RATE OF SALES TAX:
6.00%
LOCAL & COUNTY MAXIMUM RATES:
None
Table of Contents
What Are the Taxable Goods and Services?
The first step in sales tax compliance is determining if the items or services your firm offers are taxable in Kentucky.
Traditional Products and Services
Physical property, such as furniture, household appliances, and automobiles, is subject to sales tax in Kentucky.
Groceries, prescription medications, and fuel are all free from sales tax.
Some Kentucky services are subject to sales tax. View this PDF from the Kentucky Department of Revenue website for a complete list of taxable services.
Digital Products and Services
A digital item or service is anything that is supplied electronically, such as a music downloaded from iTunes or a movie bought from Amazon.
Because digital items are considered tangible personal property, Kentucky compels companies to collect sales tax on their sales of digital goods.
Kentucky, however, has one exemption to this restriction. Businesses are required to collect sales tax on pre-written computer software offered online.
How to Register for Sales Tax in Kentucky
If you have concluded that you must charge sales tax on part or all of the products and services that your company sells, the next step is to apply for a seller’s licence.
This enables your company to collect sales tax on behalf of the municipal and state governments.
You will need the following information to register:
Date of application
Legal company name
Account numbers from the past
Primary business location Type of ownership
Information about different sorts of sales
All firms must have a North American Industrial Classification System (NAICS) designation. Find the NAICS code. You may do an NAICS Code Lookup to locate the NAICS Code for LLC that corresponds to your industry.
Number of Social Security
A Resale Certificate might help you save money.
When acquiring items for resale, your firm does not have to pay sales tax if you obtain a resale certificate, also known as a reseller’s permit.
Sales Tax Collection
After obtaining your seller’s licence and starting your company, you’ll need to figure out how much sales tax to charge various consumers. It is critical for company owners to collect the right rate of sales tax to avoid penalties and the danger of expensive audits.
When computing sales tax, consider the following types of transactions:
Store Sales Shipping Within-State Sales Outside-State Sales
Sales inside the state
It is simple to calculate sales tax on products sold in Kentucky. Simply impose a flat sales tax of 6.000% on all products, whether sold in-store or sent across the state.
Out-of-State Purchases
Kentucky firms must only pay sales tax on out-of-state sales if they have a presence in other states.
Nexus indicates that the company has a physical presence in another state.
Common nexus types include:
A physical place, such as an office, retail shop, or warehouse.
An employee who works from home or as a roaming sales representative.
An affiliate marketer
Dropshipping from a third-party vendor.
A temporary physical site, such as a festival or fair booth.
Submit Your Sales Tax Return
You’re ready to submit your sales tax return now that you’ve obtained your Kentucky seller’s permit and understand how to charge the correct amount of sales tax to all of your customers. You avoid penalties and fines, be sure to meet all filing dates.
How to File a Claim
Businesses in Kentucky are required to file sales tax forms and make sales tax payments online.
How Frequently Should You File?
The frequency with which you must submit is determined by the total amount of sales tax collected by your firm.
Annual filing: If your company receives less than $125 in sales tax each month, you should submit returns on an annual basis.
Quarterly filing: If your company receives between $125 and $1,200 in sales tax every month, you should choose to submit quarterly returns.
Monthly filing: If your company receives between $1,200 and $10,000 in sales tax each month, you must submit monthly returns.
Prepaid-monthly filing: If your company receives more than $10,000 in sales tax each month, you should submit returns in advance on a monthly basis.
Deadlines for Filing
The deadline for all Kentucky sales tax returns is the 20th of the month, unless it is a weekend or federal holiday, in which case the deadline is postponed to the following working day.
Penalties for Filing Late
Kentucky levies a late filing penalty of 2% each month or partial month, with a minimum penalty of $10 and a maximum penalty of 20% of the tax owed on the tax return. If this penalty is imposed, the late payment penalty is waived.
Kentucky additionally imposes a late payment penalty of 2% per month up to 20% of the unpaid tax if the return is not submitted by the due date.
For any unpaid tax or penalty, the state levies a compounding interest rate of 6% per year or 0.5% each month or partial month.