Under what condition is a use tax on goods purchased out of state permitted?

A use tax is a tax imposed on the use, storage, or consumption of tangible personal property that is purchased out of state but used within the state. The primary purpose of a use tax is to prevent tax avoidance that could occur when consumers purchase goods from out-of-state sellers and do not pay sales tax on those purchases.

The correct answer reflects the principle that a use tax must be applied in a non-discriminatory manner. This means that the tax cannot favor in-state goods over out-of-state goods; it must treat all goods equally, regardless of where they were purchased. This is important to comply with the Commerce Clause of the U.S. Constitution, which prohibits states from enacting laws that unduly discriminate against or burden interstate commerce.

The use tax is meant to complement sales taxes and ensure a level playing field for local businesses competing against out-of-state sellers. If a state were to apply the use tax in a manner that favored in-state purchases, it would likely face legal challenges, as such a practice would undermine fair market competition and may violate constitutional provisions.

In contrast, other choices present conditions that either restrict the applicability of the use tax or incorrectly imply that discriminatory practices can be permitted, which is inconsistent with the legal standards governing taxation and