Shopping on line can be easy, simple and save you lots of money. It can also take a lot of your time, frustrate you, and result in unwanted purchases. Now the same can be said for regular high street shopping, but with the vast opportunity presented by the Internet it will pay you to spend a few minutes reading this and understanding how to better optimize your Use Tax shopping experience:
1. Compare - without doubt the biggest advantage that the Use Tax offers shoppers today is the ability to compare thousands of Use Tax at a time. This is a great thing, but not necessarily all the time! Too much can be daunting at times so take advantage of the great comparison sites and where possible let them do the hard work for you.
2. Research - if it has been said it will be on the internet. Ignorance is no longer a justifiable reason for buying the wrong thing. Take the time to research in detail everything that you could possible want to know about
3. Testimonials - don't know anybody that has bought a Use Tax? Wrong! If the Use Tax is good the internet will let you know. Use the Internet as a friend and get testimonials before you buy.
4. Questions - Got a question about Use Tax then search the Forums, FAQ's, Blogs etc. Don't be afraid to ask .....
5. Reputation - Never heard of the company selling Use Tax? Don't worry, no reason why you should know every company in the world, but you know someone that does! Use the internet to find out what people are saying about Use Tax and build up a picture of their reputation for sales, returns, customer service, delivery etc.
6. Returns - still worried that even after all of the above your Use Tax wont be what you want? Check out the returns policy. There is so much competition now that someone, somewhere is bound to offer the terms that you are comfortable with.
7. Feedback - happy with your Use Tax then let people know, after all you are depending on others people input in your buying decision, so why not give a little back.
8. Security - check for the yellow padlock on the Use Tax site before you buy, and the s after http:/ /i.e. https:// = a secure site
9. Contact - got a question about Use Tax, or want to leave a comment then check out the sites contact page. Reputable companies have them and respond.
10. Payment - ready to pay for your Use Tax, then use your credit card or PayPal! Be aware of companies that don't accept them, there may be genuine reasons but given the huge amount of choice you have when buying online there is no reason at all not to buy via credit card or PayPal.
A
use tax is a type of
excise tax levied in the
United States. It is assessed upon otherwise "tax free" tangible personal property purchased by a resident of the assessing state for use, storage or consumption of goods in that state (not for resale),
regardless of where the purchase took place. The use tax is typically assessed at the same rate as the
sales tax that would have been owed (if any) had the same goods been purchased in the state of residence. Typical purchases that require payment of use tax include those done while traveling (for things carried or sent home), through mail order, or purchases via telephone or internet.
For example, a resident of
Massachusetts, which has a five percent "sales and use tax" on certain goods and services, purchases non-exempt goods or services in New Hampshire for use, storage or other consumption in Massachusetts. Under New Hampshire law, the New Hampshire vendor collects no sales taxes on the goods but the purchaser/user must still pay five percent of the sales price directly to the Department of Revenue in Massachusetts as a use tax. If the same goods are purchased in a U.S. state that does collect sales tax for such goods at time of purchase, then whatever taxes were paid by the purchaser to that state can be deducted (as a tax credit) from the five percent owed for subsequent use, storage or consumption in Massachusetts. (Clarifying Note: With few hair-splitting exceptions, no state's vendors will charge the native sales tax on goods shipped out of state. New Hampshire vendors, however, do not omit tax because something was shipped to Massachusetts or some other state; rather, they omit sales tax because New Hampshire does not impose a sales tax in the first place.)
The assessing jurisdiction may make the use tax payable annually, but some states require a monthly payment. For example, where a Vermont resident has not paid at least 6 percent sales tax on property brought in for use in the state, Vermont law requires filing a
tax return (Form SU-452, and payment) by the 20th day of the month following non-exempt purchases to avoid a $50 late fee, a 5 percent penalty per month, to a maximum of 25 percent, plus statutory interest on the unpaid tax and penalties.
Typical exemptions include purchases by
Charitable organization non-profit organizations or governmental agencies, purchases for resale in commerce, and purchases via "casual sales" by individuals not in the ordinary course of business. Also note that there are thousands of tax jurisdictions in the U.S. and many have ever-changing lists of specific types of goods and services that are not taxable.
