Use tax is a tax on taxable purchases made out‑of‑state or online when sales tax was not collected at the time of purchase.
It ensures taxpayers pay the correct state and local tax on goods used, stored, or consumed in their state—even if the seller didn’t charge sales tax.
📌 Use tax generally applies at the same rate as the state’s sales tax.
🛒 When Use Tax Applies
You may owe use tax if all of the following are true:
- ✅ You purchase goods online, out‑of‑state, or from a remote seller
- ✅ The seller does not charge your state’s sales tax
- ✅ You use, store, or consume the item in your state
🧾 Common Examples
- 💻 Buying a laptop from an out‑of‑state retailer that doesn’t collect sales tax
- 🛋️ Purchasing furniture online with no state tax charged
- ✈️ Bringing back souvenirs or taxable items from another state or country
📄 How to Report and Pay Use Tax
Reporting methods vary by state, but commonly include:
- 🧾 Reporting use tax on the state income tax return
- 📄 Filing a separate use tax form with the state
- 🧮 Calculating tax owed using the state (and local) sales tax rate
📌 Recordkeeping Tip:
Taxpayers should keep receipts or records showing:
- Purchase price
- Date of purchase
- Sales tax paid (if any)
🛠️ Example — Use Tax Calculation
📌 Scenario
- Purchase: Camera
- Purchase price: $1,000
- Sales tax charged: $0
- State use tax rate: 6%
🧮 Calculation
$1,000 × 6% = $60
✅ Use tax owed: $60, reported on the state return (or separate use tax form).
🧠 Key Points to Remember
- ✅ Use tax applies only when sales tax was not charged
- ✅ It does not apply if the correct sales tax was already paid
- ✅ Online purchases are a common trigger for use tax
- ✅ States may assess penalties and interest if use tax is not reported