Kentucky imposes a state sales tax on transactions for tangible personal property at a rate of 6 percent. Accordingly, properly licensed Kentucky businesses must collect the tax and remit the tax revenue to the Kentucky Department of Revenue. To do so, businesses must fill out Kentucky sales tax forms and file them yearly, quarterly or monthly depending on the amount of taxes the business owes. Kentucky counties and cities do not impose any additional sales tax on top of the state rate, so filling out a Kentucky sales tax form is pretty straightforward, particularly now that you can file online.
Calculate your gross receipts. A business's gross receipts from the sale of tangible personal property dictates how much tax liability the business has. The Internal Revenue Service defines gross receipts as “the total amounts the organization received from all sources during its annual accounting period, without subtracting any costs or expenses.” This amount serves as the basis for your tax liability. In other words, because your tax liability is a percentage of your gross receipts; the higher your gross receipts are, the higher your tax liability will be.
Subtract any deductions. Kentucky sales tax law provides for a number of deductions, and the sales tax form has different codes for different deductions. Make sure you match up any applicable deductions you have with the codes on the form and write them in the sales tax form. The form provides for 10 itemized deductions. Make sure you have documentation for any deductions you are claiming.
Calculate your tax liability. Once you have calculated your gross receipts and listed your deductions, subtract your deductions from your gross receipts. For example, if you have $1,200 in gross receipts and $200 in deductions, you owe 6 percent of $1,000 in sales taxes. Six percent of $1,000 is $60. Therefore, your tax liability would be $60.
File the sales tax form with the Department of Revenue, and remit your payment. You have a couple of options for filing the form with the Department of Revenue. You can file it online or mail the form in. To file online, you must register on the Department of Revenue’s website to obtain an e-file account. If you choose to efile, you can only access the form once you create an efile account. To obtain the form to mail a return, you must obtain a copy from a local office of the Department of Revenue. If you mail the return, you must make sure its postmarked before the due date unless the due date is a Sunday or legal holiday. In that case, it must be postmarked by the following business day. Make sure you include payment with the form to avoid penalties and interest.
Three types of transactions are exempt from sales taxes. Sales for resale are exempt under Kentucky sales tax laws. The seller must obtain a Resale Certificate to claim this exemption, though. In addition, property purchased that will be delivered outside of Kentucky is exempt. Finally, sale of property that Kentucky sales tax laws have specifically exempted fall into this category.
Make sure you file timely and remit payment in full. You can be penalized for filing late and for making a late payment. Penalties are 2 percent of taxes owed for every 30 days of late filing and the same for late payment.