103 KAR 31:030. Direct pay authorization

Link to law: http://www.lrc.ky.gov/kar/103/031/030.htm
Published: 2015

      103 KAR 31:030.

Direct pay authorization.

 

      RELATES TO: KRS

139.260, 139.400, 139.710

      STATUTORY

AUTHORITY: KRS 131.130, 139.260, 139.660, 139.720

      NECESSITY,

FUNCTION, AND CONFORMITY: KRS 13A.139, 131.130(1), 139.260, 139.400, and

139.710 authorized the Revenue Cabinet to promulgate administrative regulations

for the: (1) assessment, collection, refunding, administration, and enforcement

of Kentucky tax laws; and (2) direct pay authorization. This administrative

regulation establishes the requirements and procedures for the direct payment

of Kentucky sales and use tax on purchases of tangible personal property

excluding energy and energy producing fuels.

 

      Section 1.

Definitions. (1) "Direct pay authorization" or "DPA" means

an authorization issued by the Revenue Cabinet that permits a taxpayer to

report Kentucky sales and use tax directly to the cabinet on all purchases of

tangible personal property, excluding energy and energy-producing fuels.

      (2)

"Distribution facility" means a specific location which is used to

receive, hold, and ship business inventory.

      (3)

"Manufacturing" means a process that transforms tangible personal

property having no commercial value for its intended use before processing into

tangible personal property having appreciable commercial value for its intended

use after processing.

 

      Section 2.

Qualifications. An applicant shall:

      (1) Be a person

engaged in:

      (a)

Manufacturing;

      (b) Extracting

minerals, ores, clay, stone, coal, or natural gas;

      (c) Operating a

transportation company; or

      (d) Operating a

distribution facility; and

      (2) Hold a valid

Kentucky retail sales and use tax permit; and

      (3) Have a

record of timely payment of taxes administered by the cabinet;

      (4) Maintain

records in such a manner that, as applicable, the amount of tangible property

purchased from:

      (a) A Kentucky

vendor may be properly reported; or

      (b) An

out-of-state vendor for storage, use, or other consumption in Kentucky or

elsewhere can be verified; and

      (5) Be engaged

in business in Kentucky, and own property, other than office furniture and

equipment, that is located in more than one (1) state; or

      (6)(a) Have been

in engaged in business in Kentucky in excess of twenty-four (24) months; and

      (b) Have

purchased tangible personal property of at least ten (10) million dollars for

use in his Kentucky operations in the preceding calendar or fiscal year, as

applicable.

 

      Section 3.

Application. (1) An applicant shall apply to the cabinet for a DPA upon Revenue

Form 51A112, "Application for Direct Pay Authorization".

      (2) The

application shall include:

      (a) The

applicant's:

      1. Legal

business name;

      2. Federal

Employer Identification Number;

      3. Date

operations began in Kentucky;

      4. Kentucky

business address;

      5. Mailing

address;

      6. Type of

operation: manufacturing/processing; mining/quarrying; transportation company;

or distribution facility;

      7. Telephone and

fax numbers;

      8. Kentucky

Employer's Withholding Account Number;

      9. Kentucky

Corporation Income and License Account Number; and

      10. Kentucky

Sales and Use Account Number;

      (b) If an

applicant is engaged in business and has property, other than office furniture

and equipment, located in more than one (1) state, the location of the

applicant's home office, and plants or places of business;

      (c) If the applicant

is not engaged in business and does not have property, other than office

furniture and equipment, located in more than one (1) state, the amount of

tangible property purchased for use in the applicant's Kentucky business

operations in the last calendar or fiscal year, as applicable;

      (d) Statements

relating to records and documentation required by Sections 2(3) and (4) and 7

of this administrative regulation;

      (e) Most recent

year's financial statement certified by the applicant's chief financial officer

or a certified public accountant; and

      (f) A detailed

description of the records maintained to document that the amount of taxable

purchases is properly reported.

 

      Section 4.

Requirements. A DPA holder shall:

      (1) Furnish all

of his vendors, excluding vendors of energy and energy-producing fuels, with a

copy of Revenue Form 51A110, "Direct Pay Authorization";

      (2) Report and

remit the sales or use tax on all taxable purchases of tangible personal

property, excluding energy and energy-producing fuels, that would have been

remitted by the applicant's retailer if the DPA had not been granted; and

      (3) Report all

taxable purchases in accordance with KRS 139.540, 139.550, 139.560 and 139.590.

 

      Section 5.

Vendor Responsibility. (1) A vendor shall be relieved of the duty of collecting

and paying the sales or use tax if he:

      (a) Accepts a

copy of a company's DPA in good faith; and

      (b) Retains the

copy in his records pursuant to KRS 139.720(2).

      (2) A vendor

shall:

      (a) Include

sales for which a DPA has been accepted in Line 1, Gross Receipts, of Revenue

Form 51A102, "Sales and Use Tax Return"; and

      (b) Take a

corresponding deduction on Line 19, which shall be labeled "DPA

Sales".

 

      Section 6.

Limitations. A DPA holder shall not:

      (1) Issue the

DPA to a construction contractor; or

      (2) Allow a

contractor to use the holder's DPA to purchase, lease, or rent tangible

personal property or purchase taxable services.

 

      Section 7.

Records. A DPA holder shall maintain records pursuant to KRS 139.720(2) and 103

KAR 31:020.

 

      Section 8. Bond

Requirement. Upon demand of the cabinet, the applicant or holder of a direct

pay authorization shall execute pursuant to KRS 139.660, a bond or an indemnity

agreement securing the payment of the sales or use taxes to the cabinet in an amount

not less than $75,000 and not greater than three (3) times the estimated

monthly liability.

 

      Section 9.

Transfer of Authorization. (1) A DPA shall not be transferable upon the sale,

lease, or other transfer of the business.

      (2) A DPA holder

shall notify the cabinet within ten (10) days of the effective date of the

sale, lease, or other transfer of the business.

 

      Section 10.

Termination. (1) The cabinet shall terminate a DPA if the DPA holder:

      (a) Fails or

ceases to be an eligible taxpayer;

      (b) Fails to

timely file its sales and use tax returns and timely pay any tax due; or

      (c) Fails to

comply with any of the provisions of this administrative regulation.

      (2)(a) The

cabinet shall notify a DPA holder of the termination by certified mail at his

last known address.

      (b) Upon receipt

of the notification of termination, a DPA holder shall notify all vendors

within thirty (30) days of the date of termination.

      (3) The

effective date of the termination shall be the date of the mailing of the

termination notice.

 

      Section 11.

Protests. The denial or termination of a DPA may be protested pursuant to KRS

131.110.

 

      Section 12.

Incorporation by Reference. (1) The following material is incorporated by

reference:

      (a)

"Application for Direct Pay Authorization, Form 51A112 (12-97)";

      (b) "Direct

Pay Authorization, Form 51A110 (8-97)"; and

      (c) "Sales

And Use Tax Return, Form 51A102 (9-92)".

      (2) This

material may be inspected, copied, or obtained at Kentucky Revenue Cabinet, 200

Fair Oaks, Frankfort, Kentucky 40620, or at a Kentucky Taxpayer Service Center,

Monday through Friday, 8 a.m. to 4:30 p.m. (SU-56; 1 Ky.R. 470; eff. 3-12-75;

Am. 24 Ky.R. 920; 1522; 1643; eff. 2-10-98.)
Read Entire Law on www.lrc.ky.gov