{"data":{"id":"us-ky/krs-139.795","jurisdiction":"us-ky","citation":"KRS 139.795","heading":"Certified service provider is agent of seller -- Liability -- Exemption for","body":"purchaser, seller, and certified service provider.\n(1) (a) A certified service provider is the agent of a seller, with whom the certified\nservice provider has contracted, for the collection and remittance of sales and\nuse taxes.\n(b) The certified service provider is liable for sales and use tax due each member\nstate on all sales transactions it processes for the seller, except when the\nliability for not collecting the sales or use taxes results from the certified\nservice provider's reliance on software certified by the state. Relief from\nliability shall not be granted if the certified service provider has incorrectly\nclassified an item or transaction into a product -based exemption certified by\nthe state, except when the item or transaction is classified based upon the\nindividual listing of items or transactions within a product definition approved\nby the governing board or the member state.\n(c) A person that is responsible for th e certified automated system is responsible\nfor the functioning of the system and is liable to the state for underpayments\nof tax attributable to errors in the functioning of the certified automated\nsystem.\n(2) (a) A seller that contracts with a certified service provider is not liable to the state\nfor sales or use tax due on transactions processed by the certified service\nprovider unless the seller misrepresented the type of items it sells or\ncommitted fraud;\n(b) In the absence of probable cause to believe that the seller has committed fraud\nor made a material misrepresentation, the seller is not subject to audit on the\ntransactions processed by the certified service provider; and\n(c) A seller is subject to audit for transactions not processed by the certif ied\nservice provider.\n(3) The member states acting jointly may perform a system check of the seller and\nreview the seller's procedures to determine if the certified service provider's system\nis functioning properly and the extent to which the seller's tran sactions are being\nprocessed by the certified service provider.\n(4) (a) A model 2 seller shall be relieved of liability for not collecting sales and use\ntaxes if the liability resulted from the model 2 seller's reliance on software\npreviously certified by the state. Relief from liability shall not be granted if the\ncertified service provider has incorrectly classified an item or transaction into\na product -based exemption certified by the state, except when the item or\ntransaction is classified based upon th e individual listing of items or\ntransactions with a product definition approved by the governing board or the\nmember state.\n(b) The department shall notify the certified service provider or model 2 seller if\nan item or transaction has been incorrectly classified as to its taxability.\n(c) The certified service provider or a model 2 seller shall have ten (10) days to\nrevise the classification after the receipt of notice.\n(d) Upon expiration of the ten (10) days, the certified service provider or the\nmodel 2 seller shall be liable for the failure to collect the amount of sales or\nuse taxes due and owing.\n(5) A model 3 seller that has signed a performance agreement establishing a\nperformance standard for that system is liable for the failure of the system to me et\nthe performance standard.\n(6) A purchaser, purchaser's seller, or certified service provider shall not be subject to\nthe additional tax, related penalties imposed under KRS 131.180, or related interest\nprovided under KRS 131.183 for having failed to pay the correct amount of sales or\nuse tax on specific transactions if:\n(a) The purchaser's seller or certified service provider relied on erroneous data\nprovided by the department on tax rates, boundaries, or taxing jurisdiction\nassignments; or\n(b) The purchaser, purchaser's seller, or purc haser's certified service provider\nrelied on erroneous data in the taxability matrix completed and made available\nto the public by the department. The relief prescribed in this paragraph for\nadditional tax and related interest provided under KRS 131.183 sh all be\nlimited to the department's erroneous classification in the taxability matrix as\n\"taxable\" or \"exempt,\" \"included in sales price\" or \"excluded from sales\nprice,\" or \"included in the definition\" or \"excluded in the definition.\"\n(7) (a) If the departm ent does not provide the seller with at least thirty (30) days'\nnotice from the enactment of a sales and use tax rate change to the effective\ndate of the rate change, the seller shall be relieved of liability for failing to\ncollect tax at the new rate if:\n1. The seller collected tax at the immediately preceding effective rate; and\n2. The seller's failure to collect tax at the new rate does not extend beyond\nthirty (30) days after the date of enactment of the new rate.\n(b) Notwithstanding paragraph (a) of this subsection, if the department establishes\nthat the seller fraudulently failed to collect tax at the new rate or solicits\npurchasers based on the immediately preceding effective rate, the relief\nprovided to the seller in paragraph (a) of this subsection shall not apply.\n(8) A purchaser shall not be subject to the additional tax, related penalties imposed\nunder KRS 131.180, or related interest provided under KRS 131.183 for failing to\npay the correct amount of sales or use tax on specific transactions if t he purchaser\nholds a direct pay authorization and relied on erroneous data provided by the\ndepartment on the tax rates, boundaries, or taxing jurisdiction assignments.","path":["KRS Chapter 139"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=39936","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:50:32Z","sha256":"e1044a97c5fb7222f813c28cf058de03357b7e09f4fce35d6855d42d9a0f86cd","source_id":"us-ky","stale":false,"prev":"us-ky/krs-139.794","next":"us-ky/krs-139.980"},"notice":"GroundRules: Original legal text. Not legal advice."}