Kentucky Sales Tax License Revocation: Business
Shutdown Checklist
If your Kentucky sales tax license has been revoked or suspended, or if you are planning to shut down your business, you need to understand what the state requires and what happens next. A revoked or suspended sales tax license means the Kentucky
Department of Revenue has taken action to prevent you from legally collecting and remitting sales tax. This can occur for various compliance reasons, such as failure to file returns, failure to pay taxes owed, or other violations of Kentucky tax law.
Ignoring a revocation notice or failing to follow proper shutdown procedures can result in escalated enforcement action, additional penalties, interest charges, and personal liability. Understanding the state's requirements and the timeline for action helps protect your business, your employees, and your personal finances. This guide explains what this means, why it happens, what the state does next, and the specific steps you need to take.
What This Issue Means
A Kentucky sales tax license revocation is a formal action by the Department of
Revenue that cancels your authority to collect sales tax on behalf of the state. When a license is revoked, you are no longer permitted to operate a sales tax-collecting business in Kentucky legally. This is different from a temporary suspension, which may allow for reinstatement after specific conditions are met.
The state can trigger a revocation at any time during the year and typically indicates a significant compliance failure or a repeated violation of Kentucky tax law. The state issues this action as a legal document, usually by mail, and it marks a decisive break in your tax-filing authority with Kentucky.
Why the State Issued This or Requires This
The Kentucky Department of Revenue revokes sales tax licenses for several common administrative reasons. The most frequent triggers include failure to file sales tax returns for multiple quarters, failure to remit sales tax payments owed to the state, providing false information on tax applications or returns, and engaging in business without a valid license.
Under Kentucky law, the Department has the authority to notify licensing agencies to deny, suspend, or revoke various licenses (including sales tax permits, professional
licenses, driver's licenses, and business permits) for delinquent taxpayers. The licensing agency must act upon notification from the Department; this action is mandatory, not discretionary. The state may also revoke a license if the business owner has demonstrated a pattern of noncompliance or evidence of tax evasion or fraud.
What Happens If This Is Ignored
If you ignore a Kentucky sales tax license revocation and continue to operate your business, Kentucky law treats this as illegal business activity. The state may pursue additional enforcement actions, including assessing unpaid taxes with penalties and interest, pursuing collection through liens on business or personal assets, and potentially referring the matter for criminal investigation.
Under Kentucky law, willful failure to collect, account for, and pay over sales tax, or willful attempt to evade sales tax, is a Class D felony, punishable by one to five years' imprisonment. Additionally, any person who willfully fails to file a required return or willfully files a false return may be guilty of criminal violations. Continuing to collect sales tax after revocation without authorization is illegal and can expose you to civil and criminal liability.
Understanding Penalties, Interest, and Personal Liability
Kentucky sales tax penalties include specific rates you should understand. Late filing penalties are 2 percent of the total tax due for every 30 days, or fraction thereof, with a
maximum of 20 percent and a minimum of $10 (or $100 after a jeopardy assessment).
Late payment penalties follow the same structure: 2 percent per 30 days or fraction thereof, up to 20 percent, with a minimum of $10.
Negligence penalties are 10 percent of the tax assessed, while fraud penalties are 50 percent of the tax assessed. Additionally, a 25 percent Cost of Collection Fee may be added to unpaid tax 60 days after the original notice date. Interest for calendar year
2026 is 9 percent per year, calculated daily on unpaid balances. Interest is statutory and cannot be waived.
Under Kentucky law, corporate officers and LLC managers are personally liable, jointly and severally, for unpaid sales and use taxes. The only exception is if the officer or manager had no authority to collect or pay the tax and did not have actual knowledge of the failure to collect or pay. This personal liability applies regardless of whether the business is incorporated or formed as an LLC. Business structure does not protect officers and managers from sales tax liability in Kentucky.
What This Does NOT Mean
A revoked sales tax license does not automatically mean your business must close permanently. It means you are not legally authorized to collect sales tax in Kentucky while the revocation is in effect. Your company may continue to operate if it does not require sales tax collection, or if you operate in a different tax jurisdiction. While most license revocations are civil administrative matters, serious violations involving willfulness can result in criminal charges.
