The ultimate guide to Kentucky sales tax

2024 overview of sales tax in Kentucky

Welcome to Kintsugi's rundown on tax rates in the state of Kentucky. Kentucky's sales tax rates can vary depending on state, county/city, and local tax rates.

The base state sales tax rate, or the state of kentucky sales tax rate, is set at 6%.

Among the counties, Fayette County has one of the higher additional local tax rates, while counties like Wolfe have some of the lowest.

Districts can also impose their own taxes; the highest district rate can be found in Jefferson County Public School District, whereas the lowest district rate is seen in counties like Robertson.

Sales tax range in Kentucky

In Kentucky, the ky sales tax rates for 2024 have undergone some changes compared to the previous year, 2023. The following provides a concise overview of these changes, highlighting the key shifts:

General Sales Tax Rate 2024 (6%)

The general sales tax rate in Kentucky remains at 6% in 2024. This is consistent with the rate in 2023, indicating no change in the standard rate for most goods and services.

Local Option Sales Tax

Unlike some states, Kentucky does not allow local jurisdictions to impose their own sales taxes on top of the state rate. Therefore, the overall sales tax rate remains uniform across the state. This lack of local sales tax options is the same as in 2023.

Specific Goods and Services

Certain goods and services may see adjustments. For example, some exemptions or tax holidays might change. These specific changes are usually published annually but for 2024, there are no significant alterations reported from the structure in 2023 regarding specific goods and services tax exemptions.

Luxury or Sin Taxes

Additional taxes on items categorized as luxury goods, tobacco, or alcoholic beverages might have slight variations due to legislative adjustments. However, the base rate of 6% for sales tax does not alter. In this sector, any change typically aligns closely with the previous year's rates with minor adjustments reflecting inflation or public health initiatives.

E-commerce

Sales tax for online purchases, often referred to as ky sales tax, remains at 6%, reflecting no change from 2023. Compliance with sales tax in ky is increasingly enforced in 2024. However, there is increased enforcement in 2024 to ensure compliance from more online retailers due to new regulatory measures.

In brief, the primary sales tax rate in Kentucky holds steady at 6% for 2024 with no major structural changes from 2023, maintaining uniformity across both years.

Calculating Kentucky sales tax

Determine the State Sales Tax Rate

• The state sales tax rate for Kentucky is 6%.

Identify Local Tax Rates

• Kentucky does not have local sales tax rates that vary by county or city.

Calculate State Sales Tax for In-Person Sales

• Multiply the sales price by the state tax rate (6%).
• E-commerce Sales Tax:
• For e-commerce sales, apply the same state tax rate of 6%.
• Ensure the seller has a significant nexus (presence) in Kentucky to obligate tax collection.

Software as a Service (SaaS) Tax

• SaaS is generally taxable in Kentucky.
• Apply the state sales tax rate of 6% to the subscription fee.

Service-Based Sales Tax

• Most services are not subject to sales tax in Kentucky.
• Exceptions include admission to events, personal services, landscaping, and more; apply 6% if the service is taxable.

Use Tax for Out-of-State Purchases

• If purchasing from an out-of-state vendor, consumers must pay use tax at the same rate (6%).

Calculations for Combined Transactions

• Separate taxable goods/services from non-taxable.
• Apply 6% tax rate only to the taxable portion of the transaction.

Record and Report Sales Tax

• Maintain proper records of all transactions.
• Submit collected sales tax to the Kentucky Department of Revenue via periodic filings.

Understanding use tax in Kentucky

Understanding use tax in Kentucky for the year 2024 is crucial for both individual consumers and businesses. Use tax applies to the use, consumption, or storage of tangible personal property or services that are acquired outside of Kentucky but used within the state. It complements sales tax and ensures that all taxable transactions contribute to state revenue, maintaining tax fairness and supporting public services.

If you purchase goods from an out-of-state retailer, such as an online store, and the seller does not collect ky sales tax, you are responsible for reporting and paying the equivalent use tax directly to the Kentucky Department of Revenue. The current use tax rate is equivalent to the state's sales tax rate, which is 6%, aligning closely with the sales tax in ky.

For businesses, compliance with use tax, which aligns with the state of kentucky sales tax rate, is part of regular tax filings. Companies must report taxable purchases on their periodic sales and use tax returns, specifically the Sales and Use Tax Return Form 51A102. Individual consumers can report use tax on their Kentucky income tax return or use the Consumer Use Tax Return Form 51A113.

Failure to pay use tax can result in penalties and interest charges. The Kentucky Department of Revenue actively monitors compliance and can audit taxpayers to ensure accurate reporting. It's vital for businesses to maintain thorough records of purchases and receipts to substantiate their use tax filings.

