Use taxesi.e., taxes imposed by states in place of sales taxesare often overlooked. Be sure your business is not hit with an unpleasant surprise in the form of unexpected enforcement of use tax liability. Here is how use taxes work:
Example: XYZ Co., located in State A, purchases equipment from a web-based company located in State B. XYZ does not pay any sales tax on the transaction. XYZ Co. may be liable for a use tax, payable to State A, depending on the laws of State A. Had sales tax been paid on the purchase, use tax would not be owed.
When making out-of-state purchases, keep receipts showing that sales tax was paid. If no sales tax is paid on an out-of-state purchase, be sure to stay informed as to whether use tax is owed to your state on the purchase. There may be exemptions from use tax liability under certain circumstances.
For further information, contact Louis P. Stanasolovich, CFP at (412) 635-9210 or firstname.lastname@example.org