What Is Use Tax?

Use tax is a tax you owe when you buy something without paying sales tax — most commonly when purchasing from an out-of-state retailer that didn't collect your state's sales tax. It's the same rate as your state's sales tax. Most states require residents to self-report and pay use tax on their state income tax return — though few actually do. Since major online retailers now collect sales tax in most states, use tax is less common. It still applies to purchases from small out-of-state vendors and private party sales of expensive items.