense from businesses and to tighten up the non-profit I.D. requirements.

Other states have a variety of systems that apparently are workable without causing a net loss in non-profit services or damaging retailers.

This system will hurt organizations serving the public good and increase the state's involvement in and bureaucratic control over private business activity.

The implementation of the non-profit tax remittance and refund system has been wisely deferred until July of 1993 to give a little time to study the issue further.

All tax-exempt organizations, retailers and state representatives should take this opportunity to craft an appropriate system to help all sectors involved and not accept a net loss for the citizens and communities throughout the state.