Tuesday, March 10, 2026
Members of the Kentucky House Committee on Appropriations and Revenue,
On behalf of National Taxpayers Union (“NTU”), we write to express our views on certain sales tax provisions included in H.B. 757. As the nation’s oldest taxpayer advocacy organization, we hope to offer our perspective and expertise advice on how Kentucky can further reduce the significant sales tax compliance burdens faced by small businesses attempting to access a nationwide market.
Sales Tax Thresholds
Section 1 of the bill would adopt an important change: removing the separate 200-transaction trigger for remote sales tax collection while retaining the existing $100,000 trigger. We commend the committee for this change, which will help limit compliance challenges faced by small businesses. Sales taxes continue to be a compliance nightmare for small businesses selling online, but as a Streamlined state, Kentucky already does more than many states to reduce these burdens. This seemingly minor change would provide needed relief to small business owners who are currently expected to effectively moonlight as multistate sales tax experts.
Twenty-eight other states have already adopted a similar change (see map), removing transaction thresholds from their sales tax. It makes little sense to subject a taxpayer to collection obligations simply because of numerous small-dollar transactions. The interest of the state of Kentucky lies in ensuring that significant levels of economic activity are not going untaxed, an interest that the $100,000 threshold adequately safeguards without also imposing a separate threshold based on the number of transactions.
If the committee seeks to adopt further changes to increase Kentucky’s competitiveness, we offer two suggestions drawn from our report How Can States Reduce Compliance Burdens for Remote Sellers? that could further minimize compliance burdens at little to no cost to Kentucky.
Basing safe harbor thresholds on retail sales would protect businesses that engage in significant volumes of nontaxable sales from filing returns that are not worth the time and effort to either the business or the Kentucky Department of Revenue. However, Kentucky currently bases sales tax safe harbors on gross sales for individual sellers, which means that nontaxable sales are included as counting towards the $100,000 safe harbor threshold. Seventeen other states and DC, including Illinois and Tennessee, have switched away from basing their safe harbors on gross sales toward using retail sales instead.
Sales done by an individual seller on a larger marketplace should not also count towards the individual seller’s threshold. Currently, sales made on marketplace platforms by individual sellers are double-counted towards both the marketplace’s safe harbor threshold as well as the individual seller’s safe harbor. This means that a seller that sells primarily through Amazon, where Amazon is responsible for collecting and remitting sales tax on those sales, is often liable for sales tax collection in Kentucky if they make just a few sales through their own website. Eighteen other states, including Illinois and Tennessee, have amended their sales tax so that they do not double-dip in this manner.
Conclusion
We thank the committee for their efforts to assist small businesses that must navigate the patchwork of sales tax rates, definitions, exemptions, and the numerous other intricacies of multistate sales tax compliance. We hope these suggestions can help further strengthen Kentucky’s reputation as a state that values and supports small businesses.
Jessica Ward
Senior Director of State Affairs
National Taxpayers Union