10.1 - Consumer and Sellers Use Tax

Sales tax is collected from the buyer at the point of sale and paid by the retailer to the state government that has authority over the area in the transaction is located.

Sellers use tax is the same as sales tax, the distinction here is that sellers use tax is imposed on vendors located outside of the state, but are registered to collect tax in the state. This may also be referred to as retails use or vendors use tax.

Consumer use tax (sometimes called compensating use tax) applies to your purchase, even if sales tax does not. You’ll need to pay and report the use tax when you file state income tax returns.

In addition, a use tax needs to be paid on inventory purchased sans sales tax if that inventory is later used or bartered by the company that bought it. For example, ACME computer sales purchased a lot of keyboards and did not pay sales tax on the purchase. ACME will, however, collect sales tax when the keyboards are sold to customers. If ACME takes a keyboard intended for retail sale off its shelves and either uses it during the course of daily operations or uses the keyboard to barter with the company next door, ACME will need to self-assess a use tax.