A revocation also does not erase the taxes owed; those remain your responsibility and continue to accrue interest and penalties until paid. Finally, the revocation of your sales tax license does not automatically trigger the revocation of any other business licenses or registrations you may hold.
Checklist: What to Do After Receiving a Kentucky Sales
Tax License Revocation Notice
Step 1: Verify the Revocation Notice Is Legitimate
Check the notice for official Kentucky Department of Revenue letterhead and contact information. Confirm the notice includes your business name, license number, and the date of revocation. Look for an official signature or authorization line. Contact the
Division of Sales and Use Tax at (502) 564-5170 to confirm the revocation is active. Do not use contact information from an email or an unofficial source.
Step 2: Understand Your Protest and Appeal Rights
Taxpayers have the right to protest adverse Department of Revenue determinations. If you believe the revocation was issued in error, you must file a written protest within 60 days of the date of the notice to preserve your right to challenge the action. A timely protest entitles you to an informal conference with the Department.
If still dissatisfied after the conference, you may appeal to the Kentucky Board of Tax
Appeals. Missing the 60-day deadline makes the revocation final and unappealable.
Mark this deadline on your calendar immediately if you plan to dispute the revocation.
Step 3: Gather All Related Tax Documents
Locate all sales tax returns filed in the past four years, if available. The Department of
Revenue must assess additional sales tax within four years from the later of the due date of the return or the date the return was filed. For returns that were never filed, the statute does not begin to run. Collect payment receipts, bank statements, and records showing tax remittances. Gather any previous notices or correspondence from the
Kentucky Department of Revenue. Organize documents by tax period (quarter or month, depending on your filing frequency).
Step 4: Determine the Reason for Revocation and Assess Total Liability
Review the revocation notice carefully for any stated reason or explanation. Identify any specific tax periods mentioned in the notice. If the cause is unclear, contact the Division of Sales and Use Tax at (502) 564-5170 to request clarification. Request a complete, itemized account statement showing all tax periods owed, the original tax for each period, penalties assessed (late filing, late payment, negligence, fraud), interest accrued, any Cost of Collection Fee, payments received, and the current balance.
Request that the statement clearly separate tax, penalties, and interest.
Step 5: File Any Outstanding Returns Electronically
Identify any tax periods for which returns were not filed. All Kentucky sales and use tax returns must be filed and paid electronically. File unfiled returns through the
MyTaxes.ky.gov portal. Gather sales records, invoices, and payment information needed to complete the returns. Complete each unfiled return for the correct period and tax base.
If records are incomplete or unavailable, use the best information available and note any data limitations on the return. Taxpayers needing assistance with electronic filing should contact the Division of Sales and Use Tax at (502) 564-5170.
Step 6: Address Outstanding Sales Tax Debt
Determine whether you can pay the full amount owed (tax, penalties, interest, and any
Cost of Collection Fee). If paying in full is not feasible, contact the Collections Division at (502) 564-4921 to discuss installment agreement options. Payment plans allow taxpayers to pay over time, though penalties and interest typically continue to accrue during the payment period.
The Collections Division evaluates each situation individually and determines appropriate payment terms. Make payments through the MyTaxes.ky.gov portal or by check to the address specified. Include your account number with the payment for proper crediting.
Step 7: Request Penalty Waiver if Appropriate
The Kentucky Department of Revenue may waive penalties (but not interest) for reasonable cause. You must demonstrate that the tax liability resulted from circumstances beyond your control, that you acted reasonably to pay timely, or that strict enforcement would cause undue financial hardship.
Specific examples include human error on first occurrence, reliance on written
Department of Revenue advice, serious illness, natural disaster, or death of the
responsible person. Submit a separate written request for penalty waiver with supporting documentation to the Division of Sales and Use Tax. Interest is statutory and cannot be waived.
Step 8: Request Reinstatement (If Applicable)
Contact the Division of Sales and Use Tax at (502) 564-5170 to inquire about reinstatement procedures. Ask what conditions must be met to restore your sales tax license. Typically, all outstanding taxes, penalties, interest, and any Cost of Collection
Fee must be paid before the license can be reinstated.
These amounts effectively serve as the cost of reinstatement, though there is no separate application fee for the permit itself. Ask whether a reinstatement application is required and what documentation is needed. Submit a reinstatement request once all conditions are satisfied.
