Sales Tax Challenges in Kentucky and Beyond

Did you know Kentucky was listed on Kiplinger’s 2011 10 tax-friendly states for retirees? But just because it’s an attractive place to live for grandma and grandpa doesn’t mean that doing business in Kentucky and neighboring states is easy.

Here are some recent developments in sales tax legislation in Kentucky and bordering states that underscore just how hard it can be to do business across state lines:

  • HB 440 and Kentucky Use Tax: In 2013, Kentucky enacted a use tax notification requirement for out-of-state retailers. Out-of-state retailers who aren’t required to collect sales tax on sales to Kentucky residents are required to comply with guidelines around notifying consumers of their use tax obligations.
  • Ohio and SST: Ohio will enjoy full membership in the Streamlined Sales Tax Project as of January 1, 2014. Kentucky is already a full member, as is Indiana (see the full list). Look for a simplified sales tax structure that encourages out-of-state sellers to voluntarily collect and remit tax in Ohio.
  • Indiana and product taxability: In Indiana, marshmallows are taxable, but marshmallow crème is not. While chances are this is not relevant to you, the point is that food item taxability varies. Also manufacturing and farming machinery/equipment exemption are available, subject to limitations. Bundled (taxable and non-taxable items sold together as a single unit) transaction exemption rules apply.
  • Tennessee and local rate changes: This month, two cities raised their local option tax rates…but only on the first $1,600 of the sale price and with a single article cap of $44.
  • West Virginians and food tax: This year, West Virginia eliminated the state sales tax on food, although taxes still apply to certain food categories, such as vending machine food and soft drinks.
  • Illinois Amazon Tax was ruled to be discriminatory: The Illinois Supreme Court upheld a ruling by the lower court citing the click-through nexus law or “Amazon tax” is a “discriminatory tax on electronic commerce”.

From quirky food laws to hotly disputed legislation, the one thing all these states have in common is that sales tax is hard. Keeping up with the ins and outs of sales tax regulations, even one state over, can be time-consuming and inaccurate. A systematic approach to sales tax management is key to protecting yourself in the case of an audit.

 

If you’d like to some pointers on developing an effective, proactive strategy that will minimize your audit risk while making you more efficient, join Oasis Solutions and Avalara for a live webinar on November 21 at 10 AM EST: 5 Sales and Use Tax Tips for 2014.

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