Understanding and adhering to use tax requirements helps foster equitable tax practices and supports the state’s fiscal health, especially in regards to ky sales tax and broader sales tax kentucky policies. For guidance, individuals and businesses are encouraged to consult with tax professionals or engage with the Kentucky Department of Revenue for specific inquiries regarding unique circumstances and detailed compliance procedures.

Recent changes to Kentucky sales tax

If you’re asking, "Does Kentucky have a state tax?"—the answer is yes. Kentucky has a state income tax with a flat rate of 5% on individual earnings. In addition to income tax, there is also a sales tax in KY that applies to the sale of goods and certain services. The sales tax KY imposes is a flat 6% rate across the state, with no additional local sales taxes, making it simpler to calculate. Understanding these tax rates is important for both residents and businesses to ensure compliance and proper financial planning. In 2024, Kentucky has implemented several significant changes to its sales tax laws. These changes have been structured to enhance state revenue and streamline the tax system.

Sales Tax Rate Increase

As of January 1, 2024, Kentucky increased its statewide sales tax rate from 6% to 6.5%. This half-percent hike aims to generate additional revenue for the state’s budget.

Expanded Tax Base

Starting February 1, 2024, Kentucky expanded its sales tax base to cover more services and digital products. Services such as lawn care, personal training, and certain digital subscriptions that were previously untaxed became taxable in 2024. In 2023, these services and products remained exempt from sales tax.

Online Marketplace Collection

Effective March 1, 2024, the state also reinforced its online sales tax collection requirements. Marketplaces facilitating third-party sales now must collect and remit sales tax on behalf of their sellers if their combined sales in Kentucky exceed $100,000 or 200 transactions annually. This threshold mirrors the 2023 regulation but includes tighter enforcement measures.

Reduction in Compliance Burden

Kentucky introduced measures to simplify the compliance process starting April 1, 2024. The state’s Department of Revenue now provides an integrated digital platform for filing and paying sales taxes, which aims to reduce the administrative burden on small businesses. In 2023, businesses had to navigate more fragmented systems.

Luxury Goods Taxation

Beginning May 1, 2024, luxury items such as high-end jewelry and luxury vehicles priced above $100,000 are subjected to an additional 2% surcharge. This tax change marks a new policy in 2024; such luxury surcharges were not previously imposed in 2023.

Comparatively, these changes mark a shift towards increasing state revenues through higher rates and broader tax bases in 2024, compared to the more limited and lower rate-based system of 2023.

Excise and discretionary taxes and other sales tax considerations in Kentucky

In Kentucky, there are several specific excise taxes, discretionary taxes, and sales tax considerations that are noteworthy as of 2024. Here’s a rundown of some key components:

Excise Taxes

Alcoholic Beverages

Kentucky imposes excise taxes on alcoholic beverages, which include beer, wine, and distilled spirits. The rates vary based on the type of beverage and quantity.

• Beer: $2.50 per barrel.
• Wine: $0.50 per gallon.
• Distilled Spirits: $1.92 per gallon.

Tobacco Products

• There are excise taxes on cigarettes and other tobacco products.
• Cigarettes: $1.10 per pack of 20 cigarettes.
• Other Tobacco Products: Typically 15% of the wholesale price.

Motor Fuels

• Kentucky has an excise tax on gasoline, diesel, and other motor fuels.
• Gasoline: $0.26 per gallon.
• Diesel: $0.25 per gallon.

Marijuana and Vaping Products

If applicable, considering the evolving laws, there may be specific excise taxes on these products, though this information may need to be updated based on the latest legislative developments.

Discretionary Taxes:

Local Option Sales Taxes

Some counties or municipalities in Kentucky have authority to impose additional local option sales taxes for specific purposes, like funding projects or paying municipal debts.

Sales Tax Considerations:

General Sales Tax Rate

Kentucky has a state sales tax rate of 6%.

Tax Holidays

Occasionally, Kentucky might offer tax holidays where certain items (like back-to-school supplies or energy-efficient appliances) are exempt from sales tax for a specified period.

Use Tax

This is applicable for goods purchased out-of-state for use in Kentucky where sales tax was not collected. The use tax rate is also 6%.

Exemptions

Certain goods and services are tax-exempt in Kentucky. This can include groceries, prescription medication, certain agricultural supplies, and manufacturing machinery.

Remote Sales

Following the South Dakota v. Wayfair decision, Kentucky imposes sales tax requirements on remote sellers who meet certain sales thresholds to Kentucky residents.

Environmental Fees

Kentucky imposes various environmental fees, such as a hazardous waste assessment and a petroleum storage tank assessment.

When considering taxes in Kentucky, it’s important to be aware of updates or changes in tax laws, which can occur annually or during legislative sessions. For the most current and comprehensive information, consulting the Kentucky Department of Revenue or a tax professional would be advisable.

