The Internet Trap:  Sales Tax vs. Use tax

Posted by Mary Thomas on Apr 25, 2017 9:15:00 AM

Taxpayers often ask the difference between sales tax and use tax.  I use this analogy.  If you purchase paper from the store, you pay sales tax.  If you purchase the same paper from a third party on the internet and that supplier does not charge sales tax, you pay use tax.  Sales and use tax are complementary taxes.  If an item is subject to tax in your jurisdiction, one or the other is due.  Sales tax is collected by the vendor.  Use tax is remitted directly to the state taxing authority by you (the purchaser).

When a taxpayer purchases a taxable item on the internet the vendor may not charge sales tax. The vendor’s failure to charge sales tax does not alleviate the purchaser’s duty to remit use tax to the appropriate jurisdiction. The purchaser should remit use tax to the appropriate state taxing authority, if the purchase is taxable in the governing jurisdiction.

There are times that it is appropriate that the seller not charge sales tax. The seller may not be registered to collect sales tax in the governing jurisdiction. Whether the seller is required to register in the state (or not) is immaterial for the purchaser. If the seller does not collect the sales tax ona taxable item or service, the purchaser must remit use tax to the taxing authority. Do not add tax to an invoice and remit the funds to the seller. Remit use tax via the sales tax return.

There are no free rides. If you purchase taxable items and the seller does not charge the appropriate sales tax, it is your responsibility to remit use tax to the correct jurisiction.

Topics: Sales Tax

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