How to Register for a Sales Tax Permit in Utah

Living the dream is a phrase people use often in the context of being successful and enjoying the fruits of their hard work. Many would like to have the type of financial freedom that allows you to do what you love with who you love, whenever you please. In general, these are entrepreneurs, CEOs of big companies or business owners.

Now, if you live in the state of Utah and are tired of the nine-to-five job you have, and if you’d like to stop putting in hard hours for others but start working for yourself, you might want to take that step forward and start your own business. By no means does this mean that you will be able to put your feet up and get all the benefits overnight. Nothing comes easy and without hard work. But look at it this way: putting in long hard hours for your own business will not feel as hard or boring as doing the same work for someone else. This is because you would be building something of your own, something that, after a period of hard work would start generating that spare time and that financial freedom you desire.

While this article will serve as a guide to setting up your own business and registering for a sales tax permit in the state of Utah, it is not an official document and we urge you to consult with an attorney or a business advisor in order to avoid any potential issues in the process.

Preparing to Register a Business in Utah

Preparation is half the job. This is because you will be able to build your business later on the strong foundations you lay now. These foundations need to include all the data you can gather about the market conditions and the position of your company within the market.

But preparation starts even before that: it starts with you. Even before you take the step to build your own company, there are some questions you have to ask yourself. Do you think you have what it takes to run a company? Do you think you have the right skills for the job? Do you think your business would be able to stand out? Why are you starting your own business?

Often people ask these questions and take a step back and give up on the idea of starting their own business because they either don’t feel ready or think they don’t have the right skillset. But these questions shouldn’t be looked at this way. You should actually see if there are negative answers if there are any doubts and work harder to overcome all obstacles. That is the first sign of a determined entrepreneur. Here everything counts, even the hours you spent working as an employee. Think about it, all the skills you gathered at your workplace can actually be integrated into your new role as a business owner, it is just the matter of adapting to the new situation.

But, the biggest part of the preparation process is research. Due to the scale of this, you may want to consult a business advisor. Their extensive experience and connections will make it easier to compile valuable information, the information that you require specifically for your line of business. Speaking of your line of business, before commissioning a research, you should look into the markets you like. Think of it this way: you will be building a company from scratch, and so wouldn’t it be better to build something you like and watch it grow? Doing what you love almost doesn’t feel like a job.

So, once you determine your target market, you should go through it top to bottom, exploring every aspect of it: the supply-demand relation, the prices, the suppliers, the market size and everything else you can think of. This is because the results will enable you to put your company into various scenarios and determine your potential in that market. You’ll be able to project costs, revenue, income and, essentially, determine whether the business model you are proposing is actually sustainable.

It is not uncommon for the research to come back and show that the market you are targeting is actually saturated and your profit margin would be very slim. Considering the competition that already exists in that market, a newcomer would have a tough time to differentiate from the other market participants in any way. But if you do come across such a market, this is not the reason to give up. Basically, what you need is to go over the results of your research and look for signs of undersupplied segments in the market, small niche markets in which the demand outweighs the supply.

Starting a business in such a market is the way to go for several reasons. First, the demand outweighs the supply, meaning you have a healthy customer base ready to snap up the products you will be offering. Second, you would be able to learn the ins and outs of running a business without too much pressure from competition. With fewer players in that market, you have time to explore, get settled and gather valuable experience. Third, with that experience, you would also build a customer base and a following, especially if you manage to provide quality products and services and build a relationship with your customers. A returning customer would recommend you to everyone and also follow you if you decided to expand into a different market, making the switch a lot easier. These benefits are all tied back to the research you have done beforehand.

But there is actually more to it. We already mentioned your financial predictions and the potential figures your business would generate. These figures are a very important part of your research as they can form the basis of a business plan. This, in turn, is the most important thing financial institutions such as banks and investment companies will look for if you go knocking on their door pitching for them to fund your business. Barely any company would even consider talking to you, let alone investing in your company if you don’t present a strong business plan.

With all that sorted, your research completed and the results showing you the direction in which you should move at the beginning of your entrepreneurial career, it is time to take the next step and look at the legalities of registering a business. Further below we will discuss the steps you have to take in order to register your business with the relevant authorities in the state of Utah, where you have to go, what forms to fill, what sort of company you should opt for and where to you file your applications.

Registering a New Business in Utah

The state of Utah does not have a Secretary of State, meaning the responsibilities of such office are divided across a number of government institutions. To register in Utah, you have to contact the Utah Department of Commerce’s Division of Corporations and Commercial Code. The first thing advised by the Division of Corporations and Commercial Code is to consult an attorney to assist you in the process, and to “ensure appropriate consideration of all the legal implications of your choice of entity and filing.”

