Quick Highlights on Kentucky Sales Tax
| Detail | Value |
|---|---|
| State Sales Tax Rate Range | 6% |
| Base State Sales Tax Rate | 6% |
| Local Rate Range | |
| Economic Nexus Sales Threshold | $100,000 |
| Transactional Threshold | 200 transactions (OR with sales threshold) |
| Reference Period | Current or Previous Calendar Year |
| Registration Deadline | 1st day of the month that is at most 60 days after threshold is met |
| Revenue Authority | Kentucky Department of Revenue |
| Online Filing Portal | Kentucky MyTaxes |
As a business, do I need to collect sales tax in Kentucky?
Businesses are required to collect sales tax in Kentucky if they have a sales tax nexus in the state. This includes having a physical presence or reaching a specific sales level, which establishes an economic nexus. This is why understanding Kentucky state sales tax obligations is crucial for compliance.
Do I have a physical nexus in Kentucky?
A physical nexus in the state of Kentucky is established if your business has a physical presence in the state, like an office, warehouse, or store. Even temporary physical presence, like participating in trade shows or craft fairs, can create a nexus.
In Kentucky, physical nexus is triggered by employees or contractors in any role — including back-office, administrative, and support functions, not just customer-facing roles.
How do I know if I have an economic nexus in Kentucky?
An economic nexus in Kentucky is determined by your sales volume. If your enterprise meets the threshold, you must register for a Kentucky sales tax permit, collect tax on sales shipped to Kentucky, and remit that tax to Kentucky Department of Revenue.
In Kentucky, economic nexus is established if your sales in the state exceed $100,000 OR the number of transactions exceeds 200, based on Current or Previous Calendar Year.
Marketplace sales (e.g., Amazon, eBay) are included when calculating whether you've exceeded the Kentucky economic nexus threshold.
Sales made for resale are included in the nexus threshold calculation for Kentucky.
Non-taxable sales are included in the nexus threshold calculation for Kentucky.
Once you cross the threshold, you must register by 1st day of the month that is at most 60 days after threshold is met.
Which goods are taxable in Kentucky?
In Kentucky, sales tax applies to:
- Retail sales of tangible personal property
- Digital property (digital audio, audiovisual, and books)
- SaaS and prewritten software (since January 1, 2023)
- Over 35 enumerated services added under HB 8, including:
- Photography and photo finishing
- Marketing and telemarketing services
- Landscaping and lawn care
- Janitorial and cleaning services
- Small animal veterinary services
- Fitness and recreational sports centers
What items are exempt from sales tax in Kentucky?
Kentucky exempts the following from sales tax:
- Food and food ingredients for home consumption (unprepared food)
- Prescription drugs and over-the-counter medicines
- Residential utilities (electricity, gas, water)
- Agricultural inputs (feed, seed, fertilizer)
- Machinery for new and expanded industry
- Sales to government entities and qualifying nonprofits
Is SaaS taxable in Kentucky?
SaaS is fully taxable in Kentucky. All cloud software subscriptions delivered to customers in Kentucky are subject to sales tax.
How can a business get a sales tax permit in Kentucky?
To obtain a sales tax permit in Kentucky, businesses need to register with the Kentucky Department of Revenue. Registration can be completed online through the Kentucky MyTaxes.
You will need to provide detailed information about your business, including business type, ownership details, and the nature of your business activities.
When should a business file sales tax in Kentucky?
Sales tax returns in Kentucky are generally due on the 20th day of the following month for the previous period. Based on your annual tax liability, you may qualify for a less frequent filing schedule:
Note: Kentucky requires electronic filing and payment of sales and excise taxes through the MyTaxes system, with limited hardship waivers available. Filing frequency is assigned by the Department of Revenue based on your tax liability.
You can file your Kentucky sales tax return through the Kentucky MyTaxes at https://mytaxes.ky.gov/.
Does Kentucky offer a timely filing discount?
Yes, Kentucky offers a timely filing benefit for businesses that file and pay on time:
Kentucky provides a vendor compensation for timely filing and payment:
- 1.75% of the first $1,000 in taxes owed
- 1.5% of any amount above $1,000
- Capped at $50 per return
The compensation is automatically calculated when filing online. Late filings forfeit this benefit.
What are the penalties for late filing in Kentucky?
Kentucky imposes the following penalties for non-compliance:
- Late filing/payment penalty: 2% of the total tax due for each 30-day period (or fraction thereof) the return is late, up to a maximum of 20%
- Fraud penalty: 50% of the tax due for false or fraudulent returns
- Interest: Accrues on unpaid tax from the due date at the statutory rate
Penalties may be waived for reasonable cause. Contact the Kentucky Department of Revenue for abatement requests.
Is shipping taxable in Kentucky?
In Kentucky, the taxability of shipping and handling depends on how the charge is presented. Generally: • Taxable: If the shipping charges are mandatory or included in the price of a taxable item. • Non-Taxable: If shipping is separately stated on the invoice and provided as an optional service to the customer. Note: If you ship a mix of taxable and non-taxable goods in Kentucky, the shipping charge must usually be prorated to determine the taxable portion. Confirm current rules with Kentucky Department of Revenue at https://revenue.ky.gov/.
Does Kentucky have a Remote Seller program?
Kentucky requires remote sellers who exceed the economic nexus threshold to register, collect, and remit sales tax using standard state rates.