Kentucky Sales and Use Tax Protest and Refund Claim

KENTUCKY SALES AND USE TAX PROTEST AND REFUND CLAIM

TABLE OF CONTENTS

1. Sender / Taxpayer Header
2. Department Address Block
3. Identification of the Disputed Notice or Underlying Payment
4. Statement of Timeliness — Protest and Refund Tracks
5. Statement of Grounds (Protest Track — KRS § 131.110)
6. Refund Claim (Refund Track — KRS § 139.770 / § 134.580)
7. Wayfair and Economic-Nexus Defenses
8. Specific Errors and Legal Argument
9. Request for Conference and Reservation of Rights
10. Power of Attorney
11. Signature and Verification
12. Exhibit List
13. Appeal Roadmap
14. Kentucky Practice Notes
15. Sources and References

1. SENDER / TAXPAYER HEADER

[TAXPAYER FULL LEGAL NAME]

[d/b/a NAME, if applicable]

[MAILING ADDRESS]

[CITY, STATE ZIP]

FEIN: [XX-XXXXXXX]

KY Sales/Use Tax Account No.: [________________________________]

KY Account Number: [________________________________]

Date: [__/__/____]

2. DEPARTMENT ADDRESS BLOCK

Kentucky Department of Revenue

Division of Sales and Use Tax

501 High Street

Frankfort, Kentucky 40601-2103

Re: PROTEST UNDER KRS § 131.110 AND/OR REFUND CLAIM UNDER KRS § 139.770 AND § 134.580

Notice Type: [Notice of Tax Due / Notice of Refund Denial / N/A — Affirmative Refund Claim]

Notice Number: [#]

Notice Date: [__/__/____]

Tax Type: Kentucky Sales and Use Tax

Tax Period(s): [MM/YYYY through MM/YYYY]

Amount in Dispute / Refund Sought: $[________________________________]

3. IDENTIFICATION OF THE DISPUTED NOTICE OR UNDERLYING PAYMENT

3.1. Protest Track. The undersigned Taxpayer protests the [Notice of Tax Due / Refund Denial] identified above (the "Notice"), asserting additional sales-and-use-tax liability of $[AMOUNT] in tax, $[AMOUNT] in penalty, and $[AMOUNT] in interest, totaling $[AMOUNT], for the period(s) [MM/YYYY – MM/YYYY].

3.2. Refund Track. In the alternative or in addition, Taxpayer claims a refund of $[AMOUNT] in Kentucky sales and use tax erroneously paid for the period(s) [MM/YYYY – MM/YYYY], plus statutory interest under KRS § 131.183 from the date of overpayment, pursuant to KRS § 139.770 and KRS § 134.580.

3.3. Uncontested portion (if any). Taxpayer concedes only $[AMOUNT or "None"] of any assessment and remits same under separate cover without prejudice to the protest.

4. STATEMENT OF TIMELINESS — PROTEST AND REFUND TRACKS

4.1. Protest timeliness. The Notice is dated [__/__/____]. This Protest is postmarked [__/__/____], within sixty (60) days of the Notice date as required by KRS § 131.110(1)(a). For any portion of the assessment relating to a notice issued before July 1, 2018, Taxpayer files within the applicable forty-five (45) day window and reserves the historic deadline argument.

4.2. Refund-claim timeliness. Each tax period for which a refund is claimed was paid on or after [__/__/____], which is within four (4) years preceding the date of this claim, satisfying KRS § 134.580(2) and KRS § 139.770.

4.3. Statute-of-limitations on assessment. Any portion of the assessment relating to periods more than four (4) years prior to the Notice date is barred by KRS § 139.620, absent fraud, failure to file, or substantial misstatement.

5. STATEMENT OF GROUNDS (PROTEST TRACK — KRS § 131.110)

5.1. Exempt sale or transaction. The sales the Department has reclassified as taxable were exempt under [KRS § 139.470 — exemptions; KRS § 139.480 — manufacturing exemption; KRS § 139.260 — resale; KRS § 139.495 — religious / nonprofit; etc.].

