Use tax

Tax Glossary Definition

Use tax

Use tax is a tax imposed on the use, consumption, or storage of goods within a particular jurisdiction, even if those goods were purchased outside that jurisdiction. It is designed to complement sales tax and prevent tax avoidance when items are bought elsewhere to escape local taxes. Typically, the rate of use tax is equal to the local sales tax.

Example: An individual in California buys a laptop for $2,000 online from a seller in another state that does not charge California sales tax. California imposes a 7.5% use tax on the laptop, so the buyer must pay $150 to the state to comply with tax laws.

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