Kentucky – Remote Seller Notice Requirement and Vendor Compensation Modifications

SALT Report 2354 – Kentucky Governor Steve Beshear has signed into law a bill that makes several changes to the state’s sales and use tax laws.

Remote Seller Use Tax Notice Requirement

The Bill requires out-of-state retailers who are not required to collect Kentucky use tax and expect less than $100,000 in gross sales to Kentucky residents and businesses in the current calendar year to provide a notice in their retail catalogs, Web sites, online auction Web sites, and invoices that purchasers of non-exempt tangible personal property or digital property must report and pay use tax directly to the Kentucky Department of Revenue.

The use tax notification must be clearly visible and contain the following statements:

  • 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 simply 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. These forms and corresponding instructions may be found on the Kentucky Department of Revenue’s Internet Web site

The retailer can provide a reference to a supplemental page or link on their Web site that contains the required use tax notification language. The reference must state “See important Kentucky sales and use tax information regarding tax you may owe directly to the Commonwealth of Kentucky.” Additionally, retailers are prohibited from stating or implying on their Web sites or in their catalogs that there is no Kentucky tax due on purchases made from the retailer.

Vendor Compensation

The vendor compensation credit for the collection and remission of sales and use tax has been increased from 1% to 1.5%. Sellers can take this deduction on each tax return due that is in excess of $1,000. The vendor compensation credit allowed on the first $1,000 of tax due remains unchanged at 1.75%. Additionally, the total compensation allowed for each vendor in any reporting period has been reduced from $1,500 to $50.

The provisions in House Bill 440 take effect on July 1, 2013.

For Further Information

Kentucky State Legislature – House Bill 440, Laws 2013