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Consumer’s Use Tax vs. Seller’s Use Tax: Nearly Every Business Owes Use Tax

Use tax is defined as a tax on the storage, use, or consumption of a taxable item or service on which no sales tax has been paid. It is known as a complementary tax to sales tax and can be applied if a different state sales tax was charged at a lesser rate or if an incorrect rate is charged entirely. However, use tax will most often apply when a business makes a purchase from an out-of-state-seller that is not required to collect sales tax in the purchaser’s state. Use tax exists as a way for states to ensure they do not lose on possible tax revenue due to situations where unregistered sellers do not collect, or businesses make purchases outside of the state for use within their jurisdiction. It is also applied to items that were exempt from tax when purchased, yet later used in a taxable manner.

Source: taxconnections.com

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