As an illustration of the complexities: A 2006 Massachusetts law requires payment of tax on "pre-written" (not custom) software purchased and downloaded over the Internet for installation and use in Massachusetts, regardless of where it originates. However, the actual use of the same software downloaded by a Massachusetts resident to a server in another state remains a non-taxed "service". In contrast,
Arkansas generally does not tax anything delivered over the Internet (such as downloaded software or music), except
VoIP which is specifically defined as taxable "telecommunications services". Software (pre-written or custom) "delivered thru a tangible medium" (i.e., on disk) in Arkansas is taxable even if ordered online, except "custom software for a particular customer" which is non-taxable "programming services" even if delivered on a disk.
In most cases, this complexity is part of the underlying sales tax laws; but while a brick-and-mortar store only has to deal with the sales tax laws of its own location, remote sellers have to deal with the use tax laws of many jurisdictions--up to every U.S. state and locality that assesses them, if the company has a presence or "nexus" in every state (as large "click-and-mortar" sellers like Wal-Mart and
Best Buy do).
Self-Assessment
Not all use tax derives from sales transactions. There are also internal transactions a company might initiate that will trigger use tax consequences. For example, ABC Furniture Company buys its inventory tax-free with a resale certificate, then charges sales tax to its customers. But if this company removes furniture from inventory for use in the retail store by its sales staff, it has triggered a tax incident: use tax is due on the converted inventory that is being used, not sold. The states differ in the tax basis of such a transaction: some tax , others + overhead, and still others + overhead + markup.
For another example, suppose a carpet manufacturer sends swatches of carpet to its sales people to use as samples. That is a taxable use of carpeting to the manufacturer (or distributor as the case may be).
Large manufacturers puchase many items that are used in both exempt and nonexempt manners. To facilitate determination of the correct tax due, they use a Direct Pay Permit that authorizes them to omit sales tax to their vendors, while requiring them to self-assess their purchases and remit the correct amount of use tax to the proper taxing authority.
It's also possible that equipment purchased under a manufacturing or mining exemption in one state is later relocated across a state line--into a jurisdiction where the exemption no longer applies. In this case, the company must recognize the book value of the capital item when it was relocated as the basis of the use tax due to the nonexempt state. Another form of use tax related to this example is referred to as
reciprocity. Reciprocity is triggered when items taxed at a lower rate are transferred or put to use (subsequent to first use) in a taxing jurisdiction with a higher rate. The use tax due, where StateA is the sending state and StateB is the receiving state, is typically rate - StateA rate + local rateB] x tax basis]. Most states do not offer reciprocity for their local rates, and they may have specific states they will reciprocate with or they may reciprocate on a
quid pro quo basis with the other state.
Tax practitioners in large corporations must always be vigilant of transactions such as the above examples that trigger tax consequences for two reasons: 1) to make sure they are in compliance with state laws, and 2) to take advantage of all possible planning opportunities to minimize or avoid tax. Where the tax consequence is substantive and/or the law is vague, assistance will often be sought from outside professionals such as consultants, CPAs, or attorneys who specialize in sales and use tax and who keep up to date with the changing laws and case law history of the various states.
Enforcement
In some cases, the taxing jurisdiction cannot always reliably determine whether any of their residents purchased items and then brought them into the jurisdiction. This often results in the submission of any use tax payments as being on the honor system of the purchaser. Other states require annual statements, filed under pain of
perjury, that the resident has submitted all necessary use-tax payments. The filing of a false document is often a much more serious crime than evading tax on out-of-state purchases. The state of
Connecticut Attorney General occasionally publicizes the indictment of a blatant use-tax violator and soon receives millions of dollars from other guilty parties hoping for tax amnesty.
A number of states have even entered into agreements in which they will allow vendors to share in the proceeds of sales taxes collected from buyers in other states who would not otherwise fall under the vendor's state tax obligation. A registered vendor is provided with tax guidelines by each state for which it will collect "sales" taxes, and may also be granted limited amnesty for sales taxes it failed to collect in the past in registered states.
See also
References
- California BOE Use Tax FAQ
- Maine use tax FAQ
- Massachusetts use tax statute.
