Sales Tax APIThe same engine Zamp customers use.Even though Kentucky only has a state sales tax (making it a single sales tax state), it’s still important to understand the state’s sales tax regulations if you sell taxable products and services to Kentucky residents.
This Kentucky sales tax guide will address the most critical questions, such as how to collect sales tax, who has to collect it, whether services are taxable in the state, and more.
Additionally, we’ll introduce you to Zamp, a trusted tax management platform that ensures sales tax compliance throughout the process.
Collecting Kentucky Sales Tax from Customers
If you sell goods or services in Kentucky or to Kentucky-based customers, you may have questions about collecting the state sales tax.
We’ll address the most common questions below.
Do I Have to Collect Kentucky Sales Tax from Customers?
Online sellers or business owners who reach nexus based on physical or economic activity must collect sales tax from their customers. However, you may be exempt from collecting sales tax if you do not achieve nexus.
What Creates Sales Tax Nexus in Kentucky?
Some factors that create nexus in the state include:
- Economic Nexus: Online businesses achieve nexus when they have 200 or more sales transactions or generate more than $100,000 in gross receipts in Kentucky.
- Physical Location: Businesses have a physical nexus if they have a physical presence, such as an office, repair shop, warehouse, meeting room, or a publicly listed phone answering service publicly attributed to the company or its representative.
- Employees: Businesses have a physical nexus if they have employees in Kentucky who solicit business or maintain an office for the business.
Learn more about sales tax nexus and when you’re required to collect sales tax.
Do I Have to Collect Sales Tax from Kentucky Customers if I Sell on Amazon, Walmart, Ebay, or Etsy?
No.
Kentucky has a marketplace facilitator law. This means that marketplaces like Amazon or Etsy should collect sales tax on behalf of third-party sellers on their platforms.
However, if you have sales outside of the marketplace in Kentucky, you must collect sales tax on your non-marketplace sales when you have a physical or economic nexus.
Taxable Products in Kentucky
Most tangible personal property, such as clothes and digital products, are taxable in Kentucky. However, Kentucky doesn’t impose a sales tax on groceries.
Let’s take a closer look at how products are taxed in Kentucky.
Are Groceries Taxable in Kentucky?
No. Grocery items are non-taxable in Kentucky.
Is Clothing Taxable in Kentucky?
Yes, clothing is taxable in Kentucky.
Are Digital Products Taxable in Kentucky?
Yes, digital products are taxable in Kentucky.
Is Software-as-a-Service (SaaS) Taxable in Kentucky?
Yes, Kentucky taxes prewritten computer software access services, which are otherwise known as Software-as-a-Service (SaaS).
Are Services Taxable in Kentucky?
Certain services, such as landscaping and pet care services, are taxed in Kentucky. However, not all services are taxable. We recommend contacting a sales tax professional to see whether the services you provide are taxed. You can book a free call with us here.
Tax-Exempt Items
In Kentucky, tangible personal property is presumed taxable unless there is a specific exemption for the item. There are exemptions for items such as:
- Food and food ingredients
- Prescription drugs
- Certain medical supplies
Unless the items you are selling are listed as exempt, they are considered taxable. You need a sales tax permit to collect sales tax. Below, we explore how to get one.
How to Register for a Kentucky Seller’s Permit
You can apply for a seller’s permit online via the Kentucky Business One Stop Portal. Alternatively, you can mail Form 10A100 to the Kentucky Department of Revenue.
Learn how sales tax registration works in every US state.
Do I Need a Kentucky Seller’s Permit if I Only Sell Temporarily in the State?
Businesses that temporarily set up business in a location for a limited time are called “transient merchants” in Kentucky.
They can either set up a business in one locality or travel the state while spending at most six months in one location. These merchants should post a bond and obtain a permit from the county clerk in each county where they conduct business.
Do I Need a Kentucky Sales Tax License if I’m Only a Wholesaler?
Yes, you should apply for a resale certificate (Form 51A105) to be tax-exempt when buying goods you intend to resell.
How to Collect Sales Tax in Kentucky
Kentucky has a state sales tax rate of 6% and no local taxes.
Should You Collect Sales Tax on Shipping Charges in Kentucky?
Yes, Kentucky imposes sales tax on the gross receipts from sales of tangible personal property. Delivery charges, such as shipping, are included in the gross receipts, making them taxable.
How to File and Pay Sales Tax in Kentucky
Here are some ways you can file and pay your sales tax:
- Automated: Let Zamp handle your sales tax filing and remittance so you stay compliant across all states and never have to look at a sales tax return again!
- Online: You can file and pay a Kentucky sales tax return online at the Kentucky Business One Stop Filing Website.
- Electronic Payment: You can use debit and credit cards to pay electronically through the Kentucky Department of Revenue’s Electronic Payment Application.
- EFT payments: Use the Tax Payment Solution Website for EFT payments.
- Offline: Make checks or money orders payable to “Kentucky State Treasurer” and mail to:
KY Department of Revenue
Frankfort, KY 40619
Learn how to file and pay sales tax in other US states here.
