How to File the Kentucky SK-402 Sales and Use Tax Return

The Kentucky Sales and Use Tax Return, Form 51A102, is the document businesses use to report and pay sales and use tax to the Kentucky Department of Revenue. Its purpose is to detail all sales transactions within a specific filing period to calculate the total tax owed. This process involves reporting total receipts, subtracting any non-taxable sales, and calculating tax on items the business used but did not pay tax on at the time of purchase.

Determining Your Filing Requirement

Your obligation to file a Kentucky sales tax return begins once you receive a Sales and Use Tax permit from the state. Any business holding a permit must file a return for each assigned period, even if no sales were made or no tax was collected. This is known as a “zero return,” and failure to file can result in penalties.

The requirement to obtain a permit stems from having a connection, or “nexus,” with the state. A physical presence, such as having an office, warehouse, or employees in Kentucky, creates nexus. Economic nexus is established by exceeding a certain threshold of sales revenue or number of transactions within the state, which obligates remote sellers to register and collect tax.

Information and Calculations for the Return

Gross Receipts

Before beginning the 51A102 form, you must calculate your total gross receipts. This figure represents the total amount of money your business received from all sales during the filing period, without any deductions. It includes sales of tangible personal property, digital property, and taxable services, and it must encompass every transaction.

Allowable Deductions

Next, identify and sum all allowable deductions, which are specific types of sales not subject to state sales tax. Common examples include sales for resale, sales made to exempt organizations like government agencies or certain nonprofits, and sales of goods shipped to an out-of-state location. To claim these deductions, you must maintain proper documentation, such as a fully completed Resale Certificate (Form 51A105) or a Purchase Exemption Certificate (Form 51A126), and keep it on file.

Use Tax

Use tax is a counterpart to sales tax and applies to taxable items your business purchased for its own use without paying sales tax at the transaction. This often occurs when buying from an out-of-state seller not registered to collect Kentucky tax. To calculate use tax, sum the total cost of all taxable items purchased for business or personal use on which no sales tax was paid.

Tax Calculation

The tax calculation combines the figures you have gathered. First, subtract your total allowable deductions from your gross receipts to find your net taxable receipts. This amount is then multiplied by the state’s 6% sales tax rate to determine the sales tax due. Finally, the use tax you calculated is added to this amount to arrive at your total tax liability.

Completing the 51A102 Form

With your financial data gathered, you can fill out the Sales and Use Tax Return. You will begin by entering your total gross receipts on the first line of the return. The subsequent section is for itemizing your allowable deductions, where each type of deduction has a specific code from the form’s instructions that must be entered along with the corresponding sales amount on a separate line.

The form will guide you to subtract total deductions from gross receipts and calculate the 6% sales tax on the net amount. The calculated use tax is reported on a dedicated line, where you enter the total cost of items and the tax amount. The form then adds your sales tax and use tax together to show your total tax liability.

Filing Your Return and Submitting Payment

Businesses are encouraged to file electronically through the Kentucky Online Gateway (KOG). After logging into your account, you will navigate to your sales and use tax account to enter the figures from your form. Payment can be made directly through the portal via electronic funds transfer by providing your bank account and routing number, and you will receive a confirmation number for your records.

Alternatively, you can file a paper return by mail. The completed and signed 51A102 form, along with a check or money order for the amount due, should be sent to the mailing address specified by the Kentucky Department of Revenue. The return must be postmarked by the due date to be considered timely. If the due date falls on a weekend or holiday, the postmark deadline is the next business day. Whether filing online or by mail, it is important to retain a copy of the filed return for your business records.