Legal Definitions - use tax

Use tax is a type of tax that people and businesses have to pay when they buy something from another state that did not have sales tax applied. Most purchases have sales taxes included, but sometimes people buy things from out of state and don't pay sales tax. In those cases, they have to pay use tax instead.

For example, if you buy something online from a retailer in another state and they don't charge you sales tax, you will have to pay use tax on that purchase. Use tax rates are the same as sales tax rates and usually have the same exceptions, like not applying to groceries.

Most states have use tax laws, but they are not always enforced. Businesses have to report their covered purchases on their tax returns, but individuals may not always pay the tax. However, individuals may be audited for not paying taxes on larger purchases outside the state, like vehicles.

Overall, use tax is a way for states to make sure they are collecting taxes on purchases made by their residents, even if those purchases are made outside of the state.