But despite the process being handled by the Department of Commerce, the process and the registration steps are fairly similar to the registration process in other states. Your first step is to pick the business entity type to register with the state of Utah. Determining the entity type depends on various factors, one being the amount of liability protection you would like to get, as well as the scale of operation you plan on running. Each business type has its advantages and potential flaws and each brings its own registration and tax obligations.

The Department of Commerce lists five most common entity types registered in Utah. The first on the list are sole proprietorships, which are the most common and the most simple type of business entity you can choose. Sole proprietorships mean that one person is the owner and is responsible for all the decisions regarding the business, is in full control and is also liable for all the business debts. While the liability burden can be an issue, you should consider that setting up a sole proprietorship is simple and cheap without any formalities needed. It is stressed that before starting a business you should acquire all the state and local permits you might need. In addition, if you plan on conducting business under a name other than yours, you should register an assumed name with the Utah Division of Corporations and Commercial Code.

Next in line are the partnerships, which are formed when two or more people enter an agreement to conduct business together. Like the sole proprietorship, no formalities are required to establish a general partnership, and partners have unlimited liability for the obligations of the business. To register a partnership under an assumed name, you should file the name with the Utah Division of Corporations and Commercial Code according to the state regulations.

If you are looking to form a partnership but would like a certain level of liability protection, you might look into forming a Limited Partnership. The difference from the general partnership is that this business entity type can have several general partners and a number of limited partners. According to the Department of Commerce website, “general partners bear 100 percent of the risk of liability for the debts of the business, the limited partners risk only their capital contributions.” However, limited partners are not involved in the day-to-day management of the company. To register a business with the Department of Commerce, fill out the Certificate of Limited Partnership.

If you are looking for the most liability protection you can get, you could look into establishing a corporation, which is basically a business entity in its own right. To register a corporation, you have to file articles of incorporation with the Utah Division of Corporations and Commercial Code. The greatest advantage is the liability protection a corporation provides to its owner/shareholders that are not liable for the debts of the business.

A Limited Liability Company (LLC) combines the liability protection of corporations with the ease of set-up the partnerships. To create a limited liability company you should file a Certificate of Organization with the Department of Commerce.

To streamline the process the Utah government has set up an online option naming it the OneStop Business Registration, allowing you to go through the process from the comfort of your home.

The next step we will address has to be dealt with carefully: taxes. This is why, once again, you may want to look for professional advice.

Utah Sales Tax Permit

When talking about a sales tax permit in any state you have to think about the sales tax nexus, or whether your business ticks all the boxes that require it to collect and pay sales tax. In the state of Utah, a business has a sales tax nexus if it uses or has an office in the state, a warehouse, maintains a stock of goods within the state, solicits orders, delivers property in the state, or engages in leasing services.

Once you determine that you have a nexus in the state of Utah, you can register through Utah’s OneStop Business Registration platform, or you can file the Utah State Business and Tax Registration form TC-59 with the Utah State Tax Commission. You will be required to provide personal ID information as well as business information. This will include the Federal Employer Identification number, which can be obtained online through the Internal Revenue Service (IRS). You will also have to provide the business entity type information, the date you plan to start selling products in Utah as well as an estimate of your annual sales that would be subject to Utah sales tax.

It has to be added that the registration process is free of charge and can take up to four weeks to receive your permit, although the Tax Commission does not provide a timeline. Another advantage is that you are not required to renew your sales tax permit once you receive it.

Sales Tax Exemptions in Utah

While it is important to stay on top of your taxes and follow along regulatory lines, you should also know that there are also legal ways to avoid paying sales tax. The state of Utah has simplified its process and, basically, if you are purchasing products with the sole intention to resell them, you can avoid paying sales tax. This can be done by providing a Utah TC-721 Exemption certificate or by simply proving you are registered to collect sales tax.

Whether you are purchasing merchandise or selling, if a resale certificate is involved there are certain steps you have to follow. The rules are that the certificate has to be filled out properly and signed before submission. You do have the right to decline a resale certificate based on the fact that you are accepting it “in good faith” in the first place. So if you suspect that something is not fitting, you can decline. If you do accept a resale certificate, make sure you keep it on file for at least three years to use as proof of your tax-free sale in case of an audit.

Contact Details

Utah Department of Commerce

Division of Corporation and Commercial Code

160 E. 300 S. 2nd Floor
Salt Lake City, UT 84111
Phone: 801-530-4849
Toll-Free: 1-877-526-3994
Fax: 801-530-6438

E-mail: [email protected]

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