Use Tax
Category: tax
A complement to sales tax, owed by the buyer when sales tax was not collected at purchase.
Use tax is the complement to US sales tax, owed by the buyer when sales tax was not collected by the seller at the time of purchase. It applies at the same rate as the corresponding sales tax and is self-assessed by the buyer. For e-commerce, use tax obligations arise when a seller has no nexus in the buyer's state and therefore does not collect sales tax.
Examples
- • A California business buying equipment from an out-of-state vendor with no California nexus owes California use tax at 7.25% plus district tax.
- • An individual buying goods from an overseas seller with no US presence may owe use tax on the purchase when filing their state income tax return.
- • Amazon FBA sellers who create nexus through inventory storage must collect sales tax rather than leaving buyers to self-assess use tax.