Sales, Use and International Tax Activity Update - March 2010

Kentucky Schools Retailers on Retail Tax Liability

The Kentucky Department of Revenue has released a document answering frequently asked questions pertaining to sales and use tax. In addition to the topics below, other topics addressed in the document include sales and use tax record-keeping requirements, how to apply for or close a sales tax account, what transactions are subject to sales and use tax, and what triggers use tax liability.

Drop Shipments

If a Kentucky retailer sells to an out-of-state retailer not registered in Kentucky, and if the Kentucky retailer drop ships the purchased items to Kentucky customers, the out-of-state retailer can issue the Kentucky retailer a completed Kentucky resale certificate (Form 51A1105) with the other state's retail number and include a statement on the certificate that it is an out-of-state retailer not required to hold a Kentucky sales tax permit. Instead of issuing the Kentucky resale certificate or a Streamlined Sales Tax Certificate of Exemption (Form 51A260), out-of-state entities can issue the Multi-state Tax Commission's Uniform Sales and Use Tax Certificate-Multi-jurisdiction.

Refunds Paid to Customers

If a taxpayer refunds money to its customer, the taxpayer must complete an amended return and request credit, or file a refund application (Form 51A209) requesting a refund of the money. Line 28 of the sales and use tax return is not for claiming amounts refunded to customers. Line 28 is only for pre-authorized credits by the department.

Changes in Filing Frequency

The department reviews each sales tax account annually to determine if a taxpayer should report sales and use tax more or less frequently based on the tax liability paid in the past year. Any adjustment made to filing frequency should not change a taxpayer's bookkeeping.

The Kentucky FAQ for Sales and Use Tax can be viewed on the Kentucky Department of revenue Web site.

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