Kentucky Sales Tax Guide 2024: Compliance, Rates, and Regulations for Businesses

Kentucky sales tax at a glance

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Kentucky sales tax rates & calculations in 2023

The Kentucky sales tax rate in 2023 is 6% across the state. This comprises a base rate of 6% with no additional local rates.

Since no local jurisdictions in Kentucky levy a local sales tax, the total tax rate statewide is the 6% state sales tax rate.

Recent tax rate changes in Kentucky

The Kentucky state sales tax rate has remained the same. It has remained at 6% since 1990.

FAQs

How do you calculate Kentucky sales tax?

To calculate Kentucky sales tax, multiply the 6% tax rate by the purchase price. For example, on a $100 purchase, the sales tax would be $6.

Is Kentucky a destination-based or origin-based sales tax state?

Kentucky is a destination-based sales tax state. This means the sales tax rate applied depends on the ship-to-destination.

Is Kentucky a Streamlined Sales Tax state?

Kentucky has been a full member of the Streamlined Sales Tax since October 1, 2005. 

Sales tax nexus in Kentucky

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FAQs

Do I need a Kentucky seller's permit if I’m only a wholesaler?

Yes, wholesalers in Kentucky need a seller's permit to buy goods without paying sales tax under a resale exemption and collect sales tax when making retail sales.

Do I need a Kentucky seller's permit if I only sell temporarily in the state?

Yes, even temporary sales within Kentucky require a seller's permit and sales tax collection. There is no exception for temporary sales activity.

Exemptions from sales tax in Kentucky

Kentucky has a few items that are exempt from sales tax:

• Food and food ingredients: Most food and ingredients for home consumption are exempt in Kentucky. This includes groceries, meat, produce, bread, snacks, bottled water, and more. Prepared foods, dietary supplements, candy, soft drinks, and alcoholic beverages are taxable.
• Uniforms: Unlike some states, clothing purchases in Kentucky are not exempt from sales tax, except for special exemptions, mainly for schools. All non-uniform clothing purchases are subject to the standard 6% tax rate.
• Prescription drugs: Prescribed medicines and certain medical devices used to diagnose or treat medical conditions are exempt. Over-the-counter medications are generally taxable unless prescribed.
• Textbooks: Textbooks required for courses at educational institutions, including K-12 schools, colleges, and universities in Kentucky, are exempt. This includes physical textbooks and digital textbooks accessed electronically.

FAQs

Are groceries taxable in Kentucky?

No. Most grocery food items for home consumption are exempt from Kentucky sales tax.

Is clothing taxable in Kentucky?

Yes. All clothing purchases in Kentucky are subject to the standard 6% sales tax rate unless specifically exempted.

Are digital products taxable in Kentucky?

Yes. Specified digital products like music, ebooks, apps, and streaming services are subject to Kentucky sales tax.

Is software-as-a-service (SaaS) taxable in Kentucky?

Yes. SaaS and other online software subscriptions are subject to Kentucky sales tax.

Are services taxable in Kentucky?

Kentucky taxes several categories of services, including repair and installation services, some personal care services, and nonresidential cleaning services. 

Collecting sales tax in Kentucky

Let’s look at Kentucky's key steps and requirements for collecting sales tax.

Registering for a seller's permit

Any business making taxable sales in Kentucky must register for a Kentucky seller’s permit. This is required even if the company has no physical locations in Kentucky. Registration can be completed online through the Kentucky Taxpayer Access Point (TAP) system.

Once registered, businesses will receive a seller's permit number that must be displayed on all sales invoices. This permit number authorizes a company to collect, report, and remit Kentucky sales tax.

Collecting tax on shipping charges

In Kentucky, delivery charges are subject to sales tax if the items sold are taxable. Some exceptions apply to common carriers and contract carriers.

If the retailer performs shipping, charges are typically taxable. Charges may be exempt if a separate common carrier serves shipping.

See Kentucky sales tax treatment of delivery charges for specifics.

Filing zero returns

Even when no sales were made, registered sellers in Kentucky must file "zero returns" for each assigned reporting period. Failure to file can still result in penalties even when no tax was collected.

Closing seller's permit

To close an active seller's permit in Kentucky, businesses must file a final sales tax return to complete their sales tax account. This also applies when ownership of a company changes hands.

Filing and paying sales taxes in Kentucky

All businesses registered to collect sales tax in Kentucky must file returns and remit the tax they collected to the state. A zero return must be filed even when no tax was collected for a period.

Returns can be filed online through the Kentucky Taxpayer Access Point (TAP) system. Payment can also be remitted electronically when filing online.

Sales tax return filing schedule and due dates

The Kentucky Department of Revenue assigns filing frequencies to each business based on anticipated taxable sales volumes. The schedules are monthly, quarterly, semi-annually, or annually.

The standard due date for all filing schedules is the 20th day of the month following the close of each period. An accelerated program with earlier due dates applies to large businesses with over $10,000 monthly liability.

Monthly:

Returns and payment are due the 20th of the following month, except for December which is due January 21. Accelerated monthly returns for over $10K in liability are due on the 25th.

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Quarterly:

Returns for quarterly filers are due April 22, July 22, October 21, and January 21.

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Semi-Annually:

Returns are due July 22 and January 21.

