use tax

/yoohs/

a state tax imposed on goods purchased outside a state for which state sales tax has not been paid.

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      levy on the use or possession of a commodity. Under the principle that the taxpayer should pay according to the benefits received from public services, a use tax is often levied on the user of a service, so that costs of the service are not borne by the general taxpayer. Common examples are motor-vehicle and boat licenses and user fees for airports or harbour-docking privileges. The revenue from the tax is generally used by a government to cover the costs of the maintenance and regulation of the services—in these instances, highways, waterways, and airports. In the United States a use tax is often levied by state or local governments on purchases made outside the jurisdiction and therefore not subject to the jurisdiction's retail sales tax. In this case the use tax is generally equal to the retail sales tax.

      In the United States the first federal use tax was levied on telephone and telegraph messages during the Spanish-American War (1898). During World War I all freight and passenger transportation was subject to a use tax. A federal use tax was levied on all motor vehicles during World War II, but this tax was eventually shifted to the states.

      The use tax as a vehicle-licensing plan serves a dual purpose as revenue raiser and as a method for identifying all vehicles using the public streets and roads. However, it is a regressive tax, despite numerous attempts to make it more equitable.

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