Use tax is a tax imposed on the purchaser of sales originating from another state. The purchaser, not the seller, is liable to accrue and pay the use tax in the jurisdiction where the goods and services are consumed. Generally, there is an exemption from use tax for goods purchased for resale or production materials.

If you purchase and consume goods from another state, the vendor does not charge tax on the invoice. Therefore, you are required to remit use tax to your local tax authority. If you sell goods to a purchaser in another state, you do not charge sales tax. The purchaser is liable to remit use tax to the tax authority where the goods are consumed.

When posting a document, the system automatically determines use tax and assigns the amounts to the appropriate accounts or retains the information for reporting.

If Company 3 sells to Company 1, then Company 3 does not charge sales tax on the transaction. This means that Company 1 is responsible for accruing California use tax and must pay the tax directly to the state.