Thanks for joining us for Part 2 of our tax series. I know it’s super exciting, but it is absolutely vital that you understand your responsibilities if you want to keep your business running. Yesterday we spoke about Sales Tax, and today we are looking at Use Tax.
Mistreating the greedy tax monster in the arena of Use Tax is the easiest way to leave your business vulnerable to a large tax bill of past taxes, interest and penalties. Use Tax should be calculated and claimed every time you file your Sales Tax.
Use Tax is often misunderstood because technically we are all supposed to claim and pay Use Tax on our personal state returns, but people rarely do. When you approach Use Tax for your business with the same attitude it can spell T-R-O-U-B-L-E. Simply put, when you file your returns you have given the greedy tax monsters a list of those deductions so it is pretty easy for them to go through and audit for Use Tax.
If you deducted that pretty new camera and lens you bought online, I HIGHLY recommend that you claim and pay Use Tax on that purchase! They will catch up to you eventually if you are never submitting Use Tax as almost all businesses purchase items over the internet periodically.
The next logical question is what is subject to Use Tax? Basically, it is any tangible item that you have purchased in which you did not pay state sales tax on. Any items that you resell are NOT subject to Use Tax. Therefore, you should not pay Use Tax on your lab fees, albums, etc. Any item that you will be collecting and remitting sales tax on at the time of sale is NOT subject to Use Tax, all other items are.
Tomorrow we move onto income tax. Good news, you are making enough money to have an income! Bad news, enter the self-employment tax!