General Information
Businesses that operate within Kentucky are required to register with the Kentucky Department of Revenue so that tax liability may be assessed. In Kentucky, a business may be subject to Sales and Use Tax (KRS Chapter 139), Employer’s Withholding Tax (KRS Chapter 141), Limited Liability Entity Tax (KRS Chapter 141), Corporation Income Tax or Pass-Through Entities Tax (KRS Chapter 141), and others depending on the nature of the business. Upon registration, the Department of Revenue will issue the business one or more Kentucky tax account numbers and mail applicable tax returns to the business.
Purpose/Necessity
The tax laws in Kentucky are, of course, mandatory. The Department of Revenue is the government body which administers the tax laws, monitors the tax liabilities, and collects the tax revenues in Kentucky. A business will have to register with the Department of Revenue if it has newly opened, is under new ownership, resumed activities, hired employees, changed entity type, began new taxable activity, or for other related reasons. A non-profit organization is also required to register with the Department of Revenue to confirm tax exemption and/or determine any applicable Kentucky tax liability.
A non-profit organization is additionally able to obtain exemption from Kentucky sales and use taxes on purchases of tangible personal property, digital property, or services. If the exemption is obtained, the non-profit organization will receive a Letter of Authorization from the Kentucky Department of Revenue providing an exemption number and instructions on how to avoid paying sales and use tax to the supplier. The non-profit organization may avoid sales and use taxes only on purchases made to be used within the exempt functions of the organization.
Frequently Asked Questions
- Does a business located formed and operating primarily outside Kentucky have to register with the Kentucky Department of Revenue and pay any Kentucky business taxes?
- Depending on the extent of business within Kentucky, out-of-state companies may be subject to Kentucky business taxes and will therefore need to register with the Kentucky Department of Revenue. A business may determine whether it has a connection with Kentucky sufficient to require it to register by completing the Corporation and Pass-Through Entity Nexus Questionnaire, Form 41A800, and returning it to the Kentucky Department of Revenue.
- What is the Corporation Organization Tax and how is it paid?
- The Corporation Organization Tax, is paid by corporations formed in Kentucky at the time of formation. The Kentucky Secretary of State collects the tax based on the number of shares of capital stock authorized in the corporation’s Articles of Incorporation. It is collected later when more shares of stock are issued and Articles of Amendment or Articles of Merger are filed. A minimum tax of $10 will be collected at formation which grants the corporation 1,000 initial shares.
- What is the Unemployment Insurance Tax and how is it paid?
- The Unemployment Insurance Tax is managed by the Department for Workforce Investment, Education Cabinet. Under the statute, “subject employers” must pay a tax on “covered employment” to fund unemployment benefits for workers that have lost their jobs through no fault of their own. When a business first hires employees, it must register for the Kentucky unemployment tax and will then be assessed a tax rate based on the wages it pays.
- What tax incentives are available in Kentucky for business startups?
- There are numerous financial incentives or income tax credits, or exemptions available for businesses in Kentucky. For more information, business owners should see our firm’s page on Kentucky Business Financing and Tax Credits or contact the Kentucky Cabinet for Economic Development.
Legal Services Offered and Cost
Register for Kentucky Business Taxation
Legal fees: $300 flat fee
Filing fees and other costs: none
This includes:
- Review of client’s information to ensure legal requirements are fulfilled
- Instructions as to unique tax liability if relevant
- Completion of Tax Registration Application Form 10A100
- Submission of form with Kentucky Department of Revenue
- Email confirmation of Kentucky taxation registration
If you are ready to get started, please CLICK HERE to enter basic information using our secure online form.
Obtain Non-Profit Sales and Use Tax Exemption
Legal fees: $300 flat fee
Filing fees and other costs: none
This includes:
- Review of client’s information to ensure legal requirements are fulfilled
- Completion of Application for Purchase Exemption Sales and Use Tax Form 51A125
- Submission of form with Kentucky Department of Revenue
- Email confirmation of Kentucky sales and use tax exemption
If you are ready to get started, please CLICK HERE to enter basic information using our secure online form.