Kentucky Sales Tax Guide

Key Takeaways (Updated 2026)

Here is what’s new and important in the Bluegrass State’s sales tax rules:

• Online filing and payment are now mandatory. As of May 2025 Kentucky requires electronic filing and payment of sales and excise taxes through the MyTaxes system, with limited hardship waivers available.
• Software as a Service (SaaS) and AI-enabled digital products are taxable. Kentucky now treats these as taxable deliveries of computer software under existing law.
• Currency and bullion are now sales tax exempt, and the Department of Revenue has issued guidance on refund procedures for improperly taxed purchases.
• Qualified data centers may receive sales and use tax exemptions on equipment and infrastructure tied to job-creating projects, subject to investment threshold and approval from the Kentucky Economic Development Finance Authority.
• A new incentive program rewards qualifying attractions up to 50% of the sales tax generated by admissions, taxable merchandise, and services at cultural live performance venues to be returned to operators and sponsors.

Do You Need to Collect and Remit Sales Tax in Kentucky? 

In Kentucky, businesses selling tangible personal property, certain services, and digital products are required to collect and remit sales tax at the statewide rate of 6%. Kentucky does not allow local jurisdictions to impose additional sales tax rates, so the single statewide rate is all you need to worry about.

While many sales and services are taxable in Kentucky, several exemptions apply including:

• Services or sales provided to tax-exempt organizations, such as school districts or certain governmental entities 
• Sales for resale, where tangible personal property or digital property is purchased by another seller who provides a valid resale certificate
• Sales and purchases related to qualified data center projects, such as servers, routers, computer software, and security systems
• Most groceries and prescription drugs
• Bullion and collectible currency

Kentucky has also recently introduced a sales tax incentive for qualifying attractions and events, allowing a rebate of up to 50% of the sales tax generated from:

• Admissions
• Tangible personal property sold at the event
• Taxable services connected to the attraction

Applications must be filed with the Department of Revenue at least 60 days prior to the event and follow the administrative guidance released by the Department.

Do You Have Sales Tax Nexus in Kentucky? 

Before collecting and remitting Kentucky sales tax, a business must first determine whether it has sales tax nexus with the state. Nexus simply means a sufficient connection to Kentucky that requires a business to register, collect, and remit sales tax.

There are two primary types of nexus in Kentucky: physical nexus and economic nexus. Businesses operating within the state typically create nexus through a physical presence, while out-of-state businesses may trigger nexus through the volume of their sales into Kentucky.

Physical Sales Tax Nexus in Kentucky 

Physical nexus occurs when a business has a tangible presence in Kentucky. Even a relatively small operational footprint can create nexus and trigger sales tax obligations.

Common examples include:

• Operating a storefront or retail location
• Storing inventory in a warehouse or fulfillment center
• Owning or leasing office space in the state
• Employing workers who live or work in Kentucky
• Sending employees or contractors into the state to perform services

Economic Sales Tax Nexus in Kentucky 

Like all states that impose sales tax, Kentucky enforces economic nexus rules for remote sellers. A business establishes economic nexus if it meets either of the following thresholds:

• $100,000 or more in gross sales to Kentucky customers, or
• 200 or more separate transactions with Kentucky customers

These thresholds apply to the current or previous calendar year. Once either threshold is reached, the seller must register and begin collecting sales tax starting on the first day of the following calendar month.

While Kentucky still uses both the sales revenue threshold and the 200-transaction threshold, the national trend is moving away from transaction counts. Many states have found that the transaction threshold adds complexity without significantly improving compliance.

Kentucky may eventually follow this trend. House Bill 757 proposes eliminating the 200-transaction threshold entirely and relying solely on the $100,000 sales threshold to determine economic nexus. While the bill has not yet been enacted, it reflects a broader shift toward simplifying nexus standards for remote sellers.

For now, businesses selling into Kentucky should still monitor both thresholds when evaluating nexus.

Figuring out whether your business has sales tax nexus can get complicated—especially if you sell into multiple states. SalesTaxSolutions.US offers affordable nexus determination services backed by over 20 years of sales tax experience to help you stay compliant with Kentucky’s rules.

Are Marketplace Facilitators Required to Collect and Remit Sales Tax in Kentucky? 

Yes. Kentucky requires marketplace facilitators to collect and remit sales tax on behalf of third-party sellers using their platforms. This ensures that sales made through marketplaces are taxed the same way as sales made directly by retailers.

Marketplace facilitators are subject to Kentucky’s economic nexus thresholds, meaning they must collect and remit sales tax once they exceed $100,000 in sales or 200 transactions with Kentucky customers. If a facilitator has not met nexus requirements, it may not yet be required to collect Kentucky sales tax.

If your business sells through a marketplace, it’s a good idea to confirm that the platform is registered to collect Kentucky sales tax before assuming you have no responsibility. A quick check can prevent confusion—and potential compliance headaches—later.

Common marketplace facilitators include:

• Amazon 
• eBay 
• Shopify Shop App
• Etsy    
• Walmart Marketplace

Kentucky Sales Tax Filing

If you’ve determined you have sales tax nexus in Kentucky, follow this step-by-step process to register, collect, and file your sales tax returns:

Kentucky taxpayers that file and pay their sales tax in Kentucky on time can collect a vendor’s discount of 1.75% of the first $1,000 tax due, and 1.5% of any amount over $1,000. This compensation caps at $50 per reporting period.

Sales tax filing can take valuable time away from running your business. With 20+ years of experience, SalesTaxSolutions.US helps businesses stay compliant with Kentucky sales tax while we handle the paperwork. See our transparent pricing options here!

When Are Sales Tax Returns Due in Kentucky? 

Kentucky assigns a filing frequency—monthly, quarterly, or annually—based on your business’s projected or historic tax liability. All accounts are reviewed on an annual basis, and any adjustments to your filing frequency are typically made in June.

See the graphic below for the different due dates and their associated filing frequencies.