Calculated tax and Use Tax

Calculated tax is used for so called “reverse charge” tax scenarios. Calculated tax creates a double entry for the tax amount so that the net payment is 0 but it can be reported in tax reports as input and output. From my experience in Europe, this is used for EU reverse charge and various domestic reverse charge scenarios but could be used also outside of VAT regimes.

Use tax is a tax type specific to the USA. It should be used when buying goods in a non-taxing state and shipping them into a state that imposes the sales tax. It’s my understanding that Use Tax is a way of ensuring that there are no tax benefits to US consumers from shopping outside of their home state. 

Hi,

I’m from USA and can offer a different explanation or “use” tax.  Use tax could be considered as more of a consumption tax.   Typically this use tax would be the result of purchasing something (goods or service) where the vendor did not charge tax. Surely not all things purchased would require tax, but in a use tax situation the goods / services do require a tax, that was not paid to the supplier. So a use tax situation is identified and we must pay tax to the tax agency for those goods or services that were not taxed (by the supplier) but are still tax able.  

Hope this helps, 

Best regards, 

Thomas

Hi @IRituma, 

Thank you very much for this detailed explanation. 

Best Regards,

Vindya.

Hi @Thomas Peterson, 

Thank you very much for sharing this detailed explanation. . 

Best Regards,

Vindya.