US Use Tax

What is Use Tax

Use Tax is a self-assessed and declared levy on US consumers and businesses when they buy goods or services from out-of-state providers.  It is the mirror of US Sales Taxes, which are due on purchases by a consumer in their home state but charged and levied by the retailer.

Use Tax is a way of ensuring that there are no tax benefits to US consumers from shopping outside of their home state, and is aimed at online, catalogue and telesales in particular.

Use Tax rates are as per the Sales Tax Rates of the shopper’s home state.  Certain basics, including foodstuffs and medicines, are exempt from Use Tax.

Paying US Use Tax

For the most part, the consumer is required to calculate, declare and pay the applicable tax of their resident state.  Generally this is done on a quarterly basis – although some states now require a declaration on a monthly basis.  Businesses have to complete a special form to declare any Use Tax with their home state.

There are usually late payment fines, charged as a % per month of the overdue tax.  The penalty rates vary between 5% and 10%.

Increasingly, in order to combat non-compliance and poor revenues, states have started to include boxes in personal annual state tax returns to declare any purchases and due tax.  Neighbouring states are also co-operating to share information on the movement of goods across their borders to identify undeclared transactions.

Latest American news

US Wyoming marketplace sales tax collections

February 18, 2019

Wyoming is to require marketplaces to collect out-of-state Sellers’ sales tax from 1 July 2019. This is based on the 2019 South Dakota v Wayfair Supreme Court ruling, imposing ‘economic nexus’ sales tax liabilities on sellers not located in a state for the first time.

US New York implements Wayfair Sales Tax rule

January 16, 2019

The New York state tax department published on 15 January 2019 guidance on the immediate requirements for out-of-state sellers to register and charge Sales Tax.

US Texas Sales Tax economic nexus

January 3, 2019

Texas has become the latest US state to implement Sales Tax obligations on out-of-state (non-resident) merchants. This follows the 2018 South Dakota vs Wayfair Supreme Court ruling obliging remote sellers without a presence in a state to charge and remit local Sales Tax.