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Kentucky levies a statewide 6 percent sales and use tax. The state does not have discretionary taxes (local sales tax). It does have several industry-specific taxes. Business taxpayers can pay online or mail-in payments, but only if they do not have access to the internet. Businesses without internet will have to call the Department of Revenue to request the proper sales and use tax forms.
Types of taxes
In addition to the sales and use tax, Kentucky has several industry-specific taxes, including an alcohol tax, telecommunications tax, transient room tax, and a tobacco tax. Taxes are figured on the sales price for most items.
Sales and use tax rates
Kentucky businesses must collect a 6 percent sales tax on certain services and retail sales of digital property and tangible personal property.
The use tax works in conjunction with the sales tax. If a business purchases taxable items and does not pay the sales tax, it must pay the use tax. A business must pay the use tax if it purchases goods from out of state, and the seller does not charge sales tax.
The sales and use tax forms are not available online. They are scannable. However, businesses must be sure to use the correct forms, or they could see a processing delay or transposition errors, which could cause the sales tax return to be late.
If a business loses the original form, it can call (502) 564-5170 for a replacement. A business may also pick up a new form at any of the Department of Revenue’s field offices in:
- Frankfort: 501 High St., Station 38, Frankfort, KY 40601
- Louisville: 600 West Cedar Street, 2nd Floor West, Louisville, KY 40202
- Florence: Turfway Ridge Office Park, 7310 Turfway Road, Suite 190, Florence, KY 41042
- Owensboro: Corporate Center, 401 Frederica Street, Building C, Suite 201, Owensboro, KY 42301
- Corbin:15100 North US 25E, Suite 2, Corbin, KY 40701
- Paducah: Clark Business Complex, Suite G2928, Park Avenue, Paducah, KY 42001
- Ashland: 1539 Greenup Ave., Ashland, KY 41101
- Pikeville: Uniplex Center, 126 Trivette Dr., Suite 203, Pikeville, KY 41501
- Bowling Green: 201 West Professional Park Court, Bowling Green, KY 42104
- Hopkinsville: Kentucky Department of Revenue, 181 Hammond Dr., Hopkinsville, KY 42240
The use tax return is the same as the sales tax return.
Transient rental tax
Kentucky has a transient rental tax of 1 percent for the following types of businesses:
- Motor courts
- Tourist camps
- And similar accommodations.
Campgrounds are not included.
VRBO and Airbnb collect the 1 percent tax, so marketplace sellers using them do not have to charge the tax – VRBO and Airbnb collect the taxes. Additionally, those renting only through the marketplaces do not need a Transient Room Tax Account.
Business filers can file the transient tax online.
Businesses must still collect the Kentucky state sales tax rate of 6 percent, plus any transient room tax assessed by local jurisdictions.
Cigarette and tobacco tax
Kentucky charges a cigarette tax and tobacco tax on tobacco products, including vaping products. Wholesalers must affix a tax stamp on packs of cigarettes. The tax for a pack of 20 cigarettes is $1.10. The tax stamps “prove” that the tax was paid. Selling unstamped cigarettes in Kentucky is illegal.
Additionally, each pack carries a $0.003 for each pack stamped. The three-tenths of a cent is the Cigarette Enforcement Administration Fee.
Various forms of tobacco have a tax rate of 15 percent of the actual price of the product. These forms include:
- Smokeless tobacco products
- Chewing tobacco
- Smoking tobacco
Snuff, dry snuff, and snus have a tax of 19 percent per 1.5 ounces net weight.
Leaf tobacco not for smoking, including loose-leaf, twist chewing tobacco, and plug chewing tobacco, is taxed at various rates:
- 19 cents per unit less than 4 ounces.
- 40 cents per unit weighing at least 4 ounces but not more than 8 ounces.
- 65 cents per unit weighing at least 8 ounces but not more than 16 ounces.
- For units weighing over 16 ounces, the first 16 ounces have a 65-cent tax. Each additional 4 ounces is 19 cents.
Through July 1, 2024, all new tire sales are accompanied by a $2 fee for each new tire for motor vehicles, trailers, and semi-trailers. The retailer must collect Kentucky’s 6-percent sales tax on the fee.
Vehicle rental excise tax
Instead of implementing a rental tax on motor vehicles, Kentucky charges a motor vehicle usage tax of 6 percent for every motor vehicle used in Kentucky.
Registering for and filing Kentucky’s taxes
The easiest way to pay taxes in Kentucky is to open an online account for taxpayers. Business filers can also mail in tax reports and remit payments for sales of goods and services by mail. However, Kentucky only takes paper filings from businesses that do not have internet.
The tax filing due dates are the month following the month a business collected the tax. For example, tax collected in January is due on or before February 20.
If the state allows a business to file quarterly, remit the tax reports and payments on or before the 20th day of the month following each quarter (April, July, October, January).
Yearly tax accounts must remit tax due and reports showing tax liability on or before January 20 of the following year.
Kentucky tax exemptions
Kentucky exempts certain prescription drugs from sales and use tax. It also exempts prosthetic devices and certain delivery charges from sales and use tax.
Groceries are tax-exempt, but soft drinks and candy are not. Vending sales and prepared foods are also subject to Kentucky’s sales and use tax.
Calculating Kentucky’s sales and use tax rates
To calculate Kentucky’s sales and use tax, multiply the purchase price by 6 percent (0.06). For example, an item that costs $100 will have a tax of $6, for a total of $106 (100 times .06 equals 6).
If a business sells several items in one transaction, it can figure the tax on each item individually or on the total of the items. Most point-of-sale systems figure the tax as the retailer rings up the purchase, then provides a total at the bottom of the receipt.
Remote sellers are required to collect Kentucky sales tax if they have 200 or more transactions or $100,000 in gross receipts from sales to Kentucky residents and businesses. If a seller does not charge Kentucky sales tax, the buyer must pay use tax on the purchase. However, most businesses collect sales tax as a courtesy to the buyer.
New businesses will know at the end of the first year of business whether they should collect sales tax because the thresholds are based on the previous year’s sales.
The sales and use tax for Kentucky is 6 percent.
Visit the business’s online account or download an application for the tax resale certificate that fits your business’s needs.
In many cases, another state’s laws indicate that you do not have to collect taxes on sales of tangible personal property unless you meet a certain threshold. However, most businesses collect taxes from buyers in other states as a convenience for the buyer.
If you do not charge sales tax, notify the buyer that he must pay sales tax.
Kentucky does not have a sales tax holiday.
It takes up to three weeks for the Kentucky Department of Revenue to process the application.
Yes. The receipt must show sales tax as a separate line item. A business does not have to print a separate sales tax line for every item on the receipt. One line showing the total sales tax revenue is acceptable.
Yes. A seller can keep 1.75 percent of the first $1,000 in taxes and 1.5 percent if any amount over $1,000 is collected. However, the compensation has a cap of $50 per reporting period. If a business’s return is filed or paid late, the business cannot deduct the compensation.
A business may use a debit or credit card or may pay by ACH with an electronic check. The state charges a service fee of 1.5 percent per transaction for debit cards and 2.75 percent per transaction for credit cards. Paying by ACH/electronic check is free.