What is use tax?
Kentucky use tax is a tax on tangible personal property and digital property used in Kentucky upon which the sales tax has not been paid. In other words, it is a sort of “backstop” for the sales tax.  Tangible personal property is basically any property that you can touch other than real estate.

What causes use tax to be owed?  There are a number of things.  Here are some usual reasons:

• 1.  Tangible personal property and digital property purchased for resale, but which is used instead of being resold, is subject to sales and use tax.
• 2.  Property which is purchased, leased or rented outside of Kentucky and is brought into Kentucky for storage, use or other consumption is subject to the use tax.
• 3.  Any circumstance in which a business acquired the property for an exempt use but now is using it in a taxable use can subject it to use tax.

What is the rate of tax?
The use tax rate is six percent (6%), just like sales tax. 

How is use tax paid?

>Businesses that file a sales and use tax return:  These businesses can simply include the tax owed on the return.  It is reported in total on line 23(a) on the paper return.  Or if you file online, report it on the line which says:  Cost of tangible personal property, digital property and extended taxable warranty services purchased without payment of the sales and use tax for business or personal use. 

>Businesses that do not file a sales and use tax return:  These businesses can apply for a Consumer’s Use Tax return.  Generally, these businesses will only need to file 1 – 4 returns per year, depending on the number of purchases made on which no tax has been paid.

>Individuals: Persons who become liable for use tax are required to report and pay the tax directly to the Department within 20 days following the end of the month in which the taxable use occurs. Persons who occasionally incur a use tax liability and who do not hold a sales and use tax permit may report and pay the use tax on a non-registered basis on a Consumer’s Use Tax return, Revenue Form 51A113(0).
Individuals who have only a few, nominal instances of liability often choose to pay the tax due with their individual tax returns [line 27 of the 2019 form].
If you believe you might owe use tax or have additional questions about this, please give us a call.

reviewed: January 28, 2022