Sales Tax or Use Tax? Whats the Difference

Sales Tax is a tax on the sale, transfer, or exchange of a taxable item or service. Sales tax generally applies on the sale to the end user. It is generally added to the sales price and charged to the purchaser, but remitted by the merchant. Sales tax varies by location with different states having varying rates.

Who remits sales tax? The responsibility of remitting sales tax usually falls on the merchant who makes the sale. It’s the merchant’s responsibility to collect sales tax from customers at the time of the sale. The seller must keep accurate records of taxes collected and remit those taxes. Failure to remit sales tax can result in penalties and legal consequences for the merchant.

Use tax is a tax that is imposed on the use, storage, or consumption of goods and services. Use tax applies to purchases made outside the taxing jurisdiction but used within the state and that were purchased without paying sales tax.

Use tax ensures that people who purchase goods and services from out-of-state merchants (online retailers) pay the same amount of tax as if they purchased the goods or services in the state.

If items purchased are used in a taxable manner they are subject to use tax. It is imposed by the state where the goods or services are used and the tax rate is typically the same as the sales tax rate. The end user pays use tax.

– Both sales tax and use tax revenue is used to fund various programs and services such as education, transportation, and healthcare.Call Now For A Free Consultation – 720.878.2280

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