Sales tax vs use tax.
In plain English
Sales tax and use tax are two sides of the same coin. Sales tax is added by the seller at checkout and sent to the state. Use tax is what you owe directly to your state when you buy a taxable item and no sales tax was collected, commonly on out-of-state or online purchases, or when a business buys supplies tax-free for resale but then uses them itself. The rate is usually the same as the sales tax would have been. Businesses are audited on use tax more than individuals, but the obligation applies to both.
01Why it matters
Use tax is the part people forget: buying tax-free does not always mean tax-free, and businesses in particular can owe it later, so understanding it prevents a surprise assessment.
02The math, step by step
A business buys 5,000 dollars of equipment from an out-of-state seller that charges no sales tax. If its state has a 6 percent rate, the business still owes about 300 dollars in use tax directly to the state.
03What this is NOT
Use tax is NOT an extra tax on top of sales tax. It applies only when sales tax was not collected, so you pay one or the other on a taxable item, not both.
04Receipts
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