Use Tax
Tax on goods purchased without sales tax, typically from out-of-state sellers.
Use tax is a complement to sales tax, imposed on goods purchased from out-of-state or online sellers who did not collect sales tax. The rate is typically the same as the state's sales tax rate. Businesses are responsible for self-reporting and remitting use tax on untaxed purchases used in their state.
Example
A business buys $5,000 of office furniture from an out-of-state vendor that didn't charge sales tax—the business owes use tax of $325 (at 6.5%) to its home state.
Why It Matters for Your Business
Many businesses overlook use tax, but states actively audit for it, and owing back use tax on years of untaxed purchases can be a nasty surprise.
Related Terms
More Taxes Terms
Adjusted Gross Income
Gross income minus specific deductions like retirement contributions.
Tax Audit
An examination of tax returns by the IRS to verify accuracy.
Capital Gains
Profit from selling an asset for more than its purchase price.
Capital Loss
Loss from selling an asset for less than its purchase price.
Tax Deduction
An expense that reduces taxable income.
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