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Kentucky sales tax notices

Got a letter from the Kentucky Department of Revenue (DOR)? Find it below to see what it means, why businesses usually receive it, and what to do next.

Sources checked

Tax authority

Kentucky Department of Revenue (DOR) (opens in a new tab)

Official notice guide (opens in a new tab)

Disagree with a notice?

File a written protest with DOR within 60 days of the original Notice of Tax Due. Identify the tax type, periods, notice numbers and account number, and include a supporting statement. You can ask for a conference. You can also ask for a final ruling, which ends the DOR protest process and lets you appeal to the Kentucky Board of Tax Appeals and then the courts. The 60-day protest period cannot be extended.

Deadline: 60 days from the date of the original Notice of Tax Due (45 days if the original notice date was before July 1, 2018)

Source: Kentucky Department of Revenue (DOR) (opens in a new tab)

Failure to file

The authority has no return on record for a period it expects one, often because an account is open but filings stopped.

Failure to file

Estimated bill for failure to file a tax return

If a return is not filed on time, the account goes to the Division of Collections and DOR may bill an estimate of the amount due. The estimate is likely to be higher than what you would owe with a filed return.

Why you got it

  • A required sales and use tax return was not filed on time

What to do

  1. File the missing return; DOR will accept it and adjust the bill to match
  2. Pay the tax and interest due on the filed return, or contact DOR about a payment plan
  3. If you had reasonable cause for filing late, attach a written penalty waiver request with supporting documents to the return
  4. Do not ignore DOR contacts, because an unfiled estimate can be collected in full like any other debt

Before you pay penalties: check whether you can ask for them to be waived, and what the state needs paid first. How to ask

Source: Failure to File Tax Return - Department of Revenue (opens in a new tab)

Balance due

A bill for tax, penalty, or interest the authority says is unpaid.

Balance due

Notice of Tax Due

Kentucky's tax bill. It is issued when the full amount due for a tax period was not paid and shows the tax plus penalties, interest and fees.

Why you got it

  • A return was filed but the tax due was not fully paid
  • An audit or an assessment for a non-filed return found tax due

What to do

  1. Check the periods, amounts and account number against your returns and records
  2. If you disagree, file a written protest within 60 days of the original notice date. This deadline cannot be extended
  3. If you agree, pay the tax and interest, or contact DOR about a payment plan. Unprotested debt goes to the Division of Collections and a 25% cost of collection fee is added
  4. If you had reasonable cause, ask in writing for the penalty to be waived, with supporting documents. Interest cannot be waived

Before you pay penalties: check whether you can ask for them to be waived, and what the state needs paid first. How to ask

Response window: Protest within 60 days of the original notice date

Source: I Received a Tax Bill - Department of Revenue (opens in a new tab)

Audit

A request for records or notice that the authority is examining your returns.

Audit

Audit notice and electronic records request (Computer Assisted Audit Program)

In a sales and use tax audit, DOR asks for your records, preferably electronic transaction data, under its Computer Assisted Audit Program. The audit can end with a Notice of Tax Due.

Why you got it

  • Your business was selected for a sales and use tax audit

What to do

  1. Gather detailed sales and purchase transaction data, general ledgers, trial balances and chart of accounts for the audit period
  2. Provide records electronically if you keep them that way; Kentucky law requires this on request
  3. Review the audit results; you can protest any Notice of Tax Due that follows within 60 days, or ask in writing for a penalty waiver if you had reasonable cause

Source: Kentucky's Computer Assisted Audit Program (CAAP Brochure) (opens in a new tab)

Collections

Enforcement on unpaid balances, such as liens, levies, warrants, or referral to a collection agency.

Collections

Notice of State Tax Lien

A public claim filed in county records against your property for unpaid tax. It can hurt your credit rating.

Why you got it

  • A Notice of Tax Due was mailed demanding payment
  • The tax, penalty, interest and fees were not paid in full

What to do

  1. Pay the liability in full, or contact DOR at once to set up a payment agreement
  2. Note that a lien may still be filed under a payment agreement
  3. If you had reasonable cause, ask the collection officer about waiving penalties or the cost of collection fee. Interest cannot be waived
  4. After payment, ask DOR about lien release

Before you pay penalties: check whether you can ask for them to be waived, and what the state needs paid first. How to ask

Source: Liens - Department of Revenue (opens in a new tab)

Collections

Final Notice Before Seizure / Levy

DOR's Division of Collections can issue bank, wage or third-party levies without going to court, after trying to notify you by certified mail. A certified Final Notice Before Seizure letter is one of the collection steps.

Why you got it

  • A tax debt stayed unpaid after the Notice of Tax Due and follow-up letters
  • An agreed payment plan was not kept

What to do

  1. Contact the Division of Collections right away to pay or arrange payment
  2. Check whether any funds are exempt from levy (for example pensions or public assistance)
  3. Keep filing and paying new periods on time so new balances do not build up

Before you pay penalties: check whether you can ask for them to be waived, and what the state needs paid first. How to ask

Source: Levy - Department of Revenue (opens in a new tab)

Ask for penalty relief

Penalties on a Kentucky notice aren't always final. You can ask for them to be waived. Follow the steps below, including anything the state requires you to file or pay before it reviews the request.

Penalty Waiver for Reasonable Cause

  1. Pay what you can, or set up a payment plan, to limit further interest and penalties
  2. Ask in writing for the penalty (and any cost of collection fee) to be waived, explaining the circumstances
  3. Attach the request to the return, or send it after you receive a notice of assessment, with documents that support your claim
  4. If your account is in collections, the DOR officer assigned to your case can help with the requirements

What qualifies: Reasonable cause: the liability resulted from circumstances beyond your control, you acted reasonably trying to pay on time, or strict enforcement of penalties would cause undue financial hardship

Interest: Interest cannot be waived for reasonable cause (KRS 131.175). It can be waived only if it resulted from incorrect written advice from DOR

Source: Penalties, Interest and Fees - Department of Revenue (opens in a new tab)

Before you respond

  • Check the date on the notice. Response windows usually run from that date, not the day you open it.
  • Match the account number and filing period to your own records before paying or disputing.
  • If returns are missing, filing the actual returns usually replaces an estimated bill. Confirm how on the notice or with the authority.
  • Ask about penalty relief before paying penalties, and check what must be paid with the request. See how
  • Keep a copy of the notice and everything you send back.

This page is general information, not tax or legal advice. Notice names and procedures change, so always follow the instructions on your notice and the official sources linked above.

Need the rates, nexus thresholds and filing rules? Read the Kentucky sales tax guide.

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