- Arkansas sales & use tax rules
- Streamlined Sales Tax Project
- Streamlined Interstate Sales Tax
- Use Tax Information Site
A
use tax is a type of excise tax levied in the United States. It is assessed upon otherwise "tax free" tangible personal property purchased by a resident of the assessing state for use, storage or consumption of goods in that state (not for resale),
regardless of where the purchase took place. The use tax is typically assessed at the same rate as the sales tax that would have been owed (if any) had the same goods been purchased in the state of residence. Typical purchases that require payment of use tax include those done while traveling (for things carried or sent home), through mail order, or purchases via telephone or internet.
For example, a resident of Massachusetts, which has a five percent "sales and use tax" on certain goods and services, purchases non-exempt goods or services in New Hampshire for use, storage or other consumption in Massachusetts. Under New Hampshire law, the New Hampshire vendor collects no sales taxes on the goods but the purchaser/user must still pay five percent of the sales price directly to the Department of Revenue in Massachusetts as a use tax. If the same goods are purchased in a U.S. state that does collect sales tax for such goods at time of purchase, then whatever taxes were paid by the purchaser to that state can be deducted (as a tax credit) from the five percent owed for subsequent use, storage or consumption in Massachusetts. (Clarifying Note: With few hair-splitting exceptions, no state's vendors will charge the native sales tax on goods shipped out of state. New Hampshire vendors, however, do not omit tax because something was shipped to Massachusetts or some other state; rather, they omit sales tax because New Hampshire does not impose a sales tax in the first place.)
The assessing jurisdiction may make the use tax payable annually, but some states require a monthly payment. For example, where a Vermont resident has not paid at least 6 percent sales tax on property brought in for use in the state, Vermont law requires filing a tax return (Form SU-452, and payment) by the 20th day of the month following non-exempt purchases to avoid a $50 late fee, a 5 percent penalty per month, to a maximum of 25 percent, plus statutory interest on the unpaid tax and penalties.
Typical exemptions include purchases by Charitable organization non-profit organizations or governmental agencies, purchases for resale in commerce, and purchases via "casual sales" by individuals not in the ordinary course of business. Also note that there are thousands of tax jurisdictions in the U.S. and many have ever-changing lists of specific types of goods and services that are not taxable.
As an illustration of the complexities: A 2006 Massachusetts law requires payment of tax on "pre-written" (not custom) software purchased and downloaded over the Internet for installation and use in Massachusetts, regardless of where it originates. However, the actual use of the same software downloaded by a Massachusetts resident to a server in another state remains a non-taxed "service". In contrast,
Arkansas generally does not tax anything delivered over the Internet (such as downloaded software or music), except VoIP which is specifically defined as taxable "telecommunications services". Software (pre-written or custom) "delivered thru a tangible medium" (i.e., on disk) in Arkansas is taxable even if ordered online, except "custom software for a particular customer" which is non-taxable "programming services" even if delivered on a disk.
In most cases, this complexity is part of the underlying
sales tax laws; but while a brick-and-mortar store only has to deal with the sales tax laws of its own location, remote sellers have to deal with the use tax laws of many jurisdictions--up to every U.S. state and locality that assesses them, if the company has a presence or "nexus" in every state (as large "click-and-mortar" sellers like
Wal-Mart and
Best Buy do).
Self-Assessment
Not all use tax derives from sales transactions. There are also internal transactions a company might initiate that will trigger use tax consequences. For example, ABC Furniture Company buys its inventory tax-free with a resale certificate, then charges sales tax to its customers. But if this company removes furniture from inventory for use in the retail store by its sales staff, it has triggered a tax incident: use tax is due on the converted inventory that is being used, not sold. The states differ in the tax basis of such a transaction: some tax , others + overhead, and still others + overhead + markup.
For another example, suppose a carpet manufacturer sends swatches of carpet to its sales people to use as samples. That is a taxable use of carpeting to the manufacturer (or distributor as the case may be).
Large manufacturers puchase many items that are used in both exempt and nonexempt manners. To facilitate determination of the correct tax due, they use a Direct Pay Permit that authorizes them to omit sales tax to their vendors, while requiring them to self-assess their purchases and remit the correct amount of use tax to the proper taxing authority.