5.2. Improper sourcing. The sales were sourced outside Kentucky under KRS § 139.105 (destination sourcing rules). The auditor incorrectly treated the destination as Kentucky when delivery occurred at [ADDRESS / STATE].

5.3. Resale certificate / exemption certificate substantiation. Taxpayer obtained, in good faith, a properly completed Form 51A105 (Resale Certificate) or Form 51A126 (Purchase Exemption Certificate) from each purchaser at issue, satisfying the safe harbor under KRS § 139.270 and 103 KAR 31:111.

5.4. No economic nexus / pre-Wayfair periods. For any period prior to October 1, 2018, the Department lacked constitutional authority to compel collection from a remote seller without physical presence in Kentucky. South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018), is not retroactive, and any pre-effective-date periods are barred.

5.5. Below-threshold remote seller. For periods on or after October 1, 2018, Taxpayer did not exceed both Kentucky economic-nexus thresholds: [gross receipts of $100,000 / 200 transactions sourced to Kentucky] under KRS § 139.340(2)(g). See Section 7.

5.6. Bundled-transaction recharacterization. The Department erroneously taxed the entire price of a bundled transaction. Under KRS § 139.010 and KRS § 139.200, the taxable portion is severable, and the de minimis or true-object rule applies.

5.7. Marketplace-facilitator collection. Marketplace sales subject to KRS § 139.450 were collected and remitted by a registered marketplace facilitator. Taxpayer is not separately liable for the same tax (KRS § 139.450(7)).

5.8. Penalty abatement. Penalties should be abated for reasonable cause under KRS § 131.175.

5.9. Constitutional defenses. Commerce Clause, Due Process Clause, and Section 171 of the Kentucky Constitution defenses are preserved.

6. REFUND CLAIM (REFUND TRACK — KRS § 139.770 / § 134.580)

6.1. Taxpayer hereby applies for a refund of $[AMOUNT] in Kentucky sales and use tax erroneously paid. Taxpayer has completed and attached Form 51A209 (Sales and Use Tax Refund Application).

6.2. Specific grounds for refund (KRS § 134.580 requires the claim to "state the specific grounds upon which it is based"):

• ☐ Tax paid on exempt resale transactions for which valid resale certificates have now been collected;
• ☐ Tax paid on exempt manufacturing equipment under KRS § 139.480;
• ☐ Tax paid on exempt agricultural inputs under KRS § 139.481;
• ☐ Tax paid on exempt nonprofit purchases under KRS § 139.495;
• ☐ Tax paid on transactions sourced outside Kentucky under KRS § 139.105;
• ☐ Tax paid on bullion/collectible currency for which administrative refund was authorized;
• ☐ Duplicate payment / mathematical error;
• ☐ Other: [DESCRIBE].

6.3. Refund computation. A schedule of overpayments by tax period and transaction is attached as Exhibit C. Tax overpaid: $[AMOUNT]. Interest computed under KRS § 131.183 from each respective overpayment date: $[AMOUNT]. Total refund sought: $[AMOUNT].

6.4. Pass-through to consumer. Taxpayer-retailer represents that, upon receipt of refund, it will refund the over-collected tax to the corresponding consumers consistent with administrative practice under KRS § 134.580 and Department guidance, and will provide proof of refund upon request.

6.5. No prior refund. Taxpayer has not previously applied for or received a refund of the amounts claimed.

7. WAYFAIR AND ECONOMIC-NEXUS DEFENSES

7.1. Kentucky Economic-Nexus Standard

Effective October 1, 2018, KRS § 139.340(2)(g) imposes use-tax-collection obligations on remote retailers that, in the previous or current calendar year, exceed either:

• $100,000 in gross receipts from sales sourced to Kentucky, OR
• 200 or more separate transactions sourced to Kentucky.

Kentucky uses a disjunctive ("either/or") threshold; meeting only one threshold is sufficient. The thresholds substantially mirror the South Dakota statute upheld in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018).

