Use tax is paid by the purchaser of an item when no sales tax is collected at the time of the purchase. Sales tax and use tax work together to create the same tax result, whether a vendor collects sales tax or not. In some cases, use tax may still be due even when sales tax was collected at the time of the purchase.
For example, if the tax paid to another state is 3% and sales tax in Vermont in 6%, then the purchaser is responsible for paying 3% use tax on the
difference. However, if the other state’s tax is higher, Vermont will not refund the difference.
Sales tax is destination-based, meaning the tax is applied based on the location where the buyer takes possession of the item or where it’s delivered.
Use tax is paid in the following situations when purchases are made of tangible personal property subject to sales tax:
- You make a purchase from a vendor and the amount of sales tax, if any, is less than Vermont’s sales tax.
- You use property you normally manufacture for sale; Example: When you use something from your own inventory.
- You use property in the operation of your business or for personal use that you originally purchased for resale with an exemption certificate; Example: As a retailer you use an item that you originally purchased at wholesale and did not pay sales tax on.
The following white paper outlines general guidelines for the application of use tax in the state of Vermont: http://www.dh-cpa.com/client_media/files/pdf/2014_UseTax.pdf
Davis and Hodgdon Associates CPAs has been assiting nonprofits, individuals and businesses with tax and accounting services in the Burlington Vermont Metro area for more than 20 years. If you have any questions or concerns please feel free to call 802.878.1963 or email [email protected].