Having just finished filing your income tax last month, yet forgot to include your use tax? If you’re busy, you can avail of small business accounting software that will help you work out your use taxes.

What is Use Tax?

It is a type of excise tax imposed goods or certain services used, consumed, or stored in a particular state where sales tax has not been paid.

Generally, use taxes are the tax that you accrue when you purchase an item without paying your home state's sales tax and you use, give away, store, or consume that item in your home state.

This tax must be paid by both businesses, whether they’re wholesalers, retailers, manufacturers, corporations, partnerships, and individuals. As this tax might be confusing to keep track of, especially if you’re a busy small business owner, you can avail of online accounting programs that will prepare and make reports as well as notify you if you have pending tax payments. These accounting online programs will also help you keep track of your purchases and in calculating your use tax.

Aside from outsourcing your use tax recording, if you want you can also handle your use tax by yourself. How?

Make sure to keep all your purchase invoices for out-of-state supplies and expense items. If there was no sales or use tax deducted or paid, calculate it yourself based on the local rate. Or, keep them so you can let your accountant calculate them later.

Don’t forget to maintain a record of all expenses charged to credit cards. You can make use of a general ledger, hard-copies, e-mail receipts, and employee reimbursement for expenses.

Make sure to file each fixed asset separately. Keep each in separate file. Each file must contain the purchase invoice or contract, any additions to the item, changes in the contract, and all repair and maintenance information. In this way, you can identify the use tax due, as well as property tax and depreciation data.

You must also set up 2 accounts to make it easier for sales/use-tax reporting. Make sure to set up a Sales Tax Payable and a Use Tax Payable account.

So, if you want not to be penalized, file an extension now and work out your use tax, you have until October 15 for your extension.