Helpful Kentucky Sales and Use Tax Facts
- Jan 16, 2014 | Gail Cole
The Kentucky Department of Revenue published Sales Tax Facts in December of last year. It explains exemptions, unmasks use tax, and provides filing tips for both paper and electronic filers in Kentucky.
Exemptions for exempt entities
Under Kentucky law KRS 139.470(7), statutory or constitutional agencies of the state eligible for an exemption from income tax in Kentucky “may apply for a purchase exemption authorization to be exempt from sales and use tax on their purchases used within their exempt function.” The Application for Purchase Exemption Sales and Use Tax (Form 51A125) is only appropriate for “charitable, educational or religious institutions; historical sites; cemeteries, and units of federal, state or local government.”
Exempt purchases must be adequately documented with receipts and exemption certificates. Exemptions only apply to purchases made on behalf of the exempt organization: “Any official or employee who uses his position to make a tax-free purchase for his own personal use or that of any other person will subject himself to...” penalties.
Use tax and internet purchases
The Kentucky Department of Revenue reminds that “many purchases via the Internet are subject to Kentucky use tax.” If sales tax was not collected by the seller at the time of sale, and if the purchased tangible personal property and digital property is “stored, used, or consumed in the state of Kentucky,” then the purchaser is “directly liable” for use tax. For filing purposes:
- Retail businesses should report use tax on their sales and use tax return, line 23(a);
- Individuals should report use tax on their individual income tax return;
- Consumer use tax accounts should report use tax on Form 51A113; and
- Nonregistered accounts (either individual or business) may use Form 51A113(O).
Individuals don’t need to know the exact amount of use tax owed in order to report and remit it. Kentucky provides “a convenient use tax table with the individual income tax instructions to calculate an estimated amount of use tax due according to a person’s Kentucky adjusted gross income for the calendar year.”
Use tax notification
Thanks to a law that took effect on July 1, 2013, out-of-state retailers meeting certain requirements “must notify their Kentucky customers that use tax must be reported and paid directly to the Department of Revenue on applicable purchases in accordance” with Kentucky law. Furthermore, remote retailers “are prohibited from stating or implying on their websites or in their catalogs that there is no Kentucky tax due on such purchases.”
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