What is Sales and Use Tax?

Sales tax is a type of gross receipts tax imposed by most states on the sale of "tangible personal property" (such as computers, chairs, car parts, furniture, etc.) and certain services. Every state has a different set of rules that controls what types of items and services are taxed. Also, every state has different types of exemptions and exclusions from sales tax that favor some businesses and can be costly to others.

In order to prevent out-of-state sellers from having a competitive advantage over in-state sellers, all states (that have sales tax) impose a "use tax" on in-state purchasers. This use tax requires all purchasers (individuals and businesses) to pay use tax on any item normally subject to sales tax, unless the applicable sales tax has already been paid.

It is important to remember, that a seller is required to pay sales tax (on taxable items) over to the state even if the seller neglected (for any reason) to charge the sales tax. In addition, the corporate officers and owners can be held personally liable sales and use sales tax. Penalties can be imposed on a business if it fails to self-assess and remit any applicable use tax.

Note: Nothing on this website should be interpreted to be legal, tax, or accounting advice. Every business or person should obtain detailed advice as applied to a specific transaction or hypothetical fact pattern.