The Difference Between Sales Tax & Use Tax and Related Audit Risk

, and you’re probably exempt from paying sales tax on your inventory or raw materials. But what about the supplies you buy for consumption in your business? If you’re not paying sales tax on those purchases, you may owe consumer use tax. And if you’re not charging tax on products you sell to your customers, you may expose them to the risk of use tax audits.

Small business owners must know the difference between sales tax and consumer use tax, and understand when they must charge (or pay) both for products and services. Not understanding your use tax obligations could expose your business to costly audits and hefty fines.