Kentucky needs more auditors to go after noncompliant businesses

The Kentucky Department of Revenue is looking to nearly double its auditing staff in the coming months. While this is good news for prospective auditors, companies out of compliance in the Bluegrass State may be less cheered by the news.

Governor Andy Beshear’s executive budget recommendation gives the Department of Revenue an additional $6.5 million over two years “to improve the collection of due and owing tax payments.” $1,500,000 in fiscal year 2021 and $5,000,000 in fiscal year 2022 will support the hiring of additional staff — aka, auditors.

With their help, the department is expected to collect an extra $7.6 million more in fiscal year 2021, and an additional $28.2 million in fiscal year 2022. The department’s new integrated tax system should further streamline tax collections.

Kentucky’s sales and use tax collections are already strong: Receipts grew by 4.9% in the second quarter of fiscal year 2020, “a net $48.0 million improvement over FY19.” That’s impressive, considering sales and use tax receipts grew by 9.2% in FY10. 

Several factors have contributed to this growth. The state has required remote sellers to collect and remit sales tax since October 1, 2018. Marketplace facilitators became responsible for collecting and remitting the tax due on third-party sales on July 1, 2019, further boosting collections. And the state broadened sales and use tax to many previously exempt services as of July 1, 2018.

All these changes make it more difficult for businesses to stay on top of their tax obligations and remain in compliance. The new auditors, once hired, are unlikely to lack for things to do.

Incidentally, Kentucky isn’t the only state seeking auditors this year; the state of South Dakota is also looking to fill several auditor positions.

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