Current through Register Vol. 50, No. 6, December 1, 2023
RELATES TO:
KRS
139.010,
139.240,
139.250,
139.260,
139.540,
139.550,
139.590,
139.660,
139.710,
139.720
NECESSITY, FUNCTION, AND CONFORMITY:
KRS
131.130(1),
139.260,
and
139.710
authorize the Department of Revenue to promulgate administrative regulations
for the assessment, collection, refunding, administration, and enforcement of
Kentucky tax laws and direct pay authorization. This administrative regulation
establishes the requirements and procedures for the direct payment of Kentucky
sales and use tax on purchases of tangible personal property, digital property,
or the services specifically enumerated in
KRS 139.200(g) through
(q) according to the provisions of
KRS
139.260(3), excluding energy
and energy producing fuels.
Section 1.
Definitions.
(1) "Direct pay authorization"
or "DPA" means an authorization issued by the Department of Revenue that
permits a taxpayer to report Kentucky sales and use tax directly to the
department on all purchases of tangible personal property, digital property, or
the services specifically enumerated in
KRS 139.200(g) through
(q) according to the provisions of
KRS
139.260(3), excluding energy
and energy-producing fuels.
(2)
"Distribution facility" means a specific location which is used to receive,
hold, and ship business inventory.
(3) "Industrial processing" is defined in
KRS
139.010(17).
(4) "Manufacturing" as defined by
KRS
139.010(20).
Section 2. Qualifications. An applicant
shall:
(1) Be a person engaged in:
(a) Manufacturing;
(b) Industrial processing;
(c) Operating a transportation company;
or
(d) Operating a distribution
facility; and
(2) Hold a
valid Kentucky retail sales and use tax permit; and
(3) Have a record of timely payment of taxes
administered by the department;
(4)
Maintain records in such a manner that, as applicable, the amount of tangible
property, digital property, and the services specifically enumerated in
KRS 139.200(g) through
(q) according to the provisions of
KRS
139.260(3), purchased from:
(a) A Kentucky seller or retailer may be
properly reported; or
(b) An
out-of-state seller or retailer for storage, use, or other consumption in
Kentucky or elsewhere can be verified; and
(5) Be engaged in business in Kentucky, and
own property, other than office furniture and equipment, that is located in
more than one (1) state; or
(6)
(a) Have been engaged in business in Kentucky
in excess of twenty-four (24) months; and
(b) Have purchased digital property, tangible
personal property, or the services specifically enumerated in
KRS 139.200(g) through
(q) according to the provisions of
KRS
139.260(3), excluding energy
and energy-producing fuels, of at least $10,000,000 for use in its Kentucky
operations in the preceding calendar or fiscal year, as applicable.
Section 3. Application.
(1) An applicant shall apply to the
department for a DPA by submitting a fully completed Revenue Form 51A112,
"Application for Direct Pay Authorization".
(2) The application shall include:
(a) If an applicant is engaged in business
and has property, other than office furniture and equipment, located in more
than one (1) state, the location of the applicant's home office, and plants or
places of business;
(b) If the
applicant is not engaged in business and does not have property, other than
office furniture and equipment, located in more than one (1) state, the amount
of tangible property, digital property, and the services specifically
enumerated in
KRS 139.200(g) through
(q) according to the provisions of
KRS
139.260(3), purchased for
use in the applicant's Kentucky business operations in the last calendar or
fiscal year, as applicable;
(c)
Statements relating to records and documentation required by Sections 2(3) and
(4) and 7 of this administrative regulation;
(d) Most recent year's financial statement
certified by the applicant's chief financial officer or a certified public
accountant; and
(e) A detailed
description of the records maintained to document that the amount of taxable
purchases is properly reported.
Section 4. Requirements. A DPA holder shall:
(1) Furnish all of itssellers or retailers,
excluding sellers or retailers of energy and energy-producing fuels, with a
copy of Revenue Form 51A110, "Direct Pay Authorization";
(2) Report and remit the sales or use tax on
all taxable purchases of digital property, tangible personal property, or the
services specifically enumerated in
KRS 139.200(g) through
(q) according to the provisions of
KRS
139.260(3), excluding energy
and energy-producing fuels, that would have been remitted by the applicant's
retailer if the DPA had not been granted; and
(3) Report all taxable purchases in
accordance with
KRS
139.540,
139.550,
and
139.590.
Section 5. Seller or Retailer
Responsibility.
(1) A seller or retailer
shall be relieved of the duty of collecting and paying the sales or use tax if
it:
(a) Accepts a copy of a company's DPA;
and
(b) Retains the copy in its
records pursuant to
KRS
139.720(2).
(2) A seller or retailer shall:
(a) Include sales for which a DPA has been
accepted in Line 1, Gross Receipts, of Revenue Form 51A102, "Sales and Use Tax
Return"; and
(b) Take a
corresponding deduction on Line 19, which shall be labeled "DPA
Sales".
Section
6. Limitations. A DPA holder shall not:
(1) Issue the DPA to a construction
contractor; or
(2) Allow a
contractor to use the holder's DPA to purchase, lease, or rent tangible
personal property, digital property, or purchase taxable services.
Section 7. Records. A DPA holder
shall maintain records pursuant to
KRS
139.720(2) and
103 KAR 31:020.
Section 8. Bond Requirement. Upon demand of
the department, the applicant or holder of a direct pay authorization shall
execute pursuant to
KRS
139.660, a bond or an indemnity agreement
securing the payment of the sales or use taxes to the department in an amount
not less than $75,000 and not greater than three (3) times the estimated
monthly liability.
Section 9.
Transfer of Authorization.
(1) A DPA shall
not be transferable upon the sale, lease, or other transfer of the
business.
(2) A DPA holder shall
notify the department within ten (10) days of the effective date of the sale,
lease, or other transfer of the business.
Section 10. Termination.
(1) The department shall terminate a DPA if
the DPA holder:
(a) Fails or ceases to be an
eligible taxpayer;
(b) Fails to
timely file its sales and use tax returns or timely pay any tax due;
or
(c) Fails to comply with any of
the provisions of this administrative regulation.
(2)
(a) The
department shall notify a DPA holder of the termination by certified mail at
its last known address.
(b) Upon
receipt of the notification of termination, a DPA holder shall notify all
sellers or retailers within thirty (30) days of the date of
termination.
(3) The
effective date of the termination shall be the date of the mailing of the
termination notice.
Section
11. Forms. The forms listed herein may be inspected, copied, or
obtained, subject to applicable copyright law, at:
(1) The Kentucky Department of Revenue, 501
High Street, Frankfort, Kentucky 40601;
(2) At a Kentucky Taxpayer Service Center
during business hours; or
(3) On
the department Web site at
http://revenue.ky.gov.
SU-56; 1 Ky.R.
470; eff. 3-12-1975; Am. 24 Ky.R. 920; 1522; 1643; eff. 2-10-1998; 44 Ky.R.
1105, 1498; eff. 2-2-2018; 46 Ky.R. 70, 877; eff.
10-4-2019.
STATUTORY AUTHORITY:
KRS
131.130,
139.260,
139.660,
139.710,
139.720
