Sales tax and use tax are closely related, but they are not the same in how they are collected. In general, sales tax is collected by the seller at checkout and remitted to the state, while use tax is paid when a taxable purchase is brought into a state and sales tax was not collected on that purchase.
For ecommerce and cross-border sellers, the practical rule is simple: if you charge sales tax correctly, the buyer usually does not owe use tax on that same purchase; if no sales tax was charged and the item is taxable in the buyer’s state, the buyer may owe use tax instead. The exact result depends on nexus, sourcing, the product or service, and the state’s rules, which is why a topic like Sales Tax vs. Use Tax matters so much for marketplace and direct-to-consumer sellers.
What sales tax is
Sales tax is a transaction tax collected by the seller at the point of sale and remitted to the state when the sale is taxable under that state’s rules. In the sales tax model, the seller is the collection point: the customer pays tax at checkout, and the seller later reports and remits that tax on its state return.
For online sellers, sales tax obligations usually depend on whether the seller has nexus in the buyer’s state and whether the item being sold is taxable there. Nexus is the connection that gives a state the authority to require a seller to register and collect tax; once that obligation exists, the seller generally collects sales tax instead of leaving the buyer to self-assess use tax.
In plain terms, sales tax is the tax most buyers recognize from a checkout screen. For the seller, it is a compliance obligation: register where required, collect correctly, and remit on time.
What use tax is
Use tax is the complementary tax that applies when a taxable purchase is used, stored, or consumed in a state but sales tax was not collected at checkout. It exists to cover transactions that fall outside the seller-collected sales tax system.
Unlike sales tax, use tax is typically self-assessed by the buyer and paid directly to the state, unless a seller with an obligation to collect it charges seller’s use tax instead. State rules differ on how buyers report it, and some states allow reporting through a dedicated use tax return or another filing process.
For ecommerce buyers, use tax usually shows up when an item is purchased from an out-of-state seller who did not charge tax, or when a purchase otherwise escapes collection even though the state treats it as taxable. That is why an unpaid invoice does not necessarily mean a tax-free purchase.
Who collects and who pays each tax
Sales tax is collected by the seller, while consumer use tax is paid by the buyer. That is the core operational difference between the two taxes.
When a seller has nexus in a state and the sale is taxable there, the seller usually registers, charges sales tax at checkout, and remits it on the state return. When the seller does not collect tax and the purchase is taxable in the buyer’s state, the buyer may need to self-assess use tax and report it directly.
This is why many articles describe the two taxes as complementary: they are designed to tax the same consumption, but the burden of collection shifts depending on whether the seller collected tax at the point of sale.
When you owe use tax instead of sales tax
You generally owe use tax instead of sales tax when a taxable item is purchased without sales tax being charged and the item is used, stored, or consumed in a state that taxes that transaction. In other words, use tax fills the gap when sales tax was not collected.
This often happens in online and cross-state purchases, especially where the seller does not have nexus in the buyer’s state or is not otherwise required to collect that state’s tax. It can also happen when a buyer buys an item for business or personal use from a seller who leaves tax off the invoice, but the item is not exempt.
For sellers, the key question is not only where the buyer lives, but also whether the seller must collect based on nexus and how the sale is sourced under the state’s rules. For buyers, the key question is whether the purchase was taxed at checkout and whether the state treats the item as taxable when used there.
How nexus and sourcing affect the tax owed
Nexus determines whether a state can require a seller to register and collect tax, while sourcing determines which state’s tax rules apply to a particular sale. Together, they answer a major compliance question for ecommerce sellers: where is tax due, and who is responsible for collecting it?
If a seller has nexus in the buyer’s state, the seller may need to register and collect sales tax on taxable sales in that state. If the seller does not have that obligation, the buyer may owe use tax instead if the item is taxable where it is used or stored.
For cross-border sellers, sourcing can be especially important because the location of the buyer, the ship-to destination, and the seller’s footprint can all matter under state law. If you are unsure how a particular sale should be sourced, the exact position depends on your circumstances — confirm with the state, or talk to us and we will check it for you.
How online and cross-state purchases work
Online purchases often create the most confusion because the checkout experience may not reflect the final tax obligation. If tax is collected at checkout by a seller with the required collection obligation, the buyer usually pays sales tax and does not separately owe use tax on that same taxable purchase.
If no tax is charged on an online purchase and the item is taxable in the buyer’s state, use tax may apply instead. This is common in interstate commerce, where the seller’s ability or obligation to collect depends on nexus and the buyer’s state rules determine whether the item remains taxable when used there.
For marketplace sellers on Amazon, Shopify, Etsy, Walmart, and similar channels, the operational issue is that some transactions are collected by the platform or by the seller, while others are not, depending on the registration and collection structure in each state. Because those rules are state-specific and fact-specific, a sales tax review is often the safest way to confirm which party should collect and remit.
How sales tax and use tax are reported
Sales tax is generally reported by the seller on its periodic state sales tax return, while use tax is reported by the buyer on a consumer use tax filing or other return mechanism allowed by the state. In some states, sellers also report seller’s use tax on their sales tax return when they are registered to collect it.
That reporting split matters because the tax may be similar in amount, but the compliance path is different. A seller that collects tax must track taxable sales, exemptions, and remittance schedules; a buyer that owes use tax must identify untaxed purchases that are taxable under state law and self-assess the amount due.
For businesses, especially cross-border sellers and buyers of equipment, packaging, inventory, or office supplies, keeping invoices and tax-exempt documentation organized is essential. If the state’s rules or the transaction details are unclear, the exact position depends on your circumstances — confirm with the state, or talk to us and we will check it for you.
Examples of sales tax vs. use tax
If a customer in a state that taxes the item buys a taxable product from a seller that is registered and required to collect tax there, the customer pays sales tax at checkout. The seller then reports and remits that tax to the state.
If the same customer buys a taxable item from an out-of-state seller who does not collect that state’s tax, the customer may owe use tax when the item is brought into, stored in, or used in the state. The buyer reports it directly if the state requires consumer use tax reporting.
Put differently, the tax burden does not disappear just because tax was not charged on the invoice. When sales tax is missing on a taxable purchase, use tax often becomes the backstop that preserves the state’s tax claim.
Related reading
Getting this handled
If you would rather not work this out yourself, that is what we do. We register you, file your returns and keep you compliant across every state where you have an obligation — one point of contact, one invoice. Talk to us about your situation.
Reviewed by Paul le Roux, CA(SA). Sales Tax Compliance USA handles US sales tax registration, filing and remittance for cross-border and domestic ecommerce sellers as a fully managed service.
This article is general information for educational purposes and does not constitute legal or tax advice. Sales tax rules change and depend on your specific facts. Consult a qualified tax professional about your own position.
