Which States Have a Use Tax and Other Tax-Related Questions Answered

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Which states have a use tax?
The primary home rule states that allow local authorities to enact and administer their own general sales and use taxes are Alabama, Alaska, Arizona, Colorado and Louisiana. In most cases in these states, the locality not only separately administers the local tax, but can have different taxability rules than the state.
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If you own a business or frequently buy things online, you may have heard the term “use tax.” What precisely is use tax, though? In layman’s terms, it is a tax assessed on goods that are bought outside of the state but used there. The goal of this tax is to create parity between goods bought within the state and those bought outside of it. But not every state levies a use tax. Which states, then, levy a use tax?

By 2021, there will be usage taxes in 45 states plus the District of Columbia. Alaska, Delaware, Montana, New Hampshire, and Oregon are among the states that do not impose a usage tax. It’s crucial to remember that these states can still have other local taxes or sales taxes in effect.

States have a variety of taxes for a variety of reasons. One explanation is that each state has distinct priorities and fiscal needs. For instance, a state with a higher population could require more tax money due to greater infrastructure needs. States may also have various tax structures to entice people and businesses to live there.

The buyer is in charge of paying any sales tax that may apply. Sales tax must be collected from the buyer and sent to the state by the vendor. Use tax, on the other hand, is a tax that must be reported and paid by the buyer. This is due to the possibility that the seller is unaware of the item’s intended use by the buyer.

What are the distinctions between use tax and sales tax then? Despite the fact that both taxes are based on the purchase of goods, sales tax is applied when the item is bought locally whereas use tax is applied when the item is bought elsewhere but is used in the state that levies the tax. To put it another way, use tax is determined by the location of the use, whereas sales tax is determined by the location of the sale.

And what is 8.25 sales tax, exactly? In a state with a 6.25% state sales tax and a 2% local sales tax, the total amount of tax imposed on a purchase is 8.25%. The total sales tax rate varies from 0% to over 10% by state.

In conclusion, use tax is a tax assessed on goods bought outside of a state but utilized inside that state. While usage taxes are absent in Alaska, Delaware, Montana, New Hampshire, and Oregon, they are present in 45 states and the District of Columbia. While the reasons for state tax differences vary, they often have to do with the objectives and demands of their respective budgets. While the buyer is responsible for paying use tax, the buyer is also responsible for paying sales tax. The location of the sale versus the location of the usage determines the major distinction between sales tax and use tax.