Untangling Use Tax: How to Reduce It to a Few Simple Rules
For many manufacturers, use tax sits on the list of “let’s deal with that later.” It’s complicated, and it’s not critical to operations, so putting it off in favor of other pressing issues seems reasonable. But ignoring it has a cost, and eventually that cost may exceed the value of those other issues.
What Is Use Tax and What Is the Risk?
Use tax applies to manufacturers’ taxable purchases, when tax wasn’t charged by a vendor. The most common scenarios are online purchases, purchases from out-of-state sellers, and software or SaaS purchases.
When left unchecked, use tax oversights add up. In most states, use tax audits are the most lucrative. That means what looks like a minor nuisance can quietly grow into a six-figure liability.
Why It Feels So Complicated
Manufacturers struggle with use tax due to the number of rules, the volume and variety of purchases, and the experience it takes to apply the rules correctly. Also contributing to the struggle are changes in vendors and changes in law.
How Manufacturers Can Untangle Use Tax
The good news? Bringing order to use tax doesn’t have to be painful, or expensive. At CSH, we’ve helped manufacturers replace confusion with clarity using a simple, structured approach:
Build a decision tree – Start with broad questions to determine what’s taxable or exempt based on how items are used.
Establish clear explanations – Document general rules for your organization, such as how repair parts, safety equipment, or consumables are treated.
Drill down to the vendor and item level – Work with purchasing and accounting teams to flag vendors and materials that require special handling.
Once this process is in place, your team can make consistent, confident tax decisions and avoid the last-minute scramble when auditors ask for documentation.
From Tangled to Transparent
Untangling use tax isn’t about learning every state’s regulation by heart, it’s about creating a repeatable framework that keeps your compliance process clean and predictable. A few clear rules, backed by simple documentation, can transform a messy chore into a manageable routine.
Simplify Your Use Tax Compliance with CSH
Use tax doesn’t have to be a source of anxiety or confusion. Whether your goal is to reduce audit risk, streamline compliance, or simply make sense of your current process, CSH’s State and Local Tax (SALT) team can help.
We’ll guide you step by step, from decision trees to vendor-level clarity, so you can untangle your compliance once and for all.
