Use tax complements sales tax. It applies when sales tax is not charged on a purchase. The consumer or business pays use tax, typically at the same rate as sales tax.
Use tax prevents avoiding sales tax by buying from sellers in other states, making prices equal whether buyers purchase in-state or out-of-state.
Sales tax applies on sales within a jurisdiction. Use tax applies on goods used within a jurisdiction but purchased elsewhere without sales tax.
Consumers pay use tax directly to the state when the seller doesn’t collect sales or use tax. States want reporting and payment of all tax legally due. Under-reporting sales and use tax leads to audits. Businesses should fully comply to avoid penalties.
How is US Sales Tax Calculated?
The taxpayer base and tax collection differs between the two.
How do I know if I owe California Use Tax?
The consumer or business pays use tax, typically at the same rate as sales tax.
States want reporting and payment of all tax legally due. Businesses should fully comply to avoid penalties.