Black Friday, Cyber Monday and Use Tax

Nov. 19, 2012 – TaxTalk Blog

A lot of Hoosiers don’t know about Indiana’s “use” (rhymes with moose) tax. Generally, if you make a purchase from outside Indiana without paying sales tax on it, you’ll owe a use tax to Indiana. This tax has been collected on the state income tax return since 1969 … the same year man first stepped on the moon, Woodstock rocked our world and the NY Jets beat the Baltimore Colts in Superbowl III.

We all know about sales tax … buy a flat screen TV from the local box store and you’ll wind up paying Indiana’s 7-percent sales tax on that purchase. The retailer collects the tax and forwards it on to the state. However, if you buy that same TV over the Internet, or while traveling outside Indiana, and a sales tax isn’t charged when you buy it, you owe the 7-percent use tax to Indiana.

While sales tax is collected at the time you buy something, you usually won’t pay the use tax on your purchase until you file your Indiana income tax return. Since we’ll be filing our 2012 state tax returns in a few months time, let me quickly walk you through the process:

Step 1: Complete the worksheet in the IT-40, IT-40EZ or IT-40PNR instruction booklet (available online on Dec. 3, 2012) to help you figure how much use tax is owed.

Step 2: Enter the amount that is owed on Schedule 4 of Form IT-40, on Schedule E of Form IT-40PNR, or on line 8 on the Form IT-40EZ, depending on which form is filed.

For example, during 2012 I paid $100 for three magazine subscriptions. No sales tax was charged. I will report $7 use tax when I file my 2012 Indiana income tax return ($100 x 7-percent). Scouts honor.

To learn more about Indiana’s use tax, check out the Use Tax FAQ.

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