Kentucky Sales Tax Payment Plan & Resolution
Checklist
Kentucky sales tax is a consumption tax collected by retailers on goods and services sold in the state. When a business fails to file returns, submit required documentation, or pay taxes owed, the Kentucky Department of Revenue initiates collection and compliance actions. Understanding how sales tax obligations work and what happens when problems occur helps prevent penalties, interest, and enforcement actions that can impact operations and credit standing.
This checklist explains what sales tax issues mean, why the state takes action, what triggers escalation, and the specific steps to address delinquent taxes. Sales tax management is a core responsibility for registered retailers in Kentucky, and staying current prevents costly complications.
What This Issue Means
A sales tax issue occurs when a registered business has not filed a required return, has not paid due taxes, or has not responded to state correspondence regarding tax compliance. This may include returns filed late, returns showing insufficient payment, or complete non-filing for one or more reporting periods.
The issue represents a gap between what the state expects and what the business has completed. It does not automatically mean criminal charges or business closure; it means the state has identified a discrepancy and is taking steps to bring the account into compliance.
Why the State Issued This or Requires This
Kentucky requires retailers to collect sales tax at the point of sale and remit those funds to the state on a scheduled basis. The Department of Revenue monitors filing patterns and payment timing to ensure compliance. When a return is not filed by the deadline, when a return is filed without payment, or when payment received does not match the reported tax liability, the Department of Revenue begins standard collection procedures.
Under Kentucky law, the Department 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. These actions are administrative requirements to enforce tax law and recover revenue owed to the state.
What Happens If This Is Ignored
If a sales tax issue is not addressed, the state typically escalates collection efforts. The
Department of Revenue may issue written notices requesting immediate payment, add penalties and interest to the original tax liability, and eventually refer the account to the state's enforcement division. Penalties include late filing (2 percent per 30 days, up to
20 percent, minimum $10), late payment (2 percent per 30 days, up to 20 percent,
minimum $10), negligence (10 percent), and fraud (50 percent).
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 state law, the Department of Revenue may notify licensing agencies to deny, suspend, or revoke various licenses (including professional licenses, driver's licenses, business permits, and sales tax registration) for delinquent taxpayers. The licensing agency must act upon notification; this is mandatory, not discretionary. In some cases, the state may pursue liens against business assets or seek court action to recover the debt. The longer an issue remains unresolved, the larger the total debt becomes due to accumulating interest and penalties.
What This Does NOT Mean
Receiving a sales tax notice does not mean the business is being criminally prosecuted or that criminal charges are imminent. It does not mean the state will immediately close the business or freeze bank accounts. It does not mean penalties are final or cannot be reduced under certain circumstances. A notice is an administrative action designed to prompt response and resolution, not a legal judgment. The business retains the opportunity to respond, explain the situation, and work toward a resolution before more serious enforcement steps are taken.
Understanding Kentucky Sales Tax Basics
Kentucky has a uniform statewide sales tax rate of 6 percent on gross receipts or purchase price. There are no local sales taxes in Kentucky; the rate is the same throughout the entire state, regardless of county or city. The Department of Revenue assigns each taxpayer a filing frequency (monthly, quarterly, or annually) based on annual tax liability and adjusts these frequencies each June.
Returns are generally due by the 20th of the month following the reporting period. All taxpayers must file and pay electronically per state regulation. Taxpayers should verify their assigned filing frequency on the MyTaxes.ky.gov portal.
Checklist: Kentucky Sales Tax Payment Plan &
Resolution
Step 1: Locate and Review All Notices from the Kentucky Department of
Revenue
Review every notice, letter, or document received from the Department of Revenue.
Read the notice carefully and identify the specific tax period or periods involved, the amount claimed due (including tax, penalties, interest, and any Cost of Collection Fee), the date of the notice, the deadline for response, and the contact information provided.
The date of the notice is critical because it starts the 60-day protest deadline if you disagree with the assessment. Keep copies of all documents together in one location.
Step 2: Identify Which Tax Periods Are Affected and Verify Statute of
Limitations
Determine whether the issue involves one reporting period or multiple periods. Note the specific months or quarters listed in the notice. Check your business records to confirm which returns were filed and which were not. Under Kentucky law, 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. If uncertain about filing history, prepare a list of all periods from the date the business became registered through the current month.
Step 3: Understand Your Protest and Appeal Rights
If you disagree with the assessment, you must file a written protest within 60 days of the date of the notice of tax due to preserve your right to challenge in the evaluation. A timely protest grants you the right to an informal conference with the Department of
Revenue. If still dissatisfied after the conference, you may appeal to the Kentucky Board of Tax Appeals. Missing the 60-day deadline makes the assessment final and unappealable. Mark this deadline on your calendar immediately if you plan to dispute the assessment.
