Use Tax?

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I'm doing my taxes in TurboTax and I come across something called Use Tax. I'm not a tax professional but this is so confusing. Basically it goes like this: if I live in a state with sales tax and buy something in a state without sales tax, I pay a use tax to the state I live in for lost revenue. The law has been around since 1935, but only started getting really popular with the Internet.

Here's my confusion. I checked my purchases and most of them are digital products: mp3s, sound files, domain registrations/hosting, Steam purchases, MMO subscriptions... etc. etc. Like I have no idea if I'm suppose to claim them or if I can skip them. I don't want the IRS coming after me, but at the same time I'm so confused about what products could be use-taxed.

I'm in a moral dilemma too. I tallied up my potential use-tax purchases and the total was $1,210. Of that amount $94 is taxed based on my county's tax rate of 7.25%. $94 is the difference between a state return of $416 versus $322.

Anyone know?

I've never heard of such a thing. Anyways, it is, for all intents and purposes, impossible to avoid breaking some IRS regulation or other when you do your taxes. Make your best guess. From the moral dilemma perspective, if someone makes a rule convoluted enough that I, after an honest effort, can't understand what the hell I'm even supposed to do, I just ignore it. My reasoning being that if someone wants me to be bound by their rules, they have the obligation to make the rules lucid.

Good point. Thanks Orwell!

What state are you in? Taxes vary widely by state, there is federal tax and then 50 different state taxes, and in some places even municipal taxes. The strangest tax regime I've seen is that in Nevada, where opposition to the income tax (which was seen as a communist plot) never really abated, so the state funds itself via tons of odd taxes, with sales taxes and taxes surrounding casinos providing the bulk of revenue. Mining, the state's other big industry, is lightly taxed, as is cattle ranching. Right now they're so far in the hole that it's hard to imagine the state ever seeing daylight again. They are talking about shutting down virtually every state function except those having to do with law enforcement, and even there some people want to form vigilance committees. Tax revenue is down everywhere, so every few dollars they can grab they will. Use taxes are impossible to collect unless they happen to stumble on it, which is unlikely.

If you've purchased that much it might be a good idea. I can't say that they'd come after you over just that amount but, you don't know. California though....with the current financial mess you may be better off safe than sorry.

Also I hope I'm not throwing a damper by saying this but its not just your state's 7.25% against states with no taxes. If you buy from an area that's 5% they still would in theory want their 2.25% of the difference (heck, even another county if your locality really wants to get crazy with it - at least here in Ohio we have different rates from city to city even which are tacked on to the state's bottom line rate). Its one thing if you made huge purchases from out of state where that could add up, I'm guessing you probably haven't, but its good to know in case it should come up.

LOL techstepgenr8tion. I mean seriously. How the hell do THEY expect us to know this s**t. Gawd... LOL. So anyhow I took Orwell's advice and just did my taxes like I had done for the past 10 years. Basically didn't mess with use-tax BS.

Yeah, I don't think its as big a deal as...say...if you were a corporation - at that point they *absolutely* want your accruals and will come after you for them, in the case of an individual they're lucky if that person knows to turn it in.