What is the difference between use tax and sales tax?
Retail sales tax is applied when an item is sold in Indiana. This occurs when a business, warehouse, distribution center exists or when employees solicit or take orders for products in Indiana. This includes wholesale items. Out-of-state Use Tax is a voluntary registration that is available to out-of-state businesses not meeting the conditions listed above. While an Indiana retail merchant is issued a Registered Retail Merchant certificate, an out-of-state merchant is issued a permit authorizing them to collect sales on taxable items shipped into Indiana. View more on sales tax or use tax or you can call the Department at (317) 233-4015.
Sales tax is charged on taxable sales within a state. Such as when you go to a store and buy a computer in Massachusetts. Use tax is when you purchase something in an other state and not pay sales tax or pay sales tax at a rate lower than the state where it will be used. For example: I live in Massachusetts. they have a 5% sales tax. If I purchased a computer for $1000 in a store in MA, I would pay $50 in sales tax. If I purchased the same computer in New Hampshire (they have no sales tax), I would be subject to a $50 use tax. If a Connecticut resident purchased the same computer in CT( 6% sales tax rate I think), they would pay $60 in sales tax. If they purchased it in MA, they would still be liable for 1% use tax The difference between the state sales tax where it will be used and the sales tax charged on the purchase. Many states including MA, RI and CT have a line for this tax on their state income tax returns. In business, Use tax would be required if your vendor lived out of your
Both taxes are complimentary and are meant to assure the state gross retail tax of 7 percent is paid upon a purchase. A purchaser pays a “sales” tax when purchasing from an Indiana seller. A purchaser pays a “use” tax when purchasing from an out-of-state seller, but the purchase is delivered into Indiana. If a purchaser does not pay a sales tax or a use tax to the seller, the purchaser still has a use tax responsibility. The purchaser will pay the use tax owed on his or her annual Indiana income tax return (which is due April 15). Retail merchants with an Indiana location(s) and/or who perform certain activities, such as solicitation of orders within Indiana, are required to register their business (BT-1) and pay a one-time $25 registration fee, per location. An out-of-state seller without an Indiana location and who does not perform activities within Indiana that would legally require the seller to register (nexus), may voluntarily register to collect the Indiana use tax without incur