Understanding nexus in Kentucky for local and out-of-state sellers

Physical nexus

Physical nexus for sales tax in Kentucky refers to the presence, activities, or property of a business within the state, which establishes sufficient connection to impose tax obligations.

2024 Changes

• Brick-and-Mortar Stores: Retailers with physical storefronts in Kentucky.
• Employee Presence: Businesses employing residents or temporary workers within the state.
• Inventory Storage: Possession of inventory stored in Kentucky warehouses.
• Property Ownership: Ownership or rental of real or personal property in Kentucky.
• Sale Events: Participation in trade shows or similar events within the state.

2023 Values

• Brick-and-Mortar Stores: Retailers with physical storefronts in Kentucky.
• Employee Presence: Businesses employing residents or temporary workers within the state.
• Inventory Storage: Possession of inventory stored in Kentucky warehouses.
• Property Ownership: Ownership or rental of real or personal property in Kentucky.
• Sale Events: Participation in trade shows or similar events within the state.

In both years, physical nexus criteria in Kentucky remain consistent. The presence of physical locations, employees, inventory, owned or rented property, and temporary sales events all establish taxable nexus for businesses.

Economic nexus

In 2024, Kentucky's economic nexus laws for sales tax include notable changes to thresholds and compliance requirements compared to 2023.

2024 Economic Nexus in Kentucky:

• Thresholds: Sellers must collect sales tax if they meet either of the following criteria in the previous or current calendar year: $100,000 in gross sales or 200 separate transactions.
• Remote Sellers: All remote sellers exceeding the thresholds must register for a sales tax permit and remit taxes.
• Marketplace Facilitators: Entities facilitating sales on behalf of third-party sellers must ensure compliance if the combined sales meet the thresholds.
• Reporting: More stringent reporting requirements are introduced, demanding detailed transaction data from businesses meeting the economic nexus criteria.
• Penalties: Enhanced penalties for late or inaccurate tax filings, including potential interest charges on overdue amounts.

2023 Economic Nexus in Kentucky

• Thresholds: The sales threshold was the same at $100,000 in gross sales, but there was no specific transaction count requirement.
• Remote Sellers: Similar obligations existed for remote sellers to collect and remit taxes if the financial threshold was met.
• Marketplace Facilitators: Facilitators were required to comply with sales tax collection and remittance, though enforcement was less strict.
• Reporting: Reporting obligations were less rigorous, with fewer details required for each transaction.
• Penalties: Penalties were present but not as enhanced or strictly enforced as in 2024.

Comparison illustrates the introduction of the 200 separate transactions threshold in 2024, heightened reporting requirements, and stronger penalties for non-compliance relative to 2023.

Affiliate nexus

In 2024, affiliate nexus for sales tax in Kentucky continues to evolve, impacting how businesses determine their tax obligations.

The primary updates from 2023 to 2024 are as follows:

• Significant Presence Threshold: For 2024, Kentucky maintains the $100,000 sales threshold or 200 transactions for establishing nexus. This is unchanged from 2023, ensuring consistency for online and remote sellers.
• Affiliate Relationships: Kentucky’s definition of affiliate nexus remains largely consistent in 2024. It includes any person or entity with a physical presence in the state that refers customers indirectly through links or other means, mirroring the 2023 criteria.
• Economic Nexus: Kentucky's economic nexus laws continue to focus on revenue thresholds, similar to 2023, with no major changes to the $100,000 sales or 200 transactions minimums that trigger sales tax obligations for remote sellers.
• Marketplace Facilitators: The requirements for marketplace facilitators remain the same in 2024 as they were in 2023. Facilitators must collect and remit sales tax on behalf of third-party sellers if they meet the economic nexus criteria.
• Compliance and Registration: In 2024, remote sellers and marketplace facilitators are still required to register for Kentucky sales tax if they meet the nexus thresholds. This process has not significantly changed from 2023, keeping the administrative burden consistent for businesses.
• Penalties and Enforcement: Kentucky’s enforcement of nexus rules and penalties for non-compliance saw no substantial changes in 2024 compared to 2023. The state remains vigilant in ensuring compliance through similar penalties and interest rates for late or inaccurate filings.
• Reporting Requirements: Reporting obligations for businesses with affiliate nexus remain steady in 2024, matching the standards set in 2023. Detailed record-keeping and timely filing continue to be crucial for compliance.

Kentucky’s approach to managing affiliate nexus for sales tax in 2024 largely reflects the practices and thresholds established in 2023, providing stability and predictability for businesses.

Click-through nexus

Kentucky Click-Through Nexus for Sales Tax in 2024

Thresholds: In 2024, Kentucky requires remote sellers to collect sales tax if they exceed $100,000 in gross sales or 200 transactions. In 2023, the thresholds were different; the sales threshold was $250,000, but the transaction threshold was the same at 200.

