How do I collect sales tax legally?

How to Collect Sales Tax Legally in Kentucky

Collecting sales tax in Kentucky requires understanding state-specific rules and following proper procedures to ensure compliance. As of 2026, here is the operational guidance for legally collecting sales tax in Kentucky.

Registering for a Kentucky Sales Tax Permit

• Register with the Kentucky Department of Revenue (KY DOR): Before collecting sales tax, your business must obtain a sales tax permit by registering online through the KY DOR website.
• Provide accurate business information: During registration, supply your business name, address, federal EIN, and details about your business activities.
• Receive your sales tax account number: This number must be used on all sales tax filings and correspondence.

Collecting Sales Tax from Customers

• Determine taxable sales: Most tangible personal property sales and some services are subject to sales tax in Kentucky. Verify which products or services are taxable.
• Apply the correct tax rate: Kentucky’s statewide sales tax rate is 6%. Some local jurisdictions may add local option taxes; confirm the applicable rates based on your business location.
• Display sales tax separately: On customer receipts or invoices, show the sales tax amount separately from the sale price.

Reporting and Remitting Sales Tax

• File sales tax returns regularly: Depending on your sales volume, you may need to file monthly, quarterly, or annually. KY DOR provides filing frequency instructions upon registration.
• Use KY DOR’s online portal: Submit your sales tax returns and payments electronically for accuracy and convenience.
• Keep detailed records: Maintain sales records, exemption certificates, and tax collected for at least three years for audit purposes.

Additional Operational Considerations

• Manage exemptions properly: Some customers or sales may be exempt from sales tax. Collect valid exemption certificates to support exempt sales.
• Automate sales tax calculations: Use accounting or point-of-sale software integrated with Kentucky’s tax rates to reduce errors and improve efficiency.
• Stay updated on tax changes: Sales tax laws and rates can change. Regularly review KY DOR communications to adjust your processes accordingly.