Grass Disaster and Patriot have it right (IMO). The tax is a USE tax. For PA filers of Sales Tax collection, one entry on the form every month is USE tax. It is the taxes due (at PA rates) on out of state purchases that were not taxed. I added the last provision because many online retailers are now collecting Sales Tax for your state. Buying across state lines for the purpose of avoiding your own state's sales tax is a big no-no (as somebody correctly stated above, ... easy to spot in an audit). I think Amazon has started to collect PA sales tax. Some government regs are beginning to kick in requiring online vendors to collect the proper tax for the state to which the sale is made. Some of the posts in this thread reveal exactly what other threads also reveal -- many business owners do not know the taxing rules for the state of their residence. Claiming to buy across state lines to avoid your own state's sales taxes, and claiming "I didn't know" is a faulty strategy of explanation.