7.2. Marketplace-Facilitator Collection (KRS § 139.450)

Effective July 1, 2019, marketplace facilitators meeting the economic-nexus thresholds must collect and remit Kentucky sales and use tax on facilitated sales. Marketplace sellers are relieved of duplicate-collection liability under KRS § 139.450(7) for transactions properly collected by a registered marketplace facilitator.

7.3. Threshold Analysis

7.4. Conclusion. Taxpayer [did / did not] exceed either Kentucky economic-nexus threshold during the periods at issue and therefore [was / was not] obligated to register and collect Kentucky sales and use tax under KRS § 139.340(2)(g).

7.5. Pre-Wayfair periods. Any assessment for periods prior to October 1, 2018, against a non-physically-present remote seller violates the Commerce Clause as construed in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), in effect for those periods.

7.6. Registration date. Effective July 1, 2021, KRS § 139.340 requires a remote seller exceeding either threshold to register and begin collecting tax no later than the first day of the calendar month that is at most 60 days after either threshold is met. Taxpayer registered effective [__/__/____], which is timely under the statutory grace period.

8. SPECIFIC ERRORS AND LEGAL ARGUMENT

8.1. Issue 1 — [TITLE].

• Facts: [NARRATIVE].
• Law: KRS § [CITATION]; 103 KAR [CITATION]; [CASE].
• Application: [ANALYSIS].
• Requested relief: Withdraw $[AMOUNT] of assessment / refund $[AMOUNT] of overpayment.

8.2. Issue 2 — [TITLE].

• Facts: [NARRATIVE].
• Law: [CITATIONS].
• Application: [ANALYSIS].
• Requested relief: [$ AMOUNT].

8.3. Issue 3 — [TITLE].

• Facts: [NARRATIVE].
• Law: [CITATIONS].
• Application: [ANALYSIS].
• Requested relief: [$ AMOUNT].

9. REQUEST FOR CONFERENCE AND RESERVATION OF RIGHTS

9.1. Taxpayer requests an in-person or telephonic conference under KRS § 131.110(2) and 103 KAR 1:010 § 5.

9.2. Taxpayer reserves the right to:

☐ Supplement this Protest and Refund Claim with additional documentation;

☐ Raise additional grounds discovered during conference;

☐ Request additional time under KRS § 131.110(1)(b);

☐ Appeal any adverse Final Ruling to the Kentucky Board of Tax Appeals under KRS § 49.220 within 30 days;

☐ Pursue judicial review in Franklin Circuit Court or the Circuit Court of Taxpayer's residence under KRS § 49.250;

☐ Assert all federal and state constitutional defenses.

10. POWER OF ATTORNEY

The undersigned designates the following representative under KRS § 131.051:

[REPRESENTATIVE NAME], [FIRM], [ADDRESS], [PHONE], [EMAIL], [KY Bar / CPA / EA No.]

A signed Form 20A100 (Declaration of Representative) is enclosed.

11. SIGNATURE AND VERIFICATION

I, the undersigned, declare under penalty of perjury under the laws of the Commonwealth of Kentucky that the foregoing Protest and Refund Claim is true and correct to the best of my knowledge, that I have authority to file on behalf of Taxpayer, that the attached exhibits are authentic, and that no portion of the refund claim has previously been paid or refunded.

Date: [__/__/____]

[________________________________]

[NAME / TITLE — e.g., President; Member; Authorized Officer]

For corporate or LLC taxpayers, attach board or member resolution.

