Use Tax is a substitute for sales tax. All states which have a sales tax also impose a use tax. Use taxes are imposed to minimize unfair competition between sales made in-state and those made out-of-state. The use tax rate is the same as the sales tax rate.

When does use tax apply?

Use tax applies when sales tax has not been charged. Purchases made over the internet and out-of-state are the most common type of transactions subject to a use tax. For instance, if you purchased goods from a supplier located in Massachusetts, whether by mail order or by taking delivery in Massachusetts, use tax applies if the goods are brought to Maine for use here. A Maine resident or business does not escape sales tax by purchasing out-of-state or over the internet. Use tax is based on the purchase price of the item. Another situation where use tax applies is when a business withdraws goods from inventory for its own use. Use tax, in this case, is based on the cost of the item when it was purchased.

Common taxable items for businesses are office supplies and equipment, computer hardware, software and supplies, janitorial supplies, fax machines and supplies, photocopiers and supplies and books. For individuals common taxable purchases are computers, books, downloaded music & cd's, clothing, and auctionhouse purchases.

Are there any exemptions from use tax?

The same exemptions that apply to sales tax apply to use tax. Common exempt goods are food products, magazines and newspapers published at least quarterly and goods purchased for resale.

If you made purchases in a different state which charges sales tax and your purchase was taxed, you may not owe any use tax in Maine. If the amount of tax was equal to or more than Maine's rate, no tax is due. However if you paid less than Maine's rate you owe the difference. For instance if another state's rate is 4% and Maine's rate is 5%, a Maine use tax of 1% is due.

If you do not know the exact amount , check the approprite box and OnLine Taxes will calculate the amount for you based on the Maine 2005 instructions. (Your Maine adjusted gross income by .04% and/or the use tax table.)

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