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A use tax is a type of excise tax
levied in the United States. It is assessed
upon "tax free" tangible personal property purchased by a resident of the
assessing state for use, storage or consumption of goods in that state (i.e., 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 "tax free" purchases that require payment of
use tax include those done while travelling (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. 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.
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 (i.e., actually tax-free) include purchases by
charitable
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
USA, and many have ever-changing lists of specific types of goods and services that
are not taxable.
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