Kentucky Administrative Regulations › Title 103 - FINANCE AND ADMINISTRATION CABINET - DEPARTMENT OF REVENUE › Chapter 31 - Sales and Use Tax; Administration and Accounting › Section 103 KAR 31:011 - Methods of accounting for and remitting tax

Current through Register Vol. 51, No. 1, July 1, 2024
RELATES TO:
				KRS
				139.010,
				139.025,
				139.200,
				139.260,
				139.340,
				139.550,
				139.710,
				139.720
NECESSITY, FUNCTION, AND CONFORMITY: To interpret the sales and
				use tax law as it relates to methods of accounting for and remitting the
				tax.
Section 1. Generally, all persons
			 (e.g., corporations, partnerships, associations and proprietorships) are
			 required to determine and report their gross receipts (or sales price in the
			 case of the use tax) by the accrual accounting method. That is, all cash,
			 credit, installment and conditional sales are to be included in the measure of
			 the tax on the return for the month in which the sales transaction occurs, even
			 though all or a part of the payments owing from customers on those sales are
			 deferred under a credit, installment or conditional sale arrangement. However,
			 if the retailer maintains his records on a cash basis and accounts for cash
			 collections rather than sales transactions, he may elect to use that method in
			 reporting his sales and use tax liability provided all cash collections for the
			 reporting period are included in his return without deduction for amounts
			 received from sales transactions occurring during any period preceding the
			 reporting period. By electing the cash basis, the taxpayer has established the
			 point of "sale" as the act of receiving payment and not the filing of the
			 customer's order, the issuance of the billing to the customer or the delivery
			 of the goods or services.
Section
			 2. Where sales transactions are regularly recorded on the cash
			 basis described in Section 1 of this administrative regulation but adjustments
			 are made at the end of the year to determine receipts on an accrual sale basis
			 for income tax purposes, the cash reporting basis authorized in Section 1 of
			 this administrative regulation may still be used by the retailer in reporting
			 and paying the tax. However, the retailer must include in his last sales and
			 use tax return filed for each year the year-end accrual adjustment made and any
			 additional tax due must be remitted with the return. Any overpayment will be
			 refunded or credited to the account of the permit holder.
Section 3. If a retailer elects to employ the
			 cash basis of reporting authorized in Section 1 of this administrative
			 regulation, the tax must be paid on the taxable ending accounts receivables
			 when the business is discontinued or sold. However, if the buyer of the
			 business (including the accounts receivable) by written agreement with the
			 department agrees to report his sales and use tax liability on the cash basis
			 authorized, his receipts from the accounts receivable purchased may be reported
			 and the tax due thereon paid by him when collected.
Section 4. A retailer, after adopting a
			 method of reporting his sales and use tax liability, shall not change that
			 method without obtaining the written consent of the department. The department
			 shall not consider authorizing a change from the accrual to the cash basis
			 unless the taxpayer submits clear and convincing evidence that either the
			 nature of the business or the general accounting procedures and practices of
			 the business have changed significantly so as to warrant a change to the cash
			 basis. No request to change from accrual to the cash basis shall be authorized
			 if, in the opinion of the department, the real or ultimate purpose of the
			 change is to reduce the taxpayer's current sales or use tax payments to the
			 Commonwealth.
STATUTORY AUTHORITY:
				  KRS
				  131.130(1)