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How Utah Security Dealers Will Be Affected By New Utah Food Tax Bill

Jan 14, 2020 8:00:00 AM

In Utah, the new food tax bill has caused quite the stir. The new tax bill will raise the taxes on food and services from 1.75% to 4.85%. The bill could go into effect on January 1st, but won’t be enacted into state law until mid February. That being said, customers won’t see increases in sales taxes until April, because it has to go through the tax commission first.

What Does This Have To Do With Security Dealers?

Food isn’t the only thing that will see an increased tax rate when the Utah bill is enacted. According to KSL, the following services will also see an additional tax hike along with food:

  • Installation charges on tangible personal property or a product transferred electronically
  • Rideshare services like Lyft & Uber, and taxis
  • Pet boarding and grooming
  • Alarm system monitoring

This means that customers will have to potentially pay up to an extra 3% on alarm monitoring services. That might not seem like a big deal, but it could lead to the one bad word that alarm monitoring companies hate just about more than anything: attrition.

What is Attrition?

Attrition is the decrease in the number of accounts that your company holds. In simpler terms: it means you are losing customers. Food is an essential item for survival, so the fact that consumers will now have to pay more for food will lead them to shave other non-essential items from their monthly budget. One of the first things to go is often services.

Let’s put this in action. Jane pays $500 a month in groceries before taxes or $6,000 a year for food. At the current tax rate, she pays $105 in sales tax a year on groceries alone. When the new law comes into action, Jane will pay $291 in sales tax a year on groceries. While 3% initially doesn’t seem like a giant tax hike, overtime it really adds up to a significant amount. So, to compensate, people are going to stop paying for services to help with the burden of food. One service that could potentially see higher attrition rates is alarm monitoring.

How Much Does Alarm Monitoring Cost?

Alarm monitoring costs an average of roughly $30 dollars a month for home security services. That cost can go all the way to $100 a month for premium services, which adds up to $1,200 annually.

Let’s take that same tax formula for monitoring service costs. Let’s say Jane also pays for premium monitoring services and pays $1,200 annually. At the new tax rate, she will pay an additional 58 dollars a month. Add that to the sales tax and that’s almost $350 dollars in sales tax alone! This will make consumers wonder if security alarm monitoring is worth the investment.

How Can Alarm Monitoring Dealers Prevent Attrition?

There are a handful of ways that alarm monitoring companies in Utah can prepare for this potential bump in attrition, and hopefully combat it.

  • Annual contracts vs monthly contracts - Getting your customers to sign longer contracts can help attrition rate.
  • Implementing customer feedback - If you show that you listen to the customer, they are more likely to stay with your service.
  • Sell upmarket - when you do business with bigger companies, your business can typically charge more for services.

Those are only a couple of ways your company can improve recurring monthly revenue. And if you are looking for a monitoring company that always keeps you in mind, visit Avantguard to find out more.

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