Retail Sales and Use Tax.  Retail sales taxes are imposed on retail sales of most articles of tangible personal property, digital products, and some services.  A retail sale is a sale to the final consumer or end user of the property, digital product, or service. If retail sales taxes were not collected when the user acquired the property, digital products, or services, then use tax applies to the value of property, digital product, or service when used in this state. The state, all counties, and cities levy retail sales and use taxes. The state sales and use tax rate is 6.5 percent. 
 
Tax Deferral Program for Redevelopment of Underdeveloped Property.  In 2022, the Legislature established a sales and use tax incentive program to encourage the redevelopment of underdeveloped property in targeted urban areas.  The legislative authority of a city with a population of at least 135,000 and not more than 250,000 may authorize a sales and use tax deferral for an investment project within the city if the city finds there are both significant areas of underdeveloped land and a lack of affordable housing, and adopts a resolution that includes information regarding the process for application, approval, appeals and any additional requirements, condition, and obligations that must be followed after approval.  Underdeveloped property is defined as land used as a surface parking lot as of June 9, 2022. 
  
Application.  The city may approve an application if:

• the project is set aside primarily for multifamily housing units and the applicant commits to renting or selling at least 50 percent of the units as affordable rental housing or affordable homeownership housing to very low, low, and moderate-income households;
• in a mixed-use project, only the ground floor of a building may be used for commercial purposes with the remainder dedicated to multifamily housing units;
• at least 50 percent of the investment project set aside for multifamily housing units must be rented at a price at or below fair market rent for the county or sold at a price at or below county median price; and
• the applicant commits to any additional affordability and income eligibility conditions adopted by the local government.  

Sales and Use Tax Deferral Certificate.  A program participant must submit an application to the Department of Revenue (DOR) before initiation of the construction of the investment project.  The application must include a copy of the conditional certificate of program approval issued by the city, estimated construction costs, time schedules for completion and operation, and any other information required by DOR.  DOR must rule on the application within 60 days.  DOR must keep a running total of all estimated sales and use tax deferrals and may not accept applications for the deferral after June 30, 2032. 

Cancelation of an Exemption.  If a conditional recipient maintains the property for qualifying purposes for at least ten years, deferred sales and use taxes need not be repaid.  If a conditional recipient voluntarily opts to discontinue compliance, they must notify the city and DOR within 60 days of the change in use or intended discontinuance.  If the city finds that a portion of an investment project is changed or will be changed to disqualify the recipient from eligibility, they must notify DOR and taxes deferred are immediately due and payable.  DOR must assess interest at the rate provided for delinquent taxes and penalties retroactively to the date the sales and use tax deferral certificate was issued. 

Tax Deferral Program for Redevelopment of Underdeveloped Property.  Tax deferral program for redevelopment of underdeveloped property is updated.  The legislative authority of a city with a population of at least 135,000 and not more than 275,000 may authorize a sales and use tax deferral for an investment project within the city if the city finds there are both significant areas of underdeveloped property and a lack of affordable housing.  Underdeveloped property is defined as any vacant, partially used, or underutilized land identified by a qualifying city as suitable for development of affordable housing.

In addition to other requirements, the resolution adopted by the city to create the program must include any additional affordability and income eligibility conditions.  The governing authority may also designate a residential targeted area or areas by resolution after providing the required notice and holding a public hearing.   The residential targeted area must:

• be within an urban center;
• have a high number of underdeveloped, underutilized, or vacant properties;
• be proximate to the land with insufficient available, desirable, and convenient residential housing, including affordable housing, to meet the needs of the public;
• a significant number of existing improvements proximate to the area do not meet the maximum permitted density for the property that allows for multifamily, mixed-use, commercial and industrial uses;
• the provision of additional housing opportunity in the area will assist in achieving the purpose of the sales and use tax incentive program; and
• the designation of the area is in compliance with the anti-displacement requirements.

Application.  The city may approve an application if the project is set aside primarily for multifamily housing units and the applicant commits to renting or selling:

• at least 50 percent of the units as affordable rental or homeownership housing to very low, low, and/or moderate-income households; or
• at least 20 percent of the units as affordable rental or homeownership housing to very low, low, and/or moderate-income households if the project is located in a residential target area.

Sales and Use Tax Deferral Certificate.  If the city finds that the work was not completed within the required time period due to circumstances beyond the control of the conditional recipient and that the conditional recipient has been acting and could reasonably be expected to act in good faith and with due diligence, the governing authority may extend the deadline for completion of the work for a period not to exceed 24 consecutive months, and must notify DOR of the extension.  

The application the recipient of a conditional certificate of approval must submit to DOR is updated to require that the application include specifics of the investment project conditionally approved and clarify any portions of the project not approved for tax deferral.  DOR must review the application for completeness and provide a tax deferral certificate within 60 days.  No certificate may be issued for an investment project that has already received a tax deferral under this program or business investment projects in rural counties.

Cancelation of an Exemption. Removes the requirement for a city to notify DOR if it finds that a portion of an investment project is changed or will be changed to disqualify the recipient from eligibility.   If the city or DOR find that the investment project is no longer eligible a portion of the deferred taxes are immediately due.  DOR must assess interest at the rate provided for delinquent taxes, but not add penalties, retroactively to the date the sales and use tax deferral certificate was issued.