Use Tax is a tax that is functionally much the same as Sales Tax but instead of being applied where the product is sold but instead being applied where it was purchased but the tax was not paid on the purchase. In terms of functionally it AccountEdge there are two different approaches to tracking Use Tax. You should consult your accountant to determine which is appropriate for you, and which accounts to use.  

Import Duty type Tax Code for Use Tax Method

One approach to tracking Use Tax is to setup a new Tax Code in your accounting software using the Import Duty tax code type.

From the Lists menu, choose Tax Codes. Create a new Tax Code, choosing Import Duty as the tax type. Link this tax code to the appropriate liability account that you will use to accrue the Use Tax. Set the tax rate to the appropriate rate given by your state.

Once you have your tax code setup, use Purchases the way you normally would with an Order or Bill. On each line of the purchase, make it a taxable line by clicking in the Tax column. Then, make sure the tax code being used is the one that you created for Use Tax. You will notice that using this new tax code will not add a tax amount to the total purchase price. The amount of Use Tax is tracked outside of the amount paid or owed to the vendor.

If you Recap this transaction (found under the Edit menu), you will see that the payable amount is the correct amount you owe the vendor and the Use Tax amount is allocated to the payable account chosen for the tax code you created.

When it is time to file your Sales and Use Tax Return, the Sales Tax Detail reports will list the amounts and transactions that referenced the Use Tax code.

Important: when using this method, the report shows the amount of Use Tax in the Tax Paid column. This occurs because we are using a Import Duty tax code type. The amounts in the Tax Paid column for the tax code created for Use Tax would be the amount of Use Tax you owe.

Using a 0% Rate Tax Code Method

Another option for tracking Use Tax would be by creating a sales tax code with a 0% rate.

From the Lists menu, choose Tax Codes. Create a new Tax Code choosing Sales Tax as the type. Link this tax code to the appropriate liability account which you will use to accrue Use Tax. Set the rate for this tax code to 0%. By setting the rate to 0%, no sales tax will be calculated and added to the total amount of the bill. This will ensure that the payable with your vendor is not changed.

To track Use Tax, create bills and purchase orders the way you normally would and check off the Tax column on each line of a purchase that you wish to track Use Tax. On the bill or purchase order next to the amount, select your Use Tax code that you have created before recording.

If you regularly purchase goods from this vendor, you can set their default tax code to your newly created Use Tax code on the vendors card in the Buying Details tab. By doing this, the tax code will always be set for this code when creating the bill and all you have to do is check off the tax column on each line you wish to track Use Tax.

Using the Sales Tax Detail report, you now see the purchases which you owe Use Tax for. You can take the total Purchase Value for this tax code and calculate the amount owed.