Step 9: Keep Records of All Communications
Document all communications with the Kentucky Department of Revenue regarding the revocation. Keep copies of all notices received, copies of all responses you send, proof of mailing (certified mail receipts or email confirmations), names and titles of
Department employees you speak with, dates and summaries of phone calls, and confirmation of payment or payment plan arrangements. These records are essential if questions arise later or if you need to pursue an appeal to the Kentucky Board of Tax
Appeals.
- State enforcement notices and responses
- Sales tax audits, assessments, and collections
- Payroll & trust fund tax enforcement issues
- Penalty and interest reduction options
- Payment plans and state tax relief eligibility
- Representation before state tax agencies
Step 10: Monitor for Follow-Up Notices and Continue Compliance
Monitor mail from the Kentucky Department of Revenue for any additional notices or requests. Open and review each notice immediately upon receipt. Note any deadlines or required actions stated in the notice. Respond to requests for information or documentation within the stated timeframe. If your license is reinstated, continue filing all current returns on time through the MyTaxes.ky.gov portal. Missing current returns after reinstatement can lead to additional compliance issues.
What Happens After This Is Completed
Once you have submitted all required documentation, filed outstanding returns electronically, and made payments, the Kentucky Department of Revenue typically reviews your account and determines the next steps. The state processes reinstatement requests within a timeframe that varies depending on the matter's complexity and the current workload. During this time, the Department may request additional documentation or clarification about specific tax periods or payments.
If you have satisfied all conditions for reinstatement and the Department approves your request, you will receive written notice that your sales tax license has been restored. If you do not pursue reinstatement or if conditions are not met, your revocation remains in effect, and your business cannot legally collect sales tax in Kentucky.
Common Mistakes to Avoid
Ignoring the revocation notice and continuing to operate can result in additional penalties and potential criminal referral for Class D felony violations. Failing to file outstanding returns electronically through MyTaxes.ky.gov violates state electronic filing requirements. Missing the 60-day protest deadline makes the revocation final and eliminates your right to challenge it. Not responding to the Department's follow-up notices may result in escalated enforcement action.
Submitting incomplete or inaccurate information on returns or reinstatement applications can delay processing. Paying only part of the amount owed without arranging a formal payment plan with the Collections Division may not satisfy reinstatement requirements.
Assuming the debt will disappear is a mistake; sales tax debt continues to accrue interest and penalties until fully paid. Failing to keep copies of submissions makes it difficult to follow up if the state does not receive your materials.
Frequently Asked Questions
Can I continue to operate my business while my sales tax license is revoked?
You cannot legally collect sales tax while your license is revoked. If your business requires sales tax collection to operate, you cannot legally continue operations unless your license is reinstated. Willful continued operation after revocation can result in Class
D felony charges.
Am I personally liable for the business's unpaid sales tax?
Yes. Under Kentucky law, corporate officers and LLC managers are personally liable, jointly and severally, for unpaid sales and use taxes. The only exception is if you had no authority to collect or pay the tax and did not have actual knowledge of the failure.
Business structure does not protect officers and managers from sales tax liability.
What are the penalties and interest I will owe?
Late filing and late payment penalties are 2 percent per 30 days (max 20 percent, min
$10). Negligence penalties are 10 percent; fraud penalties are 50 percent. A 25 percent
Cost of Collection Fee may be added 60 days after the original notice date. Interest for
2026 is 9 percent per year, calculated daily. Interest cannot be waived.
Can I appeal the revocation?
Yes. You must file a written protest within 60 days of the date of the notice to preserve your right to challenge the revocation. A timely protest entitles you to an informal conference. If still dissatisfied, you may appeal to the Kentucky Board of Tax Appeals.
Contact the Division of Sales and Use Tax at (502) 564-5170 for protest procedures.
What if I cannot pay the full amount owed?
Contact the Collections Division at (502) 564-4921 to discuss payment plan options.
Payment plans allow you to pay over time, though penalties and interest typically continue to accrue.
Facing State Tax Enforcement Action?
If you’ve received a notice related to sales tax or payroll tax enforcement and are unsure how to respond, our team can help you understand your options and next steps.
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