KRS 139.270 — Resale certificate and certificates of exemption

(1) The resale certificate, certificate of exemption, agriculture exemption license
number, or Streamlined Sales and Use Tax Agreement Certificate of
Exemption relieves the retailer or seller from the burden of proof if the retailer
or seller:
(a) Within ninety (90) days after the date of sale:
1. Obtains a fully completed resale certificate, certificate of exemption,
or Streamlined Sales and Use Tax Agreement Certificate of
Exemption;
2. Obtains an agriculture exemption license number from the
purchaser or a fully completed Streamlined Sales and Use Tax
Agreement Certificate of Exemption that contains an agriculture
exemption license number; or
3. Captures the relevant data elements that correspond to the
information that the purchaser would otherwise provide to the
retailer or seller on the Streamlined Sales and Use Tax Agreement
Certificate of Exemption; and
(b) Maintains a file of the certificate, agriculture exemption license number, or
Streamlined Sales and Use Tax Agreement Certificate of Exemption
obtained or relevant data elements captured in accordance with KRS
139.720.
(2) The relief from liability provided to the retailer or the seller in this section does
not apply to a retailer or seller who:
(a) Fraudulently fails to collect the tax;
(b) Solicits purchasers to participate in the unlawful claiming of an
exemption; or
(c) Accepts an exemption certificate when the purchaser claims an
entity-based exemption when:
1. The product sought to be covered by the exemption certificate is
actually received by the purchaser at a location operated by the
retailer or seller; and
2. The state in which that location resides provides an exemption
certificate that clearly and affirmatively indicates that the claimed
exemption is not available in that state.
For purposes of this paragraph, "entity-based exemption" means an
exemption based on who purchases the product or who sells the product.
An exemption available to all individuals shall not be considered an
entity-based exemption.
(3) (a) If the department requests that the seller or retailer substantiate that the
sale was a sale for resale or an exempt sale and the retailer or seller has
not complied with subsection (1) of this section, the seller or retailer shall
be relieved of any liability for the tax on the transaction if the seller or
retailer, within one hundred twenty (120) days of the department's
request:
1. Obtains a fully completed resale certificate, exemption certificate,
agriculture exemption license number, or Streamlined Sales and
Use Tax Agreement Certificate of Exemption from the purchaser for
an exemption that:
a. Was available under this chapter on the date the transaction
occurred;
b. Could be applicable to the item being purchased; and
c. Is reasonable for the purchaser's type of business; or
2. Obtains other information establishing that the transaction was not
subject to the tax.
(b) Notwithstanding paragraph (a) of this subsection, if the department
discovers through the audit process that the seller or retailer had
knowledge or had reason to know at the time the information was
provided that the information relating to the exemption claimed was
materially false, or the seller or retailer otherwise knowingly participated in
activity intended to purposefully evade the tax that is properly due on the
transaction, the seller or retailer shall not be relieved of the tax on the
transaction. The department shall bear the burden of proof that the seller
or retailer had knowledge or had reason to know at the time the
information was provided that the information was materially false.
(4) Notwithstanding subsections (1) and (3) of this section, the seller or retailer
may still offer additional documentation that is acceptable by the department
that the transaction is not subject to tax and to relieve the seller or retailer from
the tax liability.
(5) If the department later finds that the retailer or seller complied with subsections
(1), (3), and (4) of this section, but that the purchaser used the property or
service in a manner that would not have qualified for resale status or the
purchaser issued a certificate of exemption, an agriculture exemption license
number, or a Streamlined Sales and Use Tax Agreement Certificate of
Exemption and used the property or service in some other manner or for some
other purpose, the department shall hold the purchaser liable for the remittance
of the tax originally due and may apply penalties provided in KRS 139.990.