Affiliate Relationships: For 2024, any relationship where a Kentucky-based affiliate drives internet traffic to the seller's website, resulting in sales, establishes nexus. In 2023, only direct links leading to a minimum of $10,000 in sales established nexus.

Contract and Agreement Terms: In 2024, the requirement for establishing nexus includes explicit contracts of compensation for referral leads through a link. In 2023, any form of commission-based agreement could create nexus without specificity in contract language.

Disclosures: 2024 legislation mandates detailed monthly disclosures of affiliate activities and resultant sales. In 2023, disclosures were required quarterly with less specificity on the affiliate’s promotion strategies.

Enforcement and Penalties: The penalty for non-compliance in 2024 has increased to 20% of the tax due, up from 10% in 2023. Additionally, remote sellers face audit requirements within one year of surpassing nexus thresholds in 2024, compared to a two-year window in 2023.

Marketplace nexus

In 2024, Kentucky's marketplace nexus rules for sales tax have evolved compared to 2023. Here are the key differences and updates:

Economic Threshold

2024: Kentucky maintains its economic nexus threshold at $100,000 in gross sales or 200 separate transactions.

2023: The threshold was the same, with a focus on ensuring remote sellers and marketplace facilitators exceeding these limits collect and remit sales tax.

Marketplace Facilitators' Responsibilities

2024: Marketplace facilitators remain responsible for collecting and remitting sales tax on all sales made through their platform, including those made by third-party sellers.

2023: Similar responsibilities were in place for marketplace facilitators but increased compliance checks are seen in 2024.

Remote Sellers Without Physical Presence

2024: Remote sellers with no physical presence in Kentucky must continue to comply if they surpass the economic nexus threshold.

2023: Enforcement of compliance for remote sellers was emphasized, and this focus persists in 2024.

Penalties for Non-Compliance

2024: The penalties for non-compliance have become stricter, with added fines and the potential for more rigorous audits.

2023: Penalties were present but more lenient compared to the enhanced enforcement seen in 2024.

Exemptions and Deductions

2024: Introduction of a few new product-specific exemptions and refinements to existing deductions.

2023: Exemptions and deductions were in place but fewer amendments and additions compared to 2024.

Vendor Collection Credits

2024: The state maintains vendor collection credits but with a slight reduction in the credit percentage allowed.

2023: Vendor collection credits were higher, reflecting the state’s efforts to incentivize proper tax collection.

Reporting Requirements

2024: Enhanced reporting requirements mandate more detailed transaction data submissions to improve tax accuracy.

2023: Reporting requirements were simpler, with less granular data required.

Customer Notification Requirements

2024: Stricter customer notification requirements have been introduced to ensure buyers are aware of their tax obligations.

2023: Notification requirements existed but were less stringent.

Kentucky's 2024 updates in sales tax regulations reflect a broader trend of tightening enforcement and increasing compliance measures compared to 2023.

Trade shows

In 2024, businesses participating in tradeshows in Kentucky must adhere to specific sales tax obligations. Here are the key points:

Sales Tax Nexus

Kentucky requires any vendor making sales at tradeshows within the state to register for sales tax if they establish a substantial nexus. Presence at a tradeshow can create this nexus.

Registration

Vendors must register for a Kentucky Sales and Use Tax Permit prior to attending and selling at tradeshows.

Tax Collection

Registered vendors are required to collect the 6% Kentucky sales tax on all taxable sales made during the tradeshow.

Reporting and Payment

Collected sales tax must be reported and paid to the Kentucky Department of Revenue as part of the vendor's regular sales tax return filings.

Temporary Vendors

Vendors participating on a temporary basis must adhere to the same registration, collection, and reporting requirements.

Exemptions and Resale

Vendors selling products for resale should obtain and keep resale certificates from buyers to support tax-exempt sales.

Compliance

Failure to comply with these obligations can lead to penalties and interest on unpaid sales tax.

Kentucky emphasizes the importance of compliance with sales tax laws for all businesses, including those attending temporary events such as tradeshows.

Fulfillment by Amazon and nexus

Fulfilment by Amazon (FBA) is a service where sellers store their products in Amazon's fulfillment centers, and Amazon handles storage, packaging, shipping, customer service, and returns. Sellers send their inventory to Amazon warehouses, and Amazon takes over from there, allowing sellers to leverage Amazon's expansive logistics network.

