Kentucky: Sales Tax Handbook
What constitutes sales tax nexus in Kentucky?
One of the more complicated aspects of Kentucky sales tax law is sales tax nexus, the determination of whether a particular sale took place within the taxation jurisdiction of Kentucky, and is thus subject to state (and possibly local) sales taxes.
If a vendor's transactions are determined to have nexus in Kentucky, the vendor must register for a Kentucky sales tax license and collect appropriate sales taxes from the buyer for all transactions with nexus in the state. On this page, we have compiled some of the most commonly needed facts about what constitutes sales tax nexus in Kentucky.
Sales Tax Nexus in Kentucky
According to Kentucky's law, retailers who have tax nexus can be defined in several distinct ways. To have tax nexus, the business must meet a minimum of one of the following requirements
Owning, leasing property, has computer software which is utilized by a third party user located within the state, an employee or any other business representitive within the state's boundaries, services which are completed in the state, merchandise stored in a warehouse within the state, or by participating in craft or trade festivals in Kentucky for a total of at least fifteen days per year.
For additional details on sales tax nexus law in Kentucky, see the nexus information page from the Department of Revenue at http://revenue.ky.gov/NR/rdonlyres/68F3BACE-F56F-4719-9E68-B61D497D6DDC/0/13_41A8001213.pdf
Taxation of Internet-Based Sales in Kentucky
NOTE: 2018 Supreme Court Ruling Regarding Online Sales Taxes
In the 2018 Supreme Court case South Dakota vs. Wayfair Inc, Et Al., the court overturned a previous ruling that required a merchant to have physical nexus in order for a state to collect sales tax. This means that any state is now free to enforce collection of sales taxes on out-of-state online merchants. The information provided here may be subject to change, and many states are expected to begin collecting online sales taxes following this ruling.
Generally, Kentucky does not charge sales tax on Internet-based transactions determined to have nexus within the state. This means that purchases from Amazon.com and other Internet-based retailers may be sales-tax-free.
The nexus status and taxability of Internet-based sales, by vendors and/or consumers within Kentucky, have been the subject of hot debate in recent years. You can learn more on our introduction to Internet-based sales taxes.
Does my business have tax nexus in Kentucky?
The folks at the sales tax compliance company Avalara are an approved Kentucky sales tax partner, and you can use their free Kentucky nexus wizard tool to determine whether or not your business has nexus, and is therefore required to pay Kentucky sales taxes. If you're interested in automating your sales tax collection and filing process, click here to get more information.
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