Use Taxes

As a general rule, a state's taxing power reaches only as far as its borders. What this means for sales tax purposes is that a state cannot impose its sales tax on retail sales that are consummated in other states. This restriction created the concern that purchasers could avoid paying a state's sales tax by making their purchases outside the state. To close this perceived loophole, each state that has a sales tax also has a complementary "use" tax. The use tax applies to the "use, storage, or other consumption" within the state of tangible personal property, the purchase of which would have been subject to the sales tax had the transaction occurred within the state.


Let's assume you operate a commercial photography studio in California. You regularly go to Oregon to purchase all the cameras you use in your business. California can't impose its sales tax on your camera purchases, because those purchases were made outside the state. However, California can subject the cameras to its use tax once you bring them into the state.

The following are the key elements of use taxes: