Kentucky Sales Tax Rates

Total Range for 2024

6%

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Why do you need to collect sales tax in Kentucky?

If you’re selling goods and services in Kentucky then sales tax might apply! To determine your obligation, you need to understand “nexus,” which ties businesses to states for tax purposes.

Two types of nexus exist:

  1. Physical Nexus: Having a physical presence, like an office, warehouse, or employees in Kentucky, triggers this type. If you do, you likely need to collect sales tax.
  2. Economic Nexus: This kicks in when your sales within Kentucky exceed a certain economic threshold. Even without a physical presence, surpassing this threshold requires collecting sales tax.

In Kentucky, there is also a transaction threshold of 200, which means that even if your sales aren’t over $100,000 if you’ve sold more than 200 items then you still need to pay sales tax.

Is what you’re selling taxable in Kentucky?

Now that you’ve grasped the basics of Kentucky’s sales tax and nexus thresholds, let’s delve into whether your specific products or services are taxable.

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How to register for sales tax in Kentucky

There are two main ways to register for a sales tax permit in Kentucky:

  1. Online: This is the recommended method as it’s faster and easier.
    • Visit the Kentucky Online Gateway (https://kog.chfs.ky.gov/home/).
    • You will need to register with the Kentucky Department of Revenue (DOR) before applying for a sales tax permit.
    • The online application will ask for information about your business, such as:
      • Business name, address, and contact information
      • Federal Employer Identification Number (EIN)
      • Date your business began or will begin operations
      • Projected monthly sales
      • Projected monthly taxable sales
      • Products or services you will be selling
  2. Paper Application:
    • Download the Kentucky Tax Registration Application (Form 10A100) from the Kentucky Department of Revenue website.
    • Fill out the application completely and mail it to the Kentucky Department of Revenue.

How to collect sales tax in Kentucky

Here’s a breakdown of how to collect sales tax in Kentucky:

  • Know the Rate: It’s 6% state sales tax (no local taxes).
  • Charge & Record: Add the tax to your prices and keep track of sales and collected tax.
  • File & Pay: File your sales tax returns (monthly, quarterly, or annually) and send the collected tax to the Kentucky Department of Revenue (online, mail, or phone).
Example:
  • Since Kentucky has a 6% state sales tax, you’ll need to calculate the amount of sales tax to be added:
    • Sales Tax = Price of Item x Sales Tax Rate
    • Sales Tax = $50 x 6%
    • Sales Tax = $3
  • The total price you would pay for the jacket, including sales tax, would be:
    • Total Price = Price of Item + Sales Tax
    • Total Price = $50 + $3
    • Total Price = $53

FAQs

Do you have a physical nexus in Kentucky?

A physical nexus in Kentucky, for sales tax purposes, means you have a substantial physical presence in the state. This presence triggers the obligation to register for a sales tax permit and collect sales tax from your Kentucky customers. Here’s how to determine if you have a physical nexus in Kentucky:

Factors indicating a physical nexus:

  • Physical Location: Owning or leasing a warehouse, retail store, office, or any other property in Kentucky creates a physical nexus.
  • Employees or Representatives: Having employees, salespeople, or independent contractors who regularly solicit sales or perform services in Kentucky establishes nexus.
  • Inventory: Storing inventory or products in a Kentucky warehouse or fulfillment center creates a physical nexus.
  • Trade Shows & Events: Participating in trade shows or events in Kentucky for more than 15 days per year might establish nexus.
Do you have an economic nexus in Kentucky?

Kentucky has economic nexus thresholds that determine if an out-of-state seller needs to register for a sales tax permit and collect sales tax from Kentucky customers, even without a physical presence in the state. Here’s how to know if you have economic nexus in Kentucky:

  • Thresholds: Kentucky uses a double threshold system:
    • Sales Amount: If your out-of-state business makes more than $100,000 in gross sales from Kentucky customers in the previous or current calendar year, you have economic nexus.
    • Transaction Count: OR, if your business conducts more than 200 separate transactions into Kentucky in the previous or current calendar year, you also have economic nexus.
  • What’s Included:  These thresholds consider all sales delivered to Kentucky, including taxable sales, exempt sales (like groceries in some cases), and sales for resale.
What is use tax in Kentucky?

