--- title: "What Is Use Tax?" url: https://www.uncap.com/glossary/use-tax author: "Denis Dyli" published: 2026-10-28 updated: 2026-10-28 summary: "Use tax is a state tax on using taxable goods, or certain services, in a state when sales tax was not paid at the time of purchase. It complements sales tax: the seller collects sales tax, while the buyer pays use tax directly to the state. Washington applies it to supplies a business buys tax-free and then uses." --- # What Is Use Tax? > Use tax is a state tax on using taxable goods, or certain services, in a state when sales tax was not paid at the time of purchase. It complements sales tax: the seller collects sales tax, while the buyer pays use tax directly to the state. Washington applies it to supplies a business buys tax-free and then uses. **Use tax**: Use tax is a state tax on using taxable goods, or certain services, in a state when sales tax was not paid at the time of purchase. It complements sales tax: the seller collects sales tax, while the buyer pays use tax directly to the state. Washington applies it to supplies a business buys tax-free and then uses. ## How it works Use tax is a tax on the use of goods or certain services in a state when sales tax was not paid at the time of purchase. That is the Washington Department of Revenue's definition for its state as of October 28, 2026, and it adds that items used in the state are subject to either sales tax or use tax, but not both on the same transaction. As of October 28, 2026, Pennsylvania's Department of Revenue puts it this way for its state: a use tax, at the same rate as sales tax, is due on taxable purchases of tangible personal property or specified services used or consumed in Pennsylvania where no sales tax is paid to a vendor. The details come from each state's own rules, so check the state where the goods are used. Washington lists common situations where use tax is owed: - Purchases for the business's own use: businesses can buy equipment and supplies without paying sales tax if they provide a reseller permit, but if sales tax is not charged on items used for the business, the business must pay use tax on those purchases. - Out-of-state purchases: goods bought in a state without a sales tax, or with a lower rate, and then used in Washington. - Online and mail order: goods bought from a company that does not collect Washington's sales tax. ## Use tax vs. sales tax The Washington Department of Revenue, as of October 28, 2026, draws the line by who collects and pays: - Sales tax is collected by the seller at the time of purchase and then paid to the state by the seller. - Use tax is the buyer's responsibility. The buyer pays it directly to the state when sales tax was not paid on the purchase. Washington encourages businesses to report and pay use tax for business-related purchases on their excise tax return, in the period when the goods are first used in the state. ## How use tax is calculated In Washington, use tax is determined on the value of the goods, which is generally the purchase price, including any freight, delivery, or shipping charges paid to the seller. As of October 28, 2026, Washington's use tax is made of the state rate (6.5%) plus the local use tax rate where the buyer first uses the items. This is general information, not tax advice. ## Example A Washington distributor buys pallet racking for its own warehouse from an out-of-state seller that charges no sales tax. The invoice is $2,000, including freight. The racking is not for resale, so the distributor owes use tax. - State portion: $2,000 x 0.065 = $130 - Local portion: $2,000 x the local use tax rate where the racking is first used The distributor reports both on its excise tax return for the period it starts using the racking. ## On Shopify On the seller side, Shopify's US tax reference says that if you don't have nexus in the state to which you ship products, then you're generally not required to collect sales or use tax. In states with notice and report laws, if you don't have nexus there but sell to customers there, then those customers are responsible for paying a use tax to their state. Each of those states has different rules, but in general, if your sales to customers there pass a certain threshold, you might need to add a use tax notice to your store and your checkout, send an annual notice to customers spending over a certain amount, and send an annual notice to the state. For B2B buyers, Shopify B2B (on the Basic, Grow, Advanced and Shopify Plus plans) lets each company location have its own tax ID and tax exemptions, and you can set a location to Collect tax, Don't collect tax, or Collect tax unless exemptions apply. ## How Uncap helps Uncap's guide to [Shopify tax exemption setup](/post/shopify-tax-exemption-setup) explains that company location-level exemption, available through Shopify B2B, applies to a specific location under a company account. It also advises verifying that a certificate covers the specific state or jurisdiction the order ships to, since resale certificates are often state-specific. ## Related terms - Tax exemption certificate - Economic nexus - Drop shipping - Landed cost - Purchase order ## Sources - Washington Department of Revenue: Use tax - Pennsylvania Department of Revenue: Sales, Use and Hotel Occupancy Tax - Shopify Help Center: US taxes reference ## Frequently asked questions ### What is use tax? Use tax is a state tax on goods, or certain services, used in a state when sales tax was not paid at the time of purchase. The buyer, not the seller, pays it directly to the state. ### Who pays use tax? The buyer pays use tax. As of October 28, 2026, Washington's Department of Revenue says use tax is the buyer's responsibility and that businesses and individuals are both responsible for paying it, including a business that bought items tax-free with a reseller permit and then used them itself. ### How is use tax calculated? In Washington, use tax is calculated on the value of the goods, generally the purchase price including freight, delivery, or shipping charges paid to the seller. As of October 28, 2026, the rate is the 6.5% state rate plus the local use tax rate where the items are first used. This is general information, not tax advice. ### What is the difference between use tax and sales tax? Washington's Department of Revenue explains it this way: sales tax is collected by the seller at the time of purchase and paid to the state by the seller, while use tax is the buyer's responsibility and is paid directly to the state when sales tax was not paid on the purchase. In Washington, an item used in the state is subject to one or the other, not both.