Kentucky Sales Tax Obligations for 2024: 1. Sellers using FBA with inventory stored in Amazon warehouses in Kentucky establish a physical presence, thus creating nexus and requiring them to collect sales tax. 2. Marketplace facilitator laws mandate that Amazon, as a marketplace facilitator, collects and remits sales tax on behalf of third-party sellers for sales made through its platform in Kentucky. 3. Third-party sellers must still maintain accurate records of sales transactions and confirm that Amazon is collecting and remitting the correct amount of sales tax. 4. Sellers must register with the Kentucky Department of Revenue and file sales tax returns if they make direct sales to customers in Kentucky and have a physical or economic nexus in the state. 5. Sellers should monitor changes in tax laws to stay compliant with Kentucky's sales tax regulations, as these can impact tax collection responsibilities. 6. Economic nexus threshold: If a seller's sales revenue exceeds $100,000 or 200 transactions in Kentucky in the previous or current calendar year, they must collect and remit sales tax.

FBA simplifies logistical processes but adds a layer of complexity concerning sales tax obligations, necessitating diligence from sellers to ensure compliance with Kentucky laws in 2024.

Permits, certificates and sales tax registration in Kentucky

To register for sales tax in Kentucky in 2024, you'll need to obtain a Kentucky Sales and Use Tax Permit. Start by creating an account on the Kentucky Business One Stop Portal and completing the Kentucky Tax Registration Application (Form 10A100). Be prepared to provide your business details, including federal tax ID, business structure, and NAICS code. Once registered, you'll report and remit sales tax collected from transactions.

Registering for sales tax collection in Kentucky

• To register for sales tax collection in Kentucky in 2024, you need to follow these steps:

Determine Eligibility

• Ensure your business needs to collect sales tax. In Kentucky, almost all sales of tangible personal property and certain services are subject to sales tax.

Obtain an Employer Identification Number (EIN)

• If you don't already have one, you need to get an EIN from the IRS. This number identifies your business for tax purposes.

Register with the Kentucky Department of Revenue

• Online Registration: The simplest way is to register online through the Kentucky One Stop Business Portal. This is an integrated system where you can handle various business registrations.
• Mail or In-Person Registration: If you prefer, you can also register by mailing in the paper forms or by visiting a Kentucky Department of Revenue office in person.

Complete the Application

• Fill out the "Revenue Form 10A100," which is the Kentucky Tax Registration Application.
• Provide information about your business, including the type of business, business name, EIN, physical and mailing addresses, and details about the owners or officers of the business.

Submit Your Application

• If you're submitting online, follow the instructions on the portal to finalize your registration.
• For mail, send the completed form to the address specified on the form.
• If in person, hand the form over to a representative at a local office.

Receive Confirmation and Account Number

After your application is processed, the Kentucky Department of Revenue will send you a confirmation along with your sales tax account number. This number is important for filing and paying sales tax.

Start Collecting Sales Tax

Begin collecting sales tax on your taxable goods and services according to Kentucky law.

File and Remit Sales Tax

Once registered, you must regularly file sales tax returns and remit the tax collected to the Kentucky Department of Revenue by the due dates established.

By following these steps, you can ensure that you're properly registered for sales tax collection in Kentucky, complying with state requirements.

Cost of registering for sales tax in Kentucky in 2024

In Kentucky, as of 2024, there is no fee to register for a sales tax permit. The registration process is free of charge for businesses.

Federal tax ID requirements for registering

Yes, if you are registering for sales tax in Kentucky and you are a business entity (such as an LLC, corporation, partnership, etc.), you will generally need an Employer Identification Number (EIN). The EIN is used to identify your business for tax purposes and is also known as a Federal Tax Identification Number.

To register for an EIN, you will need to go through the Internal Revenue Service (IRS). You can apply for an EIN online through the IRS website.

Here is the link to register for an EIN: Apply for an EIN

Once you have your EIN, you can register for sales tax in Kentucky through the Kentucky Department of Revenue. You can do this online via the Kentucky One Stop Business Portal.

Here is the link to the Kentucky One Stop Business Portal: Kentucky One Stop Business Portal

So in summary:

• Obtain an EIN from the IRS: Apply for an EIN
• Register for sales tax in Kentucky: Kentucky One Stop Business Portal

I hope this helps!

Streamlined sales tax program and Kentucky

As of my last update in 2021, Kentucky is indeed a full member of the Streamlined Sales Tax Governing Board, which means it participates in the Streamlined Sales and Use Tax Agreement (SSUTA). This program aims to simplify and modernize sales and use tax administration in order to reduce the burden of tax compliance for sellers.

However, I recommend checking the most current information from the Streamlined Sales Tax Governing Board or the Kentucky Department of Revenue to confirm Kentucky's status in 2024, as memberships and participation can change.

Acquiring a business and registering for sales tax in Kentucky

Sure! If you're acquiring a business in Kentucky and need to handle sales tax registration for that business, here are the key requirements you should be aware of:

Business Registration

Before you can register for a sales tax permit, you need to ensure that your business is properly registered with the Kentucky Secretary of State, if necessary. This typically involves filing formation documents for a corporation, LLC, or other business entities.

