SO, WHAT ARE USE TAXES?

A use tax is a tax on the use, storage or consumption of taxable property or a taxable service.  It is often thought of as a complement to a sales tax.  In general it’s purpose is to substitute for sales taxes which, for some reason, were not collected on a particular transaction.

Businesses are responsible for accruing and paying use taxes on their purchases of all taxable equipment, supplies, furniture and other business assets if sales taxes were not charged, or the wrong sales taxes were charged by the vendor.  One example that is often overlooked in Colorado is that businesses are liable for use tax on food that is brought into their office for their employees.  That is very common because sales taxes are usually not charged on food at grocery stores.

If a businesses property if moved from one jurisdiction to another, the business my owe use taxes to the new jurisdiction.  That can occur when the use tax rate at the new location is higher than the sales tax rate at the old location.  The business will owe use taxes equal to the purchase prices times the difference between the two rates.

Just like most other aspects of sales and use taxes, the use tax side of the equation is equally as complicated as the sales tax side.  So don’t forget to consider use taxes when moving your office, your equipment, or feeding your employees!  If we can help in any way, please call us in advance so that we can help you minimize your tax obligations.

Posted by Keith Crichton, MBA, MT, CPA

DISLAIMER

The information contained in this blog is general in nature and is not intended, and must not be construed by the reader as legal, accounting, tax advice or opinion, provided by Crichton Consulting Services, LLC or any person referenced herein. The reader is also cautioned that this material may not be applicable to, or suitable for, the reader’s specific circumstances or needs. More importantly the reader must consider any effects on taxes other than sales and use taxes, as well as financial and personal considerations other than taxes, before actions are taken. The reader should contact his or her tax  and legal advisors prior to taking any action based upon this information or information discussed in prior blogs.  Crichton Consulting Services, LLC assumes no responsibility for loss incurred by any person acting, or refraining from action, as a result of any material provided in this or future blogs, nor by prior blogs to which this blog may refer.