What it is

“Sales and use tax” is one phrase, but it covers three distinct mechanisms. Sales tax is what an in-state seller collects on a sale to an in-state buyer. Seller’s use tax is the parallel tax a remote seller collects when it ships into a state where it has nexus but isn’t physically based. And consumer use tax is the tax a buyer self-assesses when no seller collected anything.

Seller’s use tax applies specifically to interstate transactions — the seller is in one state, the buyer is in another, and the seller has established a tax connection (nexus) in the buyer’s state. Functionally it is identical to sales tax: the seller charges the buyer the correct rate, holds the money in trust, and remits it to the state. The different name mostly matters on the paperwork — many states have a separate line, return, or registration type for “use tax” collected by out-of-state vendors. <!– src: https://sovos.com/blog/sut/demystifying-tax-types-sales-tax-vs-sellers-use-tax-vs-consumers-use-tax/ –> <!– src: https://www.salestaxinstitute.com/sales_tax_faqs/sales-tax-vs-use-tax-guide –>

Why it matters to a multi-state seller

If you sell online, almost all of your taxable sales are interstate. That means most of the tax you collect is technically seller’s use tax, not sales tax — and a handful of states care about the distinction at registration. Some states issue a “remote seller” or “use tax” permit that is separate from the in-state sales tax license, and a few apply a flat statewide use-tax rate to remote sellers rather than the full local rate that an in-state store would charge.

The practical risk is twofold. First, registering under the wrong tax type, or filing seller’s use tax on a sales tax return, can trigger notices and reconciliation headaches. Second, because seller’s use tax is collected on someone else’s behalf, it is trust-fund money — if you collect it and don’t remit it, states treat that far more harshly than an honest under-collection, and the liability can reach owners and officers personally.

Worked example

Your business is based in Florida and sells equipment online nationwide.

• A customer in Florida buys a $2,000 machine. You have a store and inventory in-state, so you charge Florida sales tax and remit it on your Florida sales tax return.
• A customer in Ohio buys the same $2,000 machine. You have no location in Ohio, but your remote sales there crossed Ohio’s economic nexus threshold last year. You now collect seller’s use tax on that Ohio sale and remit it to Ohio.
• A customer in Wyoming buys the machine, but you have no nexus in Wyoming and aren’t registered. You collect nothing — and the Wyoming buyer may owe consumer use tax on the purchase themselves.

Same product, same price, three different tax outcomes — driven entirely by where you have nexus and whether you’re the in-state or out-of-state seller.

How this connects to staying compliant

Seller’s use tax is what you owe the moment economic (or physical) nexus makes you a registered remote seller in a state. The compliance chain is the same as for sales tax: cross a nexus threshold, register under the correct tax type, collect the right rate, and file on schedule. The only added wrinkle is getting the classification right — sales tax vs. seller’s use tax — so your registrations and returns line up with how each state expects a remote seller to report.

Get that classification wrong and you can end up registered twice, filing on the wrong form, or applying the wrong rate. Get it right and seller’s use tax is simply sales tax under another name.

Sources: Sovos — Sales Tax vs. Seller’s Use Tax vs. Consumer’s Use Tax: https://sovos.com/blog/sut/demystifying-tax-types-sales-tax-vs-sellers-use-tax-vs-consumers-use-tax/ Sales Tax Institute — Sales Tax vs. Use Tax Guide: https://www.salestaxinstitute.com/sales_tax_faqs/sales-tax-vs-use-tax-guide Avalara — Use tax vs. sales tax: What’s the difference?: https://www.avalara.com/blog/en/north-america/2023/05/use-tax-sales-tax-everything-you-need-to-know.html