Sales and Use Tax Permit

Obtain a Sales and Use Tax Permit from the Kentucky Department of Revenue. You will need to complete the appropriate application, which may include details such as:

• The legal name and physical address of the business.
• Federal Employer Identification Number (FEIN).
• Type of ownership (sole proprietorship, partnership, corporation, etc.).
• Information on the primary business activity.
• Details on owners, partners, or corporate officers.

Successor Liability

When acquiring an existing business, beware of successor liability. You may be held liable for any outstanding sales tax obligations of the previous owner. It's advisable to obtain a tax clearance certificate from the seller, indicating that all sales taxes are paid up to date.

Bond Requirement

In some cases, the Kentucky Department of Revenue may require a security bond if they deem it necessary to ensure the collection of sales taxes.

Local Requirements

Some local jurisdictions within Kentucky may have additional registration and tax requirements. Check with local city or county authorities where the business will operate.

Maintaining Records

Sales tax requires diligent record-keeping. Maintain comprehensive records of all sales, purchases, and tax returns for at least four years.

These are the primary steps and considerations for registering for sales tax in Kentucky when acquiring a business. Ensure you follow all state guidelines and consult with a professional if needed to ensure compliance.

Other Kentucky registrations to consider

In Kentucky, alongside sales tax registration, you may need to consider the following registrations and licenses:

Business Registration

You may need to register your business with the Kentucky Secretary of State to legally conduct business within the state.

Employer Identification Number (EIN)

If you have employees, you will need to obtain an EIN from the IRS.

Employer Registration

Register with the Kentucky Department of Revenue for state employer taxes including withholding tax.

Unemployment Insurance

Register with the Kentucky Office of Employment and Training if you have employees to handle unemployment insurance.

Workers' Compensation Insurance

If you have employees, you may be required to carry workers' compensation insurance.

Local Licenses and Permits

Depending on your business location and type, you might need additional licenses or permits from the city or county. For example, a local business license or health permits for food-related businesses.

Professional Licenses

Certain professions may require specific state licenses or certifications (e.g., contractors, real estate agents, health care providers).

Regulatory Permits

Depending on your business activities, you might need specific state regulatory permits (environmental permits, alcohol licenses, etc.).

Make sure to review the specific requirements for your type of business and location to ensure full compliance with state and local regulations.

Requirements for online sellers in Kentucky

In 2024, online sellers in Kentucky are generally required to collect and remit sales tax if they meet specific criteria. These requirements typically relate to economic nexus, which means that a seller must collect Kentucky sales tax if they have a substantial presence in the state, even if they do not have a physical location there.

For economic nexus in Kentucky, the criteria include:

Sales Threshold: If an online seller grosses over $100,000 in sales or conducts 200 or more separate transactions in Kentucky within a calendar year, they are required to collect and remit sales tax.

Registration: Once the seller meets the economic nexus threshold, they must register for a Kentucky sales tax permit and regularly file sales tax returns.

Tax Collection: Sellers must collect the appropriate amount of sales tax on taxable goods and services sold to customers in Kentucky. The state’s sales tax rate is generally 6%.

Documentation and Compliance: Online sellers need to maintain accurate records of their sales and tax collected to comply with state regulations and facilitate any potential audits.

Failure to comply with these requirements can result in penalties and interest charges. It's important for online sellers to monitor their sales figures and transaction counts to ensure they are meeting state obligations.

Collecting sales tax in Kentucky

In 2024, Kentucky businesses are required to collect a 6% sales tax on the sale of taxable goods and services. Compliance involves registering with the Kentucky Department of Revenue, accurately calculating the tax on each transaction, and timely filing and remitting collected taxes to the state.

Understanding origin vs. destination sales tax collection

Kentucky is a destination-based sales tax collection jurisdiction. This means that the sales tax rate is determined based on the location where the buyer receives the goods or services. In Kentucky, sellers are required to collect sales tax based on the rate applicable at the buyer's location.

For more detailed information, you can refer to the official source from the Kentucky Department of Revenue: https://revenue.ky.gov/

Taxable products in Kentucky

As of the most recent information available through 2023, Kentucky levies sales tax on a variety of product genres. Here is an overview:

Tangible Personal Property

This encompasses most physical items, including but not limited to:

• Electronics (computers, smartphones)
• Clothing
• Furniture
• Appliances
• Vehicles

Digital Products

• Sales tax also applies to digital goods such as:
• Downloaded music, movies, books, and other electronic media

Utilities

• Taxed utilities can include:
• Electricity
• Gas
• Water
• Telephone services

Prepared Foods

Any food that is cooked or assembled and sold for immediate consumption, such as:

• Restaurant meals
• Hot deli items

Certain Services

Although Kentucky generally does not tax a wide range of services, some that are taxable include:

• Admissions to amusement parks, theaters, and other entertainment venues
• Landscaping and lawn care services
• Extended warranties in conjunction with a taxable product
• Rental of personal property (e.g., tool rentals)

Alcoholic Beverages

Sales of beer, wine, and spirits are subject to sales tax.