Step 4: Gather Financial and Business Records
Collect all sales records, bank statements, accounting records, and receipts for the affected periods. Organize documents by month or quarter to match the state's reporting schedule. Include records of any previous payments made to the Department of Revenue during these periods. If records have been lost or destroyed, document the
circumstances and timeline. This step may take time, but it is essential for understanding what actually occurred and responding accurately to the state.
Step 5: Contact the Kentucky Department of Revenue
Contact the appropriate division based on your situation. For Sales and Use Tax inquiries, contact the Division of Sales and Use Tax at (502) 564-5170 or email
KRC.WebResponseSalesTax@ky.gov. For collection and payment plan matters, contact the Collections Division at (502) 564-4921. Identify yourself as the business owner or authorized representative and reference the notice number. Ask for the name of a specific representative assigned to the account. Provide current contact information and request written confirmation of the conversation. Document the date, time, and substance of the call.
Step 6: Request Itemized Account Statement
Ask the Department of Revenue to provide 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. This document becomes the foundation for any resolution plan.
Step 7: Request Kentucky Sales Tax Payment Plan Information
Ask the Collections Division representative at (502) 564-4921 whether a payment plan is available for the amount due. Inquire about the terms, including monthly payment amounts, number of payments, and interest or penalty calculations during the payment plan. Request written information about available options. Ask whether payment plans require an application or if verbal agreement is sufficient. Confirm the deadline by which payment or a completed application must be submitted.
Step 8: File Written Protest if You Disagree With the Assessment
If you disagree with the assessment, file a written protest within 60 days of the date of the notice. Your protest should include your business name and tax identification number, the notice number or reference number, a clear statement of what you agree with and what you disagree with, an explanation of why you disagree supported by your records, documentation, or attachments supporting your position, a proposed correct amount if you have calculated one, and your contact information and the date. Send by certified mail to the address specified in the notice to preserve your appeal rights.
Step 9: 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. Examples of reasonable cause 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.
Interest is statutory and cannot be waived.
Step 10: File Missing or Amended Returns if Required
If the Department of Revenue confirms that returns must be filed for delinquent periods, obtain the correct Kentucky sales tax return forms. Complete the returns using accurate sales and tax information from business records. File electronically through the
MyTaxes.ky.gov portal as required by state regulation. If documents are incomplete or unavailable, use the best available information and note any data limitations on the return. File the returns by the deadline provided by the Department of Revenue. Keep proof of filing.
Step 11: Submit Payment Plan Application or Make Payment
If a payment plan is available and desired, complete any required application or agreement form. Provide accurate business and financial information as requested.
Specify the monthly payment amount that the company can sustain. Apply by the deadline stated by the Collections Division. If paying in full, pay through the
MyTaxes.ky.gov portal or by check to the address specified.
Include the account number or notice number with the payment for proper crediting.
Request a receipt or confirmation of payment.
Step 12: Continue Filing Current Returns on Time
Even while resolving a back-tax issue, continue filing all current returns as they become due through the MyTaxes.ky.gov portal. Do not stop filing current returns because a prior period is delinquent. File returns by the deadline each month or quarter (generally by the 20th of the following month). Pay current tax along with the regular return or make the required payment plan payment. Missing current returns while resolving past-due returns creates additional compliance problems and may result in cancellation of payment plan arrangements.
Step 13: Maintain Detailed Records of All Communications and Payments
Keep a written log of every phone call, email, letter, and payment sent to or received from the Department of Revenue. Record the date, time, person's name, and summary
of the conversation. File all written correspondence in chronological order. Retain copies of payment confirmations, bank statements showing payments, all Department of
Revenue notices, statements, and agreements. This documentation protects the business if disputes later arise over what was agreed to or paid.
Step 14: Monitor Account and Complete Payment Plan
Continue monitoring the account for new notices or contact from the Department of
Revenue. Make each payment on time as agreed in the payment plan. Do not skip or delay payments. If financial hardship occurs and a payment cannot be made, contact the Collections Division at (502) 564-4921 immediately before the payment is missed.
Continue until the account is fully paid and the state confirms the liability is resolved.
- 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 15: Request Final Confirmation of Resolution
Once all payments have been made and all returns have been filed, contact the
Collections Division at (502) 564-4921 and request written confirmation that the account is resolved. Ask for a statement showing a zero balance and confirmation.
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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