Auctioneers Training Guide 2013. Background/History General Forms Resources.

Kentucky Sales and Use Tax

Auctioneers’ Training Guide2013

Part I- General Information

•Background/History•General Forms•Resources

Sales and Use Tax Law is regulated by a combination of Kentucky Revised Statutes (Chapter 139), Kentucky Administrative Regulations, and case law.

Sales Tax: tax imposed on sellers at the rate of 6% for the privilege of making “retail sales” within the Commonwealth (KRS 139.200)

Use Tax: backstop for sales tax and applies to tangible personal property or digital property purchased for storage, use, or other consumption in Kentucky upon which sales tax has not been paid (KRS 139.310)

Background/History

Part I: (A)

KRS 139.200(1)- A tax is hereby imposed upon all retailers at the rate of six percent (6%) of the gross receipts derived from retail sales, regardless of method of delivery, made within this Commonwealth

KRS 139.340(1)- Every retailer engaged in business in this state shall collect the tax imposed by KRS 139.310 from the purchaser… the taxes collected or required to be collected by the retailer shall be deemed to be held in trust for and on account of the Commonwealth

Imposition of Sales and Use Tax

Part I: (A)1

KRS 139.010(12)(a)- “Gross receipts” and “sales price”

KRS 139.010(27)(a)(2)- “Retailer”

KRS 139.010(33)- “Tangible Personal Property”

KRS 139.010(9)- “Digital Property”

Statutes and Regulations

Part I: (A)2

Registration Application (Form 51A100) Sales and Use Tax Return (Form 51A102) Resale Certificate (Form 51A105) Streamlined Sales Tax (SST) Certificate

(Form 51A260) Agricultural Certificates (Form 51A158 and

51A159)

General Forms

Part I: (B)

One Stop Business Portal www.revenue.ky.gov

Kentucky Tax Registration Application www.revenue.ky.gov/business/register

Sales and Use Tax Permit (Form 51A101) shows retailer is properly registered with the Department and is authorized to collect sales tax as required by KRS Chapter 139.

Registration Application

Part I: (B)1

Must remit a sales and use tax return (Form 51A102) according to assigned filing schedule

Due date- the 20th day following the end of the period (Accelerated filers’ return is due by the 25th)

Online filing is available Line 1 “Gross receipts” Lines 2-19 Eligible Deductions Line 23 Use Tax

Sales and Use Tax Return

Part I: (B)2

KRS 139.270 provides guidance when collecting a resale certificate (Form 51A105)

Relieves the retailer from the burden of proof if the retailer obtains a completed certificate and maintains the certificate on file

Must be collected within 90 days from the date of the sale

May be designated as a “single purchase” or “blanket”

Resale Certificate

Part I: (B)3

SST Certificate (Form 51A260) is a valid alternative to the resale and farm exemption certificates

Relieves the seller from the burden of proof if retailer obtains a completed certificate with all relevant data

Form may be accepted if collected from out-of-state buyers

Streamlined Sales Tax (SST) Certificate

Part I: (B)4

103 KAR 30:091- “Farmer” is defined as any person regularly engaged in the business of farming

Vendor must have a completed agricultural certificate on file

Farm Exemption Certificate (Form 51A158)

On-Farm Facilities Exemption Certificate (Form 51A159)

Agricultural Exemption Certificate

Part I: (B)5

Website www.revenue.ky.gov Tax Alerts addresses topics regarding all

tax types; issued about 6 times a year Sales Tax Facts provide assistance to

persons fulfilling their sales and use tax obligations; issued 2 to 4 times per year

Guide for Auctioneers guide intended for general information for licensed Kentucky auctioneers

Resources

Part I: (C)

Part II- Specific Guidance

•Registration•Collection Requirements•Property Subject to Sales and Use Tax•Exemptions•Non-Profit Charity Auctions•Buyers’ Premium

Part II

If starting a new business, must register with DOR by completing Form 10A100, Kentucky Tax Registration Application

If you need to update or correct your account information, must complete Form 10A104, Update or Cancellation of Kentucky Tax Accounts

www.revenue.ky.gov/business/register Will receive permit letter that must be posted

in a conspicuous place in the retailer’s establishment (KRS 139.250)

Registration

Part II: (A) 1

Specific Statutes

KRS 139.240(1) KRS 139.010(27)(a)

Every person presently engaged or desiring to engage in or conduct business as a retailer or seller within this state shall file with the Department an application of a permit for each place of business.

