Ask an Accountant: What is Use Tax?

Dec 5, 2019 | Business, Tax, Uncategorized

I file a Sales & Use Tax every month based on my taxable sales. I never remit Use Tax. What is it?

Generally, Use Tax is due on out-of-state purchases of goods or services that would have been subject to sales tax had they been purchased New Jersey on which either (a) no sales tax was collected or (b) sales tax was collected at less than the New Jersey rate, currently 7%. The difference between the actual sales tax paid and the 7% due had the purchase been made in New Jersey is the use tax owed. However, when taxable goods and services are purchased in another state and delivered to New Jersey for use in New Jersey, no credit is allowed for sales tax paid to the other state. Use tax is due at the rate of 7% of the purchase price, including delivery charges.

Businesses can pay any Use Tax due with the Sales Tax due for the reporting period. Businesses that do not remit Sales Tax and have had an average Use Tax liability of less than $2,000 over the last three years can file an Annual Use Tax return, Form ST-18B, to report all Use Tax due for the previous calendar year. Form ST-18B is due by May 1. If a business sells taxable goods or services or leases taxable property to others, or if the average annual use tax liability for the last three calendar years was more than $2,000, the business must include sales tax eligibility in its NJ Business Registration and must begin to file quarterly/monthly sales and use tax returns.

Individuals can remit Use Tax due on out of state purchases on either on Form ST-18 within 20 days after property is brought into New Jersey or by reporting any Use Tax due for the prior year on Form NJ-1040.

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