A short YouTube video by Donna Genie (published March 2, 2023) explaining "use tax": when it applies to out-of-state purchases, how it differs from vendor-collected sales tax, and the obligation for purchasers (including individuals) to report and pay use tax on their state returns if the vendor didn't collect sales tax. The host warns that failing to report use tax can trigger audits (one example cited owed over $6,000), points out resellers' exemption, and directs viewers to state returns and personal income tax forms for reporting. The video ends with social/website CTAs and a contact email.
Questions this video answers
March 2, 2023
Over $6,000
me@donnaampgroundictowning.com
Chapters
I was talking with a prospective customer yesterday and she mentioned she was a little disappointed that she had a sales tax audit and found out that she owed over $6,000. Well, let's talk a little bit about why she said her accountant really never told her about use tax. Use tax is a form of sales tax in a voluntary situation, and I say voluntary. It's not really voluntary. You're mandated to pay it, but you have to volunteer the information on your tax return. So use tax happens when a vendor that you make a purchase from is not required to collect sal sales tax in your state. Maybe they operate in another state and they have no presence in your state so they're not required to deal with your state's laws. It's a hefty burden if a vendor has to comply with 50 states worth of sales tax laws and most don't. But E Commerce gets complicated in that way. However, if you see on an invoice from a purchase that you made from an out of state vendor that you did not pay sales tax, first consider is this something you're going to resell? If you're going to resell it, you don't need to pay sales tax when you purchase it, you'll just collect it from the final end user of the product. But if this is something that you are the end user on, you need to file and pay use tax. So if you're filing a monthly or quarterly sales tax return, you'll find a line on most every state's returns where you pay use tax. It's basically paying the sales tax, but instead of paying it to the vendor, you're going to pay it directly to your home state. If you don't see it there, there may be a separate return for your state and individuals actually are required to pay this as well. There's usually a line on their filing income tax return for personal that asks about use tax. Most people don't know what it is when they see it, so there are a lot of zeros there. But watch out. So if you purchase something out of state you are required to still pay sales tax on that unless you have a valid reason for an exemption like reselling an item. So watch out. Make sure you're filing your use tax on time and don't have a crisis by having a sales tax audit.
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