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Kentucky Sales and Use Tax FAQS


 No matter how you shop in Kentucky, sales or use tax is due.

In a recent newsletter, the Kentucky Department of Revenue reminds taxpayers of numerous sales and use tax requirements. Topics range from food to internet sales tax.

Food

Certain types of food and food ingredients are exempt from Kentucky sales tax, provided they are for human consumption. It is more expedient to list what is not exempt. Taxable foods include:

  • Alcoholic beverages
  • Candy
  • Dietary Supplements
  • Prepared foods
  • Soft drinks (includes Gatorade, flavored water, and a few other surprises)
  • Tobacco

 Use tax

When taxpayers do not pay sales tax on tangible personal property at the time of purchase, Kentucky use tax is due. Untaxed purchases most frequently occur out-of-state or remotely, as with internet or catalog sales.  Retailers should report Kentucky use tax on line 23(a) of the sales and use tax return. Individuals should report it on their individual income tax returns.

To help spread the use tax word, remote vendors that do not collect Kentucky sales tax are required to notify their customers of their use tax obligation.

Drop shipments

For tax purposes, drop shipments are treated as two transactions:

  1. The sale from the seller (manufacturer-wholesaler) to the purchaser (retailer).
  2. The sale from the purchaser (retailer) to the end consumer.

Tax requirements depend on the location of the seller, the purchaser, and the end consumer. When all three are located in Kentucky, “the retailer furnishes a resale certificate to the seller (manufacturer/wholesaler) … and collects sales tax on the final sale to the end consumer.”

Complications arise when the retailer is located out-of-state. An out-of-state purchaser (retailer) should issue a Kentucky resale certificate (Form 51A105), but make a notation on the form that it is a nonresident retailer not required to register in Kentucky. The end consumer must remit use tax.

Additional information, including paper and online filing tips, is available in the December Sales Tax Facts.

Simplify sales tax in Kentucky and other states. Learn more.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.