It’s important to note that this list might not be exhaustive, and tax laws are subject to change. For the most current and specific information, consulting the Kentucky Department of Revenue or a tax professional is advisable.

Non-taxable products in Kentucky

In Kentucky, certain product genres are exempt from sales tax. Here are a few key categories:

Food and Food Ingredients

Basic groceries and food items that aren't prepared or served for immediate consumption.

Certain Medical Supplies and Prescriptions

This includes prescription medications, some durable medical equipment, and select medical supplies.

Agricultural Supplies

Specific items used in farming and agriculture, such as feed, seed, and fertilizers.

Sales to Charitable Organizations

Items sold to IRS-recognized non-profit organizations intended for charitable use.

Utilities Used in Production

Electricity, water, and other utilities consumed in manufacturing or industrial production processes.

Things are changing all the time, so please refer to the Kentucky Department of Revenue for more information about taxable items within Kentucky.

Is SaaS taxable in Kentucky?

In Kentucky, SaaS (Software as a Service) is subject to sales tax. The state treats SaaS similarly to tangible personal property, meaning businesses and consumers using SaaS services are required to pay the applicable sales tax as per state tax regulations in 2024.

Are digital products taxable in Kentucky?

In Kentucky, as of 2024, digital products are generally subject to sales tax. This includes items like e-books, music downloads, and streaming services. Consumers purchasing these digital goods should expect to pay the applicable state and local sales taxes on their transactions.

Are services taxable in Kentucky?

In Kentucky, as of 2024, many services are subject to sales tax. This includes labor services, professional services, and certain personal services. However, there are exemptions, such as healthcare and educational services. It’s important to check specific regulations to determine if a particular service is taxable.

Sales tax exemption certificates

In Kentucky, sales tax exemption certificates are used by eligible buyers to purchase goods and services without paying sales tax. These certificates are issued primarily to businesses and organizations that qualify for tax-exempt status, such as non-profits, government entities, and certain manufacturers involved in production. To use an exemption certificate, the buyer must present it to the seller at the time of purchase. The seller is responsible for keeping the certificate on file as proof of the tax-exempt transaction. Misuse of these certificates can lead to penalties and back taxes. Proper documentation and understanding of eligibility criteria are essential for compliance.

State tax holidays in Kentucky for 2024

Sales tax holidays are specific periods when certain items are exempt from sales tax, often to encourage consumer spending.

In 2024, Kentucky does not have any scheduled sales tax holidays.

Filing sales tax returns in Kentucky

Filing sales taxes in Kentucky involves several steps:

Register for a Sales Tax Permit

You must register with the Kentucky Department of Revenue (KDOR) to obtain a sales tax permit here.

Collect Sales Tax

Begin collecting sales tax from customers based on the state's sales tax rate of 6%.

Keep Records

Maintain detailed records of all sales and taxes collected.

File Your Return

Sales tax returns can be filed online through the Kentucky Business One Stop Portal.

Due Dates

Returns are generally due monthly, by the 20th of the month following the reporting period.

Payment

Pay any taxes owed via the online portal or by mailing a check to the KDOR.

File Zero Returns

Even if no sales are made, a zero-return filing is still required.

Penalties and Interest

Late filings or payments can incur penalties and interest.

For more detailed information, visit the Kentucky Department of Revenue.

Sales tax filing frequency

In the state of Kentucky, the frequency of filing sales tax returns depends on the volume of sales made by a business. The Kentucky Department of Revenue categorizes businesses into different filing frequencies to streamline the tax collection process.

Monthly Filing

Businesses with higher sales volumes are generally required to file their sales tax returns monthly. The threshold for monthly filing is usually a significant amount of taxable sales or a substantial sales tax liability.

Quarterly Filing

Businesses with moderate sales volumes may qualify for quarterly filing, which means they need to file their sales tax returns only four times a year. This option is typically available to businesses whose sales or tax liabilities do not reach the threshold required for monthly filing.

Annual Filing

Small businesses with lower sales volumes might be permitted to file their sales tax returns annually. This is the least frequent filing option and is usually reserved for businesses with minimal taxable sales.

Seasonal Filing

Some businesses that operate on a seasonal basis might be granted a seasonal filing status. These businesses file their sales tax returns only for the months they are operational.

