State offers table to collect taxes on online purchases

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 The Kentucky Department of Revenue is offering Kentuckians another tool in the 2011 Income Tax Instructions to calculate the 6 percent use tax owed on purchases made from out-of-state retailers. 

Included in the instructions for calendar year 2011 is a new Use Tax Look-Up Table that allows individuals to estimate use tax owed on their total annual purchases from out-of-state retailers. Recent statistics on 2011 holiday retail sales confirm that more and more consumers are establishing a tax liability for themselves through increased use of online shopping. Internet sales during November and December increased at more than three times the rate of traditional brick and mortar stores.   

When a web-based retailer or any out-of- state retailer does not collect the 6 percent Kentucky sales and use tax, the consumer is responsible for reporting and paying use tax on those untaxed purchases, in accordance with KRS 139.330.  The easiest way for the individual consumer to report and pay the use tax is on the state income tax return. The Look-Up Table provides an option to report estimated use tax owed on retail purchases based upon Kentucky adjusted gross income when receipts are not readily available to calculate the actual unpaid use tax liability. As the popularity of web-based and mobile e-commerce continues to increase, the liability of purchasers for payment of the 6 percent Kentucky use tax also increases. 

Kentucky consumers are required report use tax on their individual income tax returns to accurately reflect their tax liability, and to ensure that our Kentucky-based retailers are not unfairly undercut by competing out-of-state retailers that fail to collect the tax on taxable products delivered into Kentucky. For questions or further assistance on sales and use tax matters, contact the Kentucky Department of Revenue at 502-564-5170.