“Retailer”- every person engaged in the business of making sales at auction of tangible personal property or digital property owned by the person or others for storage, use, or other consumption

Part II: (A) 2

Auctioneer’s Responsibility- KRS 139.105(1)- must collect and remit sales and use tax even if the tax is collected in error or the purchaser refuses to pay sales tax

Prohibited Advertising- KRS 139.220- retailers are prohibited from advertising that tax will not be charged or the customer will receive a discount equal to the amount of tax paid

Collection Requirements

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Part II: (B)

Auctioneers Acting as an Agent- if hired by another auctioneer to control the bidding process does not need to report sales made at that auction

Customer Receipts-KRS 139.210(1)- must provide each purchaser a receipt showing separately the sales price and the amount of sales tax collected

Returned Merchandise- 103 KAR 31:050- may take a deduction only if the full sales price plus sales and use tax is refunded

Collection Requirements Cont.

Part II: (B)

Mobile Homes/Manufactured homes when sold as tangible personal property

Property Subject to Sales and Use Tax

KRS 139.260- establishes the presumption that all gross receipts are taxable “until the contrary is established”

Personal and recreational boats and boat trailers

Trailers- bumper hitch trailers and trailers with living quarters

Part II: (C)

Off-road vehicles: Dirt bikes, 4-wheelers, ATVs

Property Subject to Sales and Use Tax

Collectibles (Coins, Stamps, etc)

Horses unless they meet qualifications for exemption

Sales to individuals or businesses from out of state who take possession here

Part II: (C)

Exemptions Horses: 2 years or older sold to

a non-resident or purchased exclusively for breeding

Items sold for resale Sales to state and local

government Sales to resident non-profit

501(c)(3) organizations Food and food products Interstate commerce Farm machinery and agricultural

items Semi-trailers

Part II: (D)

KRS 139.010(27)(c) excludes from the definition of a retailer, persons making sales at a charitable auction for church, school, civic, and other resident nonprofit if…1. The qualifying entity is sponsoring the auction 2. The purchaser directly pays the qualifying entity

and not the person making sales at the auction3. The qualifying entity is responsible for the

collection, control, and disbursement of auction proceeds

Non-profit subject to provisions of KRS 139.496

Non-Profit Charity Auctions

Part II: (E)

KRS 139.010(12)- “gross receipts” is defined as the total amount of the sale

Sales tax is computed on the total amount of the sale including the buyers’ premium plus

Charges by the retailer for services necessary to complete the sale are also subject to sales tax delivery, shipping, transportation, postage, handling and packing charges

Buyers’ PremiumPart II: (F)

Part III- Compliance

•Audits•Non-Compliance Examples•Cost of Non-Compliance

Primary object of an audit is to determine the correct measure of tax

Statute of Limitations: KRS 139.720- auctioneers are required to keep all records for a minimum of four (4) years from the date a return is filed

Verification of records: all records must be complete and kept up to date

Deductions are reviewed to ensure they are valid and substantiated with appropriate exemption certificates

Audits

Part III (A)

Lack of records: if the taxpayer has failed to keep proper records or has lost, misplaced, or destroyed them, an assessment of tax due may be made (KRS 131.180)

Unsubstantiated Deductions: all deductions not substantiated with appropriate documentation are disallowed and are subject to sales tax

Invalid Deductions: deductions taken in error also become subject to sales tax (failure to collect tax on trailers, boats, etc)

Non-compliance IssuesPart III (B)

Cost of Non-ComplianceInterest

KRS 131.183Penalties

KRS 131.180

All taxes not paid at the time prescribed by statute shall accrue interest at the applicable year’s tax interest rate plus 2%

2009: 5% + 2%2010: 3% + 2%2011: 3% + 2%2012: 4% + 2%2013: 4% + 2%

If additional tax is due, the amount is considered paid late. Penalties should be calculated as 2% of the total amount of tax due for each 1 to 30 day period. Penalty will not exceed 20%, and there is a $10.00 minimum. There is also a late pay penalty that is calculated the same way.

Part III (C)

Part IV- Questions and Answers