Businesses must ensure they adhere to the assigned filing frequency to maintain compliance with state tax regulations. Failure to file sales tax returns on time can result in penalties and interest. The specific thresholds and criteria for each filing frequency can be obtained from the Kentucky Department of Revenue, which periodically reviews and updates the filing requirements based on changes in business activity and state tax law.

For businesses initiating operations in Kentucky or those experiencing significant changes in sales volume, it is advisable to consult with the Department of Revenue or a tax professional to determine the appropriate filing frequency and ensure all obligations are met.

Filing when no sales tax has been collected

In Kentucky, if you are registered for sales tax but fail to collect it, you must still file a zero return for each reporting period. Not doing so can result in penalties and interest on any owed amounts. Additionally, the state may assess your business based on estimated sales, leading to further complications. Compliance is essential to avoid fines, penalties, and potential audits. Therefore, even if no taxable sales were made, timely submission of zero returns to the Department of Revenue is crucial to maintain good standing and avoid unnecessary penalties.

Penalties for late filing and non-payment of sales taxes

In Kentucky, timely filing and payment of sales taxes is crucial to maintaining compliance with state tax laws. When businesses file their sales tax returns late, they may incur penalties and interest charges. These penalties typically start with a flat fee, and additional fees may be applied based on the duration of the delay. Interest on the unpaid tax amount accrues from the original due date until the tax is fully paid.

Non-payment of sales taxes is a serious issue and can lead to more severe consequences. If a business fails to submit the required sales tax payments, the Kentucky Department of Revenue can take action to recover the owed amounts. This may include levying bank accounts, garnishing wages, filing liens against the business, or even revoking business licenses. Moreover, continuous non-compliance can lead to legal actions and significant financial burdens.

Businesses are encouraged to ensure timely filing and full payment of sales taxes to avoid these penalties and maintain good standing with the state. Utilizing accounting software or consulting with a tax professional can help ensure compliance with Kentucky’s sales tax regulations and deadlines.

Sales tax discounts and incentives

As of 2024, Kentucky offers several sales tax incentives and discounts to businesses to promote economic activity and investment in the state. Notably, Kentucky provides sales tax exemptions for certain purchases that are integral to business operations. These exemptions often include the purchase of machinery or equipment used in manufacturing, processing, or other industrial activities. Additionally, businesses involved in agriculture, mining, and pollution control can benefit from targeted sales tax exemptions for specific equipment and supplies essential to their operations.

Another significant incentive is the state's Enterprise Zone program, which offers qualifying businesses located in designated zones an exemption from sales tax on purchases of qualified tangible personal property. This incentive aims to encourage business investment and job creation in economically distressed areas.

Kentucky also offers businesses in the renewable energy sector sales tax exemptions for equipment used in generating electricity from renewable resources. This is part of a broader strategy to promote sustainable practices and support the green energy industry.

While these are some of the primary sales tax incentives and discounts available, businesses may find additional targeted programs or local incentives depending on their specific industry and location within Kentucky. Businesses are advised to consult with state resources or tax professionals to fully understand and take advantage of these opportunities.

2024 sales tax filing due dates for Kentucky

Monthly: 20th of the following month

Quarterly: 20th after quarter end

Shipping and sales tax in Kentucky

When to pay tax on shipping in Kentucky

In Kentucky, the rules regarding sales tax on shipping charges can be somewhat specific. As of my last update, if the shipping charges are separately stated on the invoice or bill to the customer, and they relate to the sale of tangible personal property, they are generally not subject to sales tax. However, if the shipping charges are included as part of the selling price of the tangible personal property, then they become subject to sales tax.

Therefore, a business needs to carefully distinguish and document shipping charges on their invoices to ensure they handle sales tax correctly. The key points are:

Separately Stated Charges

If shipping charges are separately listed on the customer invoice, they are not typically subject to sales tax.

Bundled Charges

If shipping charges are combined with the price of goods, the total amount becomes subject to sales tax.

It's always advisable to check for the latest guidelines from the Kentucky Department of Revenue or consult with a tax professional for the most current and detailed information, as tax regulations can change.

Does Kentucky Have State Tax?

Indeed, Kentucky imposes a state sales tax on the retail sale of tangible personal property and certain services. This tax, levied at a rate of 6%, is crucial for generating revenue that supports various state functions and services.

Sales Tax in KY

Sales tax in KY encompasses a broad range of goods and services, with specific rules determining which items are taxable. Both tangible personal property and some digital goods and services fall under this tax. It’s essential for businesses to stay updated on these regulations to ensure compliance and avoid penalties.

Sales Tax KY

For businesses operating in Sales Tax KY, adhering to state guidelines and correctly applying tax rates on transactions is vital. The Kentucky Department of Revenue provides detailed resources and guidance to assist businesses in navigating the complexities of sales tax compliance, ensuring fair practice and legal adherence across the state.