Question about use tax

[isis297]

What is the name of your state (only U.S. law)? PA

My friend makes crafts she sells at craft shows. She has a sales tax id #. I think we are confused about use tax though. She will only buy her craft "ingredients" locally so she doesn't have to pay a use tax. I thought use taxes were only for the items she purchases online that she will use personally or for her "store" - not for the items she is using to create the products she is then selling to customers. I don't want to give her the wrong advice but also don't want to see her turn over money for taxes she doesn't owe. Could you explain please?

 

[justalayman]

from the state of PA Department of Revenue

Use Tax

Out-of-state businesses and Internet vendors often falsely advertise that they sell taxable items “tax free”. However, Pennsylvania law requires the payment of use tax by any person who purchases taxable goods or services delivered into or used in Pennsylvania if sales tax is not collected by the vendor. Use tax is the counterpart of the state and local sales taxes.

When Pennsylvania sales tax is not charged by the seller on a taxable item or service delivered into or used in Pennsylvania, the consumer is required by law to report and remit use tax to the Department of Revenue. The use tax rate is the same as the sales tax rate: 6 percent state tax, plus an additional 1 percent local tax for items purchased in delivered to or used in Allegheny County and 2 percent local tax for Philadelphia.

Why It’s Important

It’s a matter of fairness. Pennsylvania businesses – those who employ our residents, pay state and local taxes and support our communities – are put at a 6 percent competitive disadvantage against out-of-state businesses when sales or use tax is not paid on taxable items and services.
As Internet and mail-order shopping becomes more popular among Pennsylvania residents, individual consumers’ use tax compliance helps level the playing field among e-commerce retailers and Pennsylvania’s brick-and-mortar stores.
Use tax is an important source of revenue for the Pennsylvania General Fund. Every dollar collected is a dollar available for government and public services.
From an enforcement standpoint, when the Department of Revenue receives information on purchases where use tax is owed but was not paid, it will assess the purchaser for not only the tax, but also penalty and interest for late payment.
For additional information on use tax and reporting and payment options, visit Use Tax for Individuals or Use Tax for Businesses.

For examples of when use tax is owed by trusts or fiduciaries, visit the Online Customer Service Center .

For more information on use tax, please visit the quick links below.

Use Tax

it appears to basically be "sales tax" on items bought out of state that cannot be taxed by the seller. From the Dept of Revenue's page, I believe it is applicable to anything purchased out of state that has had no sales tax paid on it.

 

[isis297]

So if the site she might purchase from charges a sale tax at the time of purchase, she doesn't have to pay a use tax but if they DON'T charge a tax at time of purchase, then she does? When I searched for it at Wikipedia, it said: "It is assessed upon otherwise "tax free" tangible personal property purchased by a resident of the assessing state for use, storage or consumption of goods in that state (not for resale), regardless of where the purchase took place." It specifically says not for resale which was what my understanding had always been. Even the PA info makes it sound like it is directed at the end consumer...not a vendor who is then reselling the items hence my confusion.

 

[FlyingRon]

The use tax is very real and it is not the case that "no one pays it."

Her PA tax number means squat to anybody outside Pennsylvania. If wouldn't owe sales tax if she bought it in state, she doesn't owe use tax on it for buying it out of state however. The sales tax exemption form says "sales or use" right on it.

 

[isis297]

I don't really care to read posts from trolls. I am trying to get a clear answer here for a friend of mine because I really don't believe she has to pay use tax for buying online in this case...not when she is using the things she buys to make something she is then going to sell. FlyingRon, should she NOT be paying use tax in this case and if so, what is the link I can direct her to? Thanks!

 

[FlyingRon]

I don't really care to read posts from trolls. I am trying to get a clear answer here for a friend of mine because I really don't believe she has to pay use tax for buying online in this case...not when she is using the things she buys to make something she is then going to sell. FlyingRon, should she NOT be paying use tax in this case and if so, what is the link I can direct her to? Thanks!

Tell her to read her exemption paperwork. If she would be able to use the exemption to not pay sales tax legally for the item if purchased in PA, she is also exempt from owing use tax on the same item when purchased out of state.