The transaction tax landscape is rife with tricky and complex regulations, and when use tax comes into the equation, it gets even more confusing. Understanding how and when the use tax applies is critical to staying compliant.
Imagine a railroad company purchases tracks and wooden tiles from a manufacturer in Oregon. They spread that track out over a half-dozen states, linking their rail cars to Texas. Where do they pay the tax on the goods they have bought?
That’s a much more complicated question than one might think.
Many companies that make a large purchase of products used in multiple states choose to forgo paying sales tax in the state of purchase and, instead, pay what is called a use tax.
Put simply, the corporation pays tax on the products in the state in which they’re being used instead of the state where they were bought. This matter has become even more complicated due to the pandemic and the massive shift to remote work.