A 6 percent use tax may be due if you make out-of-state purchases for storage, use or other consumption in Kentucky and did not pay at least 6 percent state sales tax to the seller at the time of purchase. For example, if you order from catalogs, make purchases through the Internet, or shop outside Kentucky for items such as clothing, shoes, jewelry, cleaning supplies, furniture, computer equipment, software, office supplies, books, souvenirs, exercise equipment or subscribe to magazines, you may owe use tax to Kentucky. It is important to remember that use tax applies only to items purchased outside Kentucky, including another country, which would have been taxed if purchased in Kentucky.
In addition to the use tax line on the sales and use tax returns (Forms 51A102 and 51A103, line 23a) and the consumer's use tax return (Form 51A113) for businesses, other options exist for individuals to report their use tax, such as:
- Consumer Use Tax Return - Form 51A113(O) (9K), may be filed during the year each time you make taxable purchases; or
- You can report and pay use tax on an annual basis at the same time you file your Kentucky individual income tax return. Please see the Use Tax Look-Up Table information below.
- Collection of use tax is required by county clerks on tangible personal property purchased out-of-state and offered for titling or first-time registration in Kentucky.
Notice to Remote Vendors
Out-of-state retailers with no legal requirement to collect tax in this state, and who expect more than $100,000 in gross annual sales to Kentucky residents, must notify their Kentucky customers that use tax must be reported and paid directly to the Department of Revenue on applicable purchases in accordance with KRS 139.450.
The notice must be readily visible and contain the information set forth as follows:
The retailer is not required to and does not collect Kentucky sales or use tax;
The purchase may be subject to Kentucky use tax unless the purchase is exempt from taxation in Kentucky;
The purchase is not exempt merely because it is made over the Internet, by catalog, or by other remote means; and
The Commonwealth of Kentucky requires Kentucky purchasers to report all purchases of tangible personal property or digital property that are not taxed by the retailer and pay use tax on those purchases unless exempt under Kentucky law. The tax may be reported and paid on the Kentucky individual income tax return or by filing a consumer use tax return with the Kentucky Department of Revenue.
For recent correspondence on this subject, click here.
Credit Against the Kentucky Use Tax Due
You may reduce or eliminate the amount of Kentucky use tax due by the amount of a different state sales tax paid on the same property to the out-of-state seller. The reduction may not exceed the amount of Kentucky use tax due on the purchase. For example, if Georgia state sales tax of 4 percent is paid, only the additional 2 percent is due to Kentucky, or if Illinois state sales tax of 6.25 percent is paid, no additional Kentucky use tax is due. - Sales tax paid to a city, county or country cannot be used as a credit against the Kentucky use tax due.
Use Tax Look-Up Table to Assist Taxpayers in Reporting Untaxed Retail Purchases
Each year, in the Income Tax Instructions, the Kentucky Department of Revenue includes a Use Tax Look-Up Table that allows individuals to estimate use tax owed on their total annual purchases from out-of-state retailers. Recent statistics on retail sales confirm that more and more consumers are establishing a tax liability for themselves through increased use of online shopping. Every year, internet sales continue to increase more rapidly than traditional brick and mortar stores.
Kentucky consumers are required to report use tax on their individual income tax returns to accurately reflect their tax liability, and to ensure that our Kentucky-based retailers are not unfairly undercut by competing out-of-state retailers that fail to collect the tax on taxable products delivered into Kentucky.
When a web-based retailer or any out-of-state retailer does not collect the 6 percent Kentucky sales and use tax, the consumer is responsible for reporting and paying use tax on those untaxed purchases, in accordance with KRS 139.330. The easiest way for the individual consumer to report and pay the use tax is on the state income tax return.
The Look-Up Table provides an option to report estimated use tax owed on retail purchases based upon Kentucky adjusted gross income when receipts are not readily available to calculate the actual unpaid use tax liability.
For questions or further assistance on sales and use tax matters, contact the Kentucky Department of Revenue at 502-564-5170.
E-Mail DOR Taxing Areas
Questions can be directed to the Kentucky Department of Revenue, Division of Sales and Use Tax, PO Box 181, Station 67, Frankfort, KY 40602 (502) 564-5170.