Those of us who are residents of Washington State, and of most other states, are familiar with the sales tax – it is collected by the retailer every time we make a purchase. We also know that when we purchase items in a state that does not have sales tax, such as Oregon, or when we make certain internet or mail order purchases, we do not pay a sales tax.
Washington, and most other sales tax states, have a complementary tax called Use Tax. Where property is put to a taxable use (consumer or used) in the State of Washington, and sales tax was not paid on the purchase, a Use Tax is due. The use tax is the same amount as the sales tax that should have been paid.
The Use Tax is self-assessed. For most individuals the Use Tax is unenforceable; business, however, are expected to report use tax on their regular Washington Combined Excise Tax Return. For more information on Use Tax, click here to enter the Washington Department of Revenue’s website.
This is a major audit focus of the Department of Revenue. Most businesses have some taxable purchases on which no sales tax was paid. Businesses in certain industries are more likely than others to make out of state purchases, and the Department of Revenue tends to target those industries. The best defense, in my opinion, is to be pro-active and pay Use Tax where appropriate.
Good records are critical. The Department of Revenue auditors will assess Use Tax where the purchase invoice cannot be produced and the vendor is not a known local vendor.