Understanding More About Sales and Use Taxes

Unless you reside in one of the five states without sales taxes, you have surely been a buyer who paid it. Now, before we present to you a scholarly explanation of what these government charges on purchases are, let me first give you the simplest description of each one, how they’re computed, and who’s responsible for paying them. For those of us who’d like to know which states have no sales taxes, stick around.

What are Sales Tax and Use Tax? A sales tax is applied at the time of purchase, and the seller collects and sends it to the government. On the other hand, a use tax is computed when an item is bought from a different state with a lower sales tax for use across the border, where the sales tax is higher and the difference is paid by the buyer. And that’s the most fundamental definition I have. For those of us who want more, read on.

Sales Tax

The amount that a retailer is required to charge customers who buy products for personal use but not for resale is known as Sales Tax. Typically, Sales Tax is calculated as a predetermined percentage of the item’s worth. There are added taxes that go with Sales Tax for selling luxury items, hotels, and restaurants. The merchant must also collect the said tax from consumers.

Use Tax

Use Tax is a different levy on things that people or corporations buy. When merchandise is bought for personal consumption but no sales tax is paid, a Use Tax comes into the picture. This might happen when a retailer buys items that are exempt from Sales Tax for resale but converts them to personal use.

It’s also applied when a product is bought in one state for use in another. The buyer is required to pay the difference between the lower Sales Tax in the first state and the higher Sales Tax in the second state where the goods will be used. Additionally, Use Tax is complementary to Sales Tax and is self-assessed by the buyer.

States with No Sales Taxes

There are four states without a general sales tax. They are Oregon, Delaware, New Hampshire, Montana, and Oregon. Alaska joins them as the fifth because of its negligible sales tax of 1.76%. Needless to say, if we are to buy a product from the first four, we will have to pay a use tax, which is the sales tax of our home state.

Since we’re on the subject of extremes on the sales tax ladder, we can also mention which states are in the top spots. Louisiana, Tennessee, Alabama, and Washington hold the title. The sales and use tax in Kearny, NJ, is information that you can get from your local accountant.

Understanding Numbers

“I’m poor at math” is an excuse that won’t hold water when you’re dealing with finances and taxes. You’ll need an understanding of numbers in business and in your personal life. Remember that a tax is a fine for doing great, and a fine is a tax for doing poorly. Either way, it’s money out of our pockets, and it’s not good if you don’t make an effort to keep a close eye on it.

Make sure that we get help in creating a balance sheet that will provide us with a clear overview of our financial situation. Accountants are what we need to make sense of things that have to do with business, money, and what are sales and use tax. Assistance in the areas of financial planning and tax filing may be had with Nicholas J. Coco, CPA. You can reach him by filling out the form on our website, or you can call him at 201-955-3100.