Sales Tax in Kentucky: A Complete Guide for Ecommerce Sellers

Kentucky is an SST member state with a flat 6% statewide rate and no local additions. The rate structure is simple, but Kentucky’s 2023 expansion of taxable services dramatically changed the compliance landscape for technology and service companies. Kentucky now explicitly taxes SaaS, along with dozens of other previously untaxed services. Sellers of any software, subscription, or digital service into Kentucky need to confirm whether their product category is now taxable.

Quick reference

Economic nexus

Kentucky’s OR threshold: $100,000 in gross sales OR 200 or more separate transactions into Kentucky in the current or prior calendar year. Either condition alone triggers registration.

Kentucky enacted its economic nexus rules effective October 1, 2018.

Physical nexus

Physical presence in Kentucky creates nexus without any threshold:

• Warehouse, office, or storage facility in Kentucky
• Amazon FBA inventory in Kentucky fulfillment centers
• Employees, agents, or independent contractors in Kentucky
• Sales representatives in Kentucky

Registration

Kentucky is an SST member state. Register through a Certified Service Provider for simultaneous registration in Kentucky and all other SST states at no charge.

Sellers can also register directly with the Kentucky Department of Revenue through Kentucky One Stop Business Portal (onestop.ky.gov). Registration is free.

Tax rates

State rate: 6% flat

No local additions: Kentucky does not allow counties or municipalities to levy additional sales taxes. The 6% state rate is the only rate statewide.

What’s taxable

Generally taxable: Electronics, clothing, furniture, sporting goods, toys, most tangible personal property. Many services (see below).

Generally exempt:

• Prescription medications
• Most food for human consumption (groceries)
• Agricultural equipment and supplies
• Residential utilities

Notable Kentucky rules:

• 2023 service tax expansion: Kentucky enacted significant sales tax expansion on services effective January 1, 2023. The expansion explicitly added dozens of taxable service categories, including:
  • Software as a Service (SaaS)
  • Advertising services
  • Landscaping and lawn care
  • Fitness and recreation services
  • Photography and videography
  • Limousine, taxi, and ride-share services
  • Several professional and personal services
• SaaS: Explicitly taxable in Kentucky effective January 1, 2023. Any remotely accessed software subscription delivered to Kentucky customers is subject to 6% Kentucky sales tax
• Digital products: Kentucky taxes downloaded software, digital audio, and digital audiovisual works. Combined with the SaaS expansion, Kentucky now taxes the full range of digital product and service delivery models
• Clothing: Taxable in Kentucky, no clothing exemption
• Food: Kentucky broadly exempts food for home consumption. Prepared food, candy, and soft drinks are taxable

Shipping taxability

Kentucky taxes delivery charges when the shipped goods are taxable. When all goods in a shipment are exempt, the delivery charge is also exempt.

Marketplace facilitator rules

Kentucky enacted marketplace facilitator legislation effective July 1, 2019. Qualifying marketplace facilitators collect and remit Kentucky sales tax on marketplace-facilitated sales.

Remote sellers with no Kentucky physical nexus whose only Kentucky sales are through marketplace facilitators may not need to separately register. Sellers with Kentucky physical nexus must register regardless.

State-specific notes

SaaS and service expansion, immediate action required: Kentucky’s 2023 service tax expansion is one of the most significant state-level taxability changes in recent years. Sellers of SaaS, subscription software, digital services, or any of the newly enumerated service categories who were not previously registered in Kentucky may have a retroactive obligation from January 1, 2023 forward. Review Kentucky DOR guidance and confirm current tax treatment for your specific product type.

Flat 6% rate: Kentucky’s single-rate structure eliminates all rate complexity. Any Kentucky address: 6%. Combined with SST membership, Kentucky should be operationally simple to implement once taxability questions are resolved.

Services nexus: Kentucky’s expanded service taxability applies to remote sellers who provide taxable services into Kentucky, it’s not limited to physical goods or to sellers with economic nexus in traditional tangible goods. Service providers with Kentucky customers above the nexus threshold should confirm registration obligations.