12. EXHIBIT LIST

13. APPEAL ROADMAP

14. KENTUCKY PRACTICE NOTES

• The 60/45-day window is jurisdictional. KRS § 131.110(1)(a) provides 60 days for notices issued on or after July 1, 2018, and 45 days for notices issued before that date. Both deadlines run from the Notice date — not the receipt date — and cannot be extended. An untimely protest converts the assessment into a final liability collectible under KRS Chapter 134.
• Refund claims have a 4-year window. KRS § 134.580(2) requires refund applications to be filed within four years of payment. Each period-by-period payment runs its own clock; aggregating into a single claim is acceptable but compute timeliness per period.
• Vendor refund procedure. Under long-standing Kentucky practice and KRS § 134.580, the retailer who collected the tax must apply for the refund and pass it through to the consumer. A consumer cannot generally bypass the retailer except in narrowly defined circumstances; consult Department guidance for any specific exemption.
• Wayfair compliance. Kentucky's economic-nexus thresholds (KRS § 139.340(2)(g)) are disjunctive: $100,000 in gross receipts OR 200 transactions, measured in the previous or current calendar year. A remote seller meeting either threshold must register and begin collecting no later than the first day of the calendar month at most 60 days after threshold is met (effective 7/1/2021).
• Marketplace facilitators. KRS § 139.450 (effective 7/1/2019) shifts collection responsibility to marketplace facilitators meeting the thresholds. Sellers should obtain written certification from facilitators that tax is being collected and remitted.
• Sourcing. Kentucky uses destination-based sourcing under KRS § 139.105. Sales of tangible personal property are sourced where the purchaser receives delivery; services are sourced under specific KRS § 139.105 rules.
• Resale-certificate good faith. A properly completed and timely received Form 51A105 protects the seller from sales-tax liability if the seller acted in good faith; a "drop-shipment" or third-party fulfillment context may require additional documentation.
• Interest. Interest on overpayments accrues under KRS § 131.183 from the date of overpayment until the date the refund is paid. Counsel should compute interest precisely and request payment with the refund.
• BOTA practice. Sales-tax cases at the Kentucky Board of Tax Appeals proceed under KRS Chapter 13B. The taxpayer bears the burden of proof; rules of evidence are relaxed; testimony, exhibits, and stipulations are typical. Discovery is more limited than in circuit court.

15. SOURCES AND REFERENCES

• Kentucky Revised Statutes (apps.legislature.ky.gov/law/statutes):
• KRS Chapter 139 (Sales and Use Taxes) — https://apps.legislature.ky.gov/law/statutes/chapter.aspx?id=37719
• KRS § 139.340 (Use tax — economic nexus)
• KRS § 139.450 (Marketplace facilitators)
• KRS § 139.620 (Limitation period)
• KRS § 139.720 (Records)
• KRS § 139.770 (Refund or credit — Claims) — https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=51506
• KRS § 134.580 (Refund of taxes)
• KRS § 131.110 (Protests)
• KRS § 131.183 (Interest)
• KRS Chapter 49 (Office of Claims and Appeals; Board of Tax Appeals)
• Kentucky DOR Sales & Use Tax — https://revenue.ky.gov/Business/Sales-Use-Tax/pages/default.aspx
• Kentucky DOR Remote Retailers and Marketplace Providers FAQ — https://taxanswers.ky.gov/Sales-and-Excise-Taxes/Pages/Remote-Retailers-Marketplace-Providers-FAQs.aspx
• Kentucky DOR Wayfair Guidance — https://revenue.ky.gov/News/Pages/Kentucky-Sales-and-Use-Tax-Collections-by-Remote-Retailers-U.S.-Supreme-Court-Ruling.aspx
• Form 51A209 (Sales and Use Tax Refund Application) — https://revenue.ky.gov/Forms/51A209%20(5-07).pdf
• Form 51A105 (Resale Certificate); Form 51A126 (Purchase Exemption Certificate); Form 20A100 (Declaration of Representative) — https://revenue.ky.gov/Forms/
• South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018)
• Quill Corp. v. North Dakota, 504 U.S. 298 (1992) (overruled by Wayfair)
• Department of Revenue v. Cox Interior, Inc., 400 S.W.3d 240 (Ky. 2010)

Disclaimer: This template is provided for informational purposes only and does not constitute legal or tax advice. A Kentucky-licensed attorney or CPA must review and customize this Protest and Refund Claim before filing. Statutes, regulations, court decisions, and Department procedures change; verify all authority before use.