Use tax, what's the deal?

Question

Okay I asked a question earlier about having to pay use tax on International purchases on the internet, and one person did answer saying that, it's a personal asset tax where you get to decide how much of the sales tax you want to pay, etc, and lastly said that very, very, very few people actually file those because it's impossible for them to track all the purchases. And use tax to my understanding is a tax put on purchases made out of state or country. But last year I had a few out-of-state purchases, and one really tiny out of country purchase, and I didn't get anything from the IRS saying I had to pay an extra tax or anything.

So is this an optional tax?

Okay I get it, the IRS can't do anything but the state can. I happen to live in VA so I think there's a use tax. The (most) purchases I made didn't give me a tax receipt, I contacted the person and she said she was below the threshold in her country to pay taxes, so that's why I didn't get a tax receipt.

Answer 1

If it was an Internet purchase I wouldn't claim it. States are still fighting to collect sales and use tax on Internet purchases made out of state. One of the main problems is that the accounting for the sellers would be out of hand, each Internet retailer would have to have state sales tax rates and would be required to collect the tax and remit it to the appropriate state. The state does not tell you when you didn't pay, they only tell you during an audit. In reality (to the letter of the law) if you purchase something at a yard sale, you are required to pay sales tax when you file, but who would claim it?

Answer 2

No, use tax is not optional. Every state assesses sales & use tax. The sales tax is paid when you purchase an item. The use tax is to catch those individuals that did not pay sales tax when they purchased an item (i.e. bought out of state or country, etc.). Say you live in California and you purchased an item from an online store in New York. Technically, when you receive the item and put it into USE in California, you should be paying California a use tax, which is the same rate as the sales tax. It is true that it is virtually impossible to track purchases made that should be subject to use tax. However, it is not impossible. The state tax authorities could supoena your bank or credit card records and when they see withdrawals/checks/charges to recipients, they could technically figure it out. Of course, it is probably something the state wouldn't due since there is no barometer of how much use tax they could collect. They might be more inclined to audit a large company rather than an individual for use tax violations.

The IRS wouldn't assess use tax, as this is assessed at the state/county/municipal level. In fact, some states (California and New York are two) in the past few years have included lines on their income tax returns where you can report your out of state purchases and pay your use tax. You have the option of either reporting the true purchases and pay the use tax calculated on these purchases, or using the table provided by the state and paying a small percentage based on your income. Leaving this line blank is not a good idea. I have heard that if the line is left blank, it is a red flag that the tax authorities will look at in determining whether a return is selected for audit or not. It is better to enter a "0" in the line than leave it blank. Of course, entering a "0" means that you are declaring, under the penalty of perjury, that you do not owe use tax.

Answer 3

I'm an accountant. I don't know about out of country purchases. But, within the U.S, the use taxes are sort of part of the sales tax laws, for those states which have a sales tax.
Every company which does business in a state is suppose to register with that state to collect and remit sales tax. Most companies do not do business in every state, but, occasionally they may sell something to a resident in a state they are not registered in. In that instance, the purchaser is required by law to pay a use tax to that state. However, the law is rarely enforced for individuals because the amount of tax is usually small. However, states will go after businesses which don't pay use taxes. Also, you would never get anything from the IRS because there is no federal sales tax, yet. Currently only states have sales taxes.

Answer 4

Use tax is not a federal tax, so the IRS has nothing to do with it. If the state you live in has a sales tax, you are probably supposed to pay tax on items you purchased out of state, IF you did not pay taxes to another state. In my state, our state income tax return has a place to enter use tax on purchases from out of state.

I do not know whether or not a state has the ability to track your purchases. Most people seem to think they don't, and so they don't pay use tax on their income tax forms.

Answer 5

The IRS has nothing to do with this tax. It is a state tax. If your state has "sales" tax, it also has "use" tax.

Go to your state department of revenue's website or post what state you are in and we can find a link. In Minnesota, we have a form called the UT-1 for Use Tax. Businesses, which are the most heavily audited for this, pay it along with the sales tax they collect.

So, no it is not optional. It is just difficult to enforce and audit individuals for.
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Here is the link for the Virginia Consumer Use Tax form:

http://www.tax.virginia.gov/web_pdfs/indForms/currentyear/cu7.pdf

Answer 6

Use taxes are NOT IRS related.

They are state related. And most states that charge them audit your credit card statements and that is how they find out about your purchases.

Michigan has been invading it's citizens privacy like this for years and years and years.

The state tax man cometh and eventually, he will catch up with you.

I just claim and submit a few of my purchases, that way I look honest. They can audit me and find the rest for all I care.

Taxes & US government stinks.