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Annually:

Returns are due January 21 for the prior calendar year period.

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FAQs

What are the Kentucky sales tax due dates?

Due dates depend on assigned filing frequency but are generally the 20th of the following month. See schedules above.

Do I still need to file a return if I didn’t collect any sales tax?

Every business must file a sales tax return for each period, even if collecting zero tax.

Can I get a filing extension in Kentucky?

Yes, filing extensions may be granted if requested before the original due date per KRS 131.081. An extension allows for late filing but does not extend the time to pay taxes owed. Interest and penalties may still apply to late payments.

Kentucky Tax Penalties

The Kentucky Department of Revenue levies monetary penalties as an incentive for complete and timely compliance with tax obligations. Multiple penalties may apply concurrently if there are several areas of non-compliance.

Late Filing Penalty

A penalty of 2% of the total tax due is charged for each 30 days (or fraction thereof) that a tax return is late, up to a maximum of 20%. After a jeopardy assessment, the minimum late file penalty is $100. Otherwise, the minimum is $10.

Late Payment Penalty

A 2% unpaid tax penalty is assessed every 30 days (or a fraction thereof) that payment is late. The maximum late pay penalty is 20% of tax not properly withheld, collected, or remitted. The minimum late pay penalty is $10.

Underpayment of Estimated Tax

Penalty for underpayment or late payment of estimated tax is calculated as the tax interest rate for the year multiplied by the estimated tax underpayment or late payment amount. The penalty is determined separately for each required installment date, and amounts are summed. There is no minimum or maximum limit to the penalty.

Failure to File/Furnish Information Penalty

A 5% penalty applies for each 30 days (or fraction thereof) that a required return or report is not filed, up to 50% of the tax assessed by Kentucky DOR. Minimum penalty is $100.

Fraud Penalty

A 50% penalty is charged on a portion of any tax assessment resulting from fraudulent intent or willful misrepresentation. There is no minimum or maximum fraud penalty.

Kentucky Tax Interest

Kentucky tax interest rates are set each calendar year and applied to unpaid tax balances. Interest accrues from the original due date and cannot be waived.

• 2023 - 8%
• 2022 - 5%
• 2021 - 5%
• 2020 - 7%

Rates from 2009-2019 ranged from 5% - 7%. The interest cannot be waived.

Kentucky Sales Tax Audit & Appeals Process

The Kentucky sales tax audit process is extensive, beginning with the initial notification of an audit through the final resolution, including any appeals. The Kentucky Department of Revenue (DOR) conducts rigorous audits to verify complete and accurate tax reporting and payments.

Audit Notification

Businesses selected for sales or use tax audits first receive an audit initiation letter from the DOR. This outlines the audit period, information and records needing to be available, and the timing for the on-site review. The law requires reasonable noticeto be provided before auditors arrive.

Information Examined During Audits

Auditors thoroughly examine various business records during on-location sales tax audits. These include but are not limited to:

• Sales invoices, receipts and other proof of transactions
• Bills of lading for inventory transfers
• Bank deposit records
• General ledger, accounts payable/receivable
• Exemption certificates and logs
• Full financial statements
• Accounting system transaction data

Auditor Review Processes

Using the extensive documentation obtained, auditors meticulously review and test all aspects of sales and use tax reporting, including:

• Verify appropriate permit registration
• Sample transaction records to match filed tax returns
• Review classifications of products sold
• Ensure proper jurisdiction tax rates are applied
• Confirm accurate taxability determinations
• Validate exemption certificate details per statutes
• Identify any unreported or under-reported taxable events
• Recalculate percentages, deductions, and exemptions claimed

Audit Results

Once the investigation is complete, auditors issue formal assessments outlining all discrepancies identified and any additional tax, penalties, and interest now owed. Businesses then have certain appeal rights if they disagree with the audit results.

After the audit – Appealing the results

If you disagree with the audit results, you can file a written protest within 45 days. An informal conference will then be scheduled to present documentation contesting the findings. If unsatisfied after the meeting, formal appeals can be made to the Kentucky Claims Commission.

Contesting audit findings helps you:

• Provide documentation not submitted already
• Clarify issues not fully explained initially
• Correct computational errors
• Avoid unnecessary assessments

How to register for sales tax in Kentucky

To register for a seller's permit in Kentucky, visit the Kentucky Taxpayer Access Point (TAP) online portal and file form 10A100. You'll need business activities, ownership structure, locations, and product category details.

Registration requirements for online sellers

Online sellers with either physical or economic sales tax nexus in Kentucky must register to collect sales tax. Economic nexus is established based on $100,000 in Kentucky sales or 200 transactions.

Cost of registration

There is no fee to register for a Kentucky seller's permit. Registration can be completed online through the TAP portal at no cost.

Agencies to register within Kentucky

The Kentucky Department of Revenue handles the state's sales tax registration and collections. No local jurisdictions or agencies within Kentucky are involved in sales tax administration or registration.

More Information & Contacts

For help with Kentucky sales tax questions, registration, filing appeals, or other issues, contact:

• Authority Name: Kentucky Department of Revenue
• Phone number: (502) 564-5170
• Website: revenue.ky.gov

There you have it—a comprehensive guide on Kentucky's sales tax regime. Need help filing taxes for your ecommerce store? Get a demo with Numeral now.