It's also possible that equipment purchased under a manufacturing or mining exemption in one state is later relocated across a state line--into a jurisdiction where the exemption no longer applies. In this case, the company must recognize the book value of the capital item when it was relocated as the basis of the use tax due to the nonexempt state. Another form of use tax related to this example is referred to as
reciprocity. Reciprocity is triggered when items taxed at a lower rate are transferred or put to use (subsequent to first use) in a taxing jurisdiction with a higher rate. The use tax due, where StateA is the sending state and StateB is the receiving state, is typically rate - StateA rate + local rateB] x tax basis]. Most states do not offer reciprocity for their local rates, and they may have specific states they will reciprocate with or they may reciprocate on a
quid pro quo basis with the other state.
Tax practitioners in large corporations must always be vigilant of transactions such as the above examples that trigger tax consequences for two reasons: 1) to make sure they are in compliance with state laws, and 2) to take advantage of all possible planning opportunities to minimize or avoid tax. Where the tax consequence is substantive and/or the law is vague, assistance will often be sought from outside professionals such as consultants, CPAs, or attorneys who specialize in sales and use tax and who keep up to date with the changing laws and case law history of the various states.
Enforcement
In some cases, the taxing jurisdiction cannot always reliably determine whether any of their residents purchased items and then brought them into the jurisdiction. This often results in the submission of any use tax payments as being on the honor system of the purchaser. Other states require annual statements, filed under pain of
perjury, that the resident has submitted all necessary use-tax payments. The filing of a false document is often a much more serious crime than evading tax on out-of-state purchases. The state of
Connecticut Attorney General occasionally publicizes the indictment of a blatant use-tax violator and soon receives millions of dollars from other guilty parties hoping for
tax amnesty.
A number of states have even entered into agreements in which they will allow vendors to share in the proceeds of sales taxes collected from buyers in other states who would not otherwise fall under the vendor's state tax obligation. A registered vendor is provided with tax guidelines by each state for which it will collect "sales" taxes, and may also be granted limited amnesty for sales taxes it failed to collect in the past in registered states.
See also
References
- California BOE Use Tax FAQ
- Maine use tax FAQ
- Massachusetts use tax statute.
- Arkansas sales & use tax rules
- Streamlined Sales Tax Project
- Streamlined Interstate Sales Tax
- Use Tax Information Site
Use tax - Wikipedia, the free encyclopedia
A use tax is a type of excise tax levied in the United States. It is assessed upon otherwise "tax free" tangible personal property purchased by a resident of the assessing state ...
HM Revenue & Customs: Student tax checker
Calculates whether an overpayment or underpayment of tax applies taking into account earnings, interest on savings, Gift Aid donations, tax already paid and allowances
Form P7X Tax codes to use from 18 May 2008
Tax codes to use from 18 May 2008 P7X(2008) Page 1 HMRC 03/08 Tax codes to use from 18 May 2008 Employees with a new electronic notification of coding, or form P6(T) dated 4 May ...
PrimaryInformation
The stamp duty land tax calculator provides the amount of liability of stamp duty land tax on lease transactions.
Form 2290 - Heavy Highway Vehicle Use Tax Return
Heavy Highway Vehicle Use Tax Return. Form 2290. Tax Forms ... Tax World The Directory of Major IRS Tax Forms Heavy Highway Vehicle Use Tax Return.
Use tax-free vouchers for childcare | This is Money
Parents working in small and medium businesses are missing out on thousands of pounds because their employers do not realise they can pay for childcare in tax-free vouchers
Use the Tax Buddies Tax Clinic For Tax Advice.
Get expert tax advice from our tax clinic. Home > Tax Clinic > Tax Clinic Main Page : Over £60 million tax recovered for clients since 1996, and still counting.
Start Calculation
Provides a means to calculate your UK benefits and tax credits online.
WHAT IS THE "USE TAX"
WHAT IS THE "USE TAX" Rhode Island followed the lead of several other states in enacting the Sales and Use Tax Act in 1947. Everyone is familiar with sales taxes.
Sales & Use Tax - AccountingWEB
The No1 web resource for accountancy profession features the latest independent news, advice and guidance for the accounting profession. Access tax advice, online business guidance ...