In Kentucky, use tax applies to purchases made from out-of-state retailers where you don’t pay sales tax at the time of purchase, but the items are then used in Kentucky. It essentially ensures fairness in the sales tax system.

Here’s a breakdown of Kentucky use tax:

  • Rate: The use tax rate in Kentucky is the same as the state sales tax rate, which is currently 6%.
  • What it applies to: Use tax applies to tangible personal property (goods) you purchase from out-of-state retailers (online or by mail order) that you will use, store, or consume in Kentucky. There are some exemptions, similar to sales tax exemptions (e.g., prescription drugs).
  • Who’s responsible: You, the buyer, are responsible for reporting and paying use tax on these purchases.
Do you need a seller/reseller permit?

In Kentucky, you don’t necessarily need both a seller’s permit and a resale certificate. They serve different purposes:

  • Seller’s Permit (Sales Tax Permit):  This is required if you sell taxable goods or services in Kentucky. It allows you to collect sales tax from your customers and remit it to the state.
    • Who Needs It: Retail stores, restaurants (for prepared food), car dealerships, service providers with taxable services (e.g., car washes, cleaning services with certain exceptions), and more.
  • Resale Certificate:  This is a certificate you provide to your suppliers to exempt yourself from paying sales tax on purchases of goods you intend to resell.
    • Who Needs It: Businesses that buy products to resell (retail stores, wholesalers, manufacturers) should obtain a resale certificate.
How to get a sales tax permit/license in Kentucky?

Get your Kentucky sales tax permit (seller’s permit) in two ways:

  1. Online (Fast & Easy):
  • Head to the Kentucky Online Gateway (https://kog.chfs.ky.gov/home/).
  • Register with the Department of Revenue (might be done within the same portal).
  • Fill out the online application with your business info (name, address, EIN, etc.)
  1. Paper Application:

The wait is on! Processing can take 2-3 weeks. You might also need a surety bond depending on your business.

When are Kentucky's Returns Due?

Kentucky sales tax returns are generally due on the 20th of the month following the end of the reporting period.  There’s a bit of flexibility, though, depending on the day of the week and holidays.

The frequency of filing your Kentucky sales tax returns depends on your business’s sales volume.

  • Monthly: If your projected monthly sales tax liability is $10,000 or more, you’ll likely file monthly.
  • Quarterly: Businesses with lower sales tax liability may be able to file quarterly.
  • Annually: Low-volume sellers might only need to file annually.
How to file sales tax in Kentucky
  1. Determine Your Filing Frequency
  2. Gather Your Records:
  • You’ll need detailed records of all your sales transactions for the filing period, including:
    • Date of sale
    • Amount of each sale
    • Amount of sales tax collected
  1. File and Pay Electronically (Recommended):
  • Kentucky Department of Revenue website: https://revenue.ky.gov/ offers the most convenient way to file and pay your sales tax electronically.
    • You can create an account, file your return, and submit your payment all in one place.
  1. Alternative Filing Methods:
  • While electronic filing is preferred, there are other options:
    • Mail: You can mail a completed paper return and your payment to the Kentucky Department of Revenue.
    • Phone: The Department of Revenue may offer a phone filing option, but it’s best to check their website for current information.
Is anyone exempt from sales tax in Kentucky?

In Kentucky, there are no general exemptions from sales tax for people (residents or non-residents). However, there are exemptions for certain types of purchases:

  • Non-Taxable Goods:  Certain goods are not subject to sales tax,  such as:
    • Prescription drugs and medical equipment
    • Food (except prepared food sold by restaurants and similar establishments)
    • Farm equipment
    • Certain construction materials used for residential or farm buildings
  • Tax-Exempt Organizations:  Organizations like qualified charities, religious organizations, and some government entities may be exempt from paying sales tax on purchases they make.  They will typically need to provide a valid exemption certificate to the seller.

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