Skip to main content

Legal

Tax & Accounting

Trade & Supply

Risk & Fraud

News & Media

Books

Developers

Entities

Differences between sales tax, seller's use tax, and consumer's use tax

Tax types

Sales tax, seller's use tax, and consumer's use tax are different tax types imposed by law.
In some states, tax types can be distinguished by the fact they must be reported on separate returns. The rate of taxation can vary for each tax type, and not all states levy all tax types.
Sales tax is often used as a catch-all term for transaction taxes, but these tax types are distinct. The differences relate to time, place, and role.

Sales tax (ST)

Sales tax is assessed at the time of sale. Sales that begin and end within a taxing jurisdiction almost always result in sales tax liability. If the state has mandated it, all sales that terminate or originate in the state, regardless of other factors, may be subject to sales tax.

Seller's use tax (SU)

Seller's use tax is imposed by some states.
Examples, when a seller isn't located in the jurisdiction where goods are being put to use, Alabama requires the seller to collect seller's use tax. The seller collects the tax at the time of sale. In Florida, the law specifies that a seller shipping goods into the state must collect use tax on the transaction.
Because the person collecting the tax is the seller, it can be thought of as seller-collected use tax.

Consumer's use tax (CU)

Consumer's use tax is a self-assessed tax that a consumer pays to a taxing jurisdiction.
When goods get purchased in place X with no or low tax and brought to place Y for use, the consumer's required by law to remit the tax they would've paid had the sale taken place in Y.
A real-world example would be a consumer driving to Portland, Oregon from Vancouver, Washington to buy a TV. No tax gets paid at the time of sale because Oregon doesn't have a sales tax. The consumer's obligated to remit consumer's use tax to the state of Washington because first use of the TV occurs in Vancouver.

This article applies to:

  • Product: ONESOURCE Indirect Tax, ONESOURCE Sales and Use Tax Compliance