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use tax

Use tax is a tax imposed on the use, storage, or consumption of tangible personal property in a state when sales tax was not collected at the time of purchase. Liability arises when a buyer would have owed sales tax had the transaction occurred within the taxing state, but the seller did not collect it, often because the seller is located out of state. Common situations include online or out-of-state purchases brought back into the state. Use tax is generally equivalent to the applicable sales tax, though rates may vary by locality. For instance, the Colorado Department of Revenue collects use tax at the statewide base rate but not at higher local rates. Use tax is primarily paid by businesses and by individuals when registering property such as vehicles or vessels, since personal purchases are typically not itemized on income tax returns.

[Last reviewed in July of 2025 by the Wex Definitions Team
] 

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