If you buy products exclusively to resale in the state of Kentucky you can often avoid paying sales tax on your purchases by presenting a Kentucky resale certificate at checkout. Always keep in mind that you should only use your resale certificate to buy items you intend to resell or that you intend to use as a component part of an item for resale or incorporated into a service that will be taxed when it is sold. Any other use of a Kentucky resale certificate (such as buying office supplies or personal items) is usually considered unlawful.
Here are the rules and regulations for using (and accepting) a resale certificate in Kentucky.
How to Use a Kentucky Resale Certificate
In Kentucky, you can buy items tax free as long as you plan to either resale them or use them as a component part in an item you intend to lease or resale. According to Kentucky law 103 KAR 28:051, if you don’t end up reselling the item you bought tax free, or if you end up using all or part of it in your own business, then you are responsible for paying use tax on the item you bought tax free.
Kentucky distributes a resale certificate for online sellers to use when buying an item to resale:
To use this resale certificate to make a tax free purchase, simply fill it out completely and present it to the retailer where you are making the purchase. Keep in mind that retailers reserve the right to refuse resale certificates.
Note to resellers: Kentucky has potential criminal penalties for misuse of a resale certificate. You can read more about Kentucky penalties for misuse of a resale certificate here.
How to Accept a Kentucky Resale Certificate
If you are a Kentucky retailer, and you are presented with a resale certificate, you have a few responsibilities:
- Make sure the resale certificate form is filled out accurately and completely – Ensure the form is properly filled out and signed by the buyer.
- Verify that the purchaser has a Kentucky (or other state) resale certificate and Tax ID– Verify the validity of your buyer’s sales tax ID on the Kentucky Department of Revenue website or with the issuing state’s department of revenue. You can find links to verify resale certificates in every state here.
- Keep the resale certificate on file – Keep a fully executed and signed copy of this form in case of audit. If you do not have a resale certificate on hand you could be held liable for uncollected sales tax.
Note to retailers: Kentucky has potential criminal penalties for misuse of a resale certificate. You can read more about Kentucky penalties for misuse of a resale certificate here.
I hope this post has helped you determine how to use and accept a Kentucky resale certificate. If you have questions or something to say, please start the conversation in the comments below! And to learn more about TaxJar and get started, visit TaxJar.com/how-it-works.