Use Tax

Posted in Operations and Supply Chain Terms, Total Reads: 914

Definition: Use Tax

Use Tax is a tax levied by the US government .  It is charged not as sales tax on the purchase of a product but on consumption or storage of a product. It is usually charged on tangible assets which are tax free.

In general cases it is charged where sales tax has not been charged like those in cases of online purchase.  The  percentage of  use tax is same as sales tax. It is also levied on the inventory withdrawn from  the stock on the purchase price. It is also being levied to prevent unnecessary  tax differences between any two states.

Example :

A resident of  Virginia  purchases an equipment in the state of California  then  he is entitled to pay a sales tax at 7 %  to the government of California . But instead he pays the same as use tax to the government  of the state where he is residing .  Baring a  few exceptions does the state government  of one state impose a sales tax on the buyer from a  different state however in cases it is also levied   the purchaser is given a tax credit  on the sales tax paid.  The items on which use tax is charged is office supplies , equipment hardware ,assemblies , photocopiers  and books . The individual is charged use tax on  books , clothes, music CD’s ,clothing etc . Most common form of  exemptions on use tax are on food products , resale of purchased goods, magazines etc.

Hence, this concludes the definition of Use Tax along with its overview.


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