Tax Tip #199

What is use tax? Basically, it is sales tax that a consumer avoided paying on an item subject to sales tax. Use tax is owed by residents and businesses that buy products out of state, online, or via mail paying no sales tax, and then bring the product to their home state, assuming the state has a sales tax. 

NJ has a sales tax. When a consumer purchases a taxable item or service in NJ, the seller collects NJ sales tax on the purchase. If the consumer purchases the same item from a company located in another state and does not pay sales tax in that state, then the consumer may have to pay use tax in their home state.

Example: A NJ resident travels to DE to purchase $10,000 of furniture for their NJ home. DE is one of five states that does not impose a sales tax (AK, MT, NH and OR are the others). Since there was no sales tax on this purchase, the NJ resident should include use tax on their personal tax return for $662 ($10,000 x 6.625 NJ sales tax rate).

Have use tax questions? Contact a Goldstein & Loggia team member for assistance.