What Are Use Taxes
Use tax is a complementary tax. A State’s Use Tax is designed to be no broader in scope than its Sales Tax. For the most part, exemptions are the same for both of the taxes.
Use Taxes are self-assessed. Perhaps the biggest difference between a State’s Sales Tax and its Use Tax is the manner in which the taxes are assessed and paid. For the most part, Sales Taxes must be paid or collected by the seller. In contrast, the responsibility for reporting and paying Use Taxes generally fall on the purchaser. This is commonly the case because the triggering event for the tax (the taxable “use” of the property in the State) occurs after the sale is completed.
Purchaser is entitled to credit for Sales Tax paid. Every State (other than Nevada) allows purchasers a Use Tax Credit for Sales Taxes paid to another State with respect to the same property.
Use Tax may be owed on property purchased within a State. In some situations, Use Tax liability may arise with respect to property that was not purchased in another State. Perhaps the two most common of these situations arise when you withdraw an item from your inventory that you produced for sale.
Example #1:
You operate a computer store where you sell computers that you personally construct and peripherals such as printers that you purchase from others under the resale exemption.
If you were to start using one of the printers that you purchased tax free for business or personal purposes, you would be liable for Use Tax with respect to that printer.
Example #2:
If you were to start using one of the computers you built in your business or for personal purposes, this may also subject you to Use Tax.
