Use Tax for Your Business

Internet retailers don’t always have to collect sales tax, but purchasers are always supposed to pay the sales tax. If your company makes an online purchase from a retailer which doesn’t collect sales tax, you are required to pay it as use tax to your state. While some states, like Michigan, base use tax on annual income and automatically charge it to taxpayers, others use voluntary systems where taxpayers are supposed to pay on items purchased. Use tax is levied on purchases that will be used, stored, or otherwise consumed in a state regardless of where the purchase took place. Say your company buys inventory tax-free with a resale certificate. Normally, the only sales tax transaction that occurs is when you collect sales tax from the customer when the inventory walks out the door and won’t be resold by another company.

However, if you use part of that inventory for your own staff in a capacity where it won’t be able to be sold at its full value later, use tax comes into the “transaction” in some states. For instance, if you send out salesmen with samples of products to use in their pitch to customers, you’ll need to pay use tax if your company has nexus in a state where it’s required. If your salesman is a traveling one who creates a nexus with a state other than where your company has a physical brick-and-mortar presence, you’ll need to pay use tax for the consumption of the sample in the state. It can get complicated quickly, especially if the sample will be used in more than one state where the states have different regulations on use tax. Sales tax DataLINK software discovers and alerts you to variances in your reporting, whether it’s a misspelling of a jurisdiction or a mismatch among numbers. Since our products are web-based, they are also always up to date. Use tax may be complex, but our tools make it easier to get it right.

Latest Articles

Sales Taxes and Sin Taxes

Sales Taxes and Sin Taxes

Sin tax A sin tax is a type of sales tax intended to discourage people from buying a particular item. An extra tax on the purchase of cigarettes, soda, or alcohol may be intended to keep consumers from buying as much if these sinful items -- oral least...

read more
The GAO on Remote Sales Tax Requirements

The GAO on Remote Sales Tax Requirements

The GAO speaks up on remote seller sales taxes The Government Accountability Office is responsible for providing important facts to Congress so they can make the best legislative decisions. They have just released a report on the question of sales tax...

read more