139.795 Certified service provider is agent of seller -- Liability -- Exemption for purchaser.
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<![CDATA[ Page 1 of 2 139.795 Certified service provider is agent of seller -- Liability -- Exemption for purchaser. (1) (a) A certified service provider is the agent of a seller, with whom the certified service provider has contracted, for the collection and remittance of sales and <br>use taxes. (b) The certified service provider is liable for sales and use tax due each member state on all sales transactions it processes for the seller, except when the <br>liability for not collecting the sales or use taxes results from the certified <br>service provider's reliance on software certified by the state. Relief from <br>liability shall not be granted if the certified service provider has incorrectly <br>classified an item or transaction into a product-based exemption certified by <br>the state, except when the item or transaction is classified based upon the <br>individual listing of items or transactions within a product definition approved <br>by the governing board or the member state. (c) A person that is responsible for the certified automated system is responsible for the functioning of the system and is liable to the state for underpayments <br>of tax attributable to errors in the functioning of the certified automated <br>system. (2) (a) A seller that contracts with a certified service provider is not liable to the state for sales or use tax due on transactions processed by the certified service <br>provider unless the seller misrepresented the type of items it sells or <br>committed fraud; (b) In the absence of probable cause to believe that the seller has committed fraud or made a material misrepresentation, the seller is not subject to audit on the <br>transactions processed by the certified service provider; and (c) A seller is subject to audit for transactions not processed by the certified service provider. (3) The member states acting jointly may perform a system check of the seller and review the seller's procedures to determine if the certified service provider's system <br>is functioning properly and the extent to which the seller's transactions are being <br>processed by the certified service provider. (4) A model 2 seller shall be relieved of liability for not collecting sales and use taxes if the liability resulted from the model 2 seller's reliance on software previously <br>certified by the state. Relief from liability shall not be granted if the certified service <br>provider has incorrectly classified an item or transaction into a product-based <br>exemption certified by the state, except when the item or transaction is classified <br>based upon the individual listing of items or transactions with a product definition <br>approved by the governing board or the member state. (5) (a) The department shall notify the certified service provider or model 2 seller if an item or transaction has been incorrectly classified as to its taxability; (b) The certified service provider or a model 2 seller shall have ten (10) days to revise the classification after the receipt of notice; and Page 2 of 2 (c) Upon expiration of the ten (10) days, the certified service provider or the model 2 seller shall be liable for the failure to collect the amount of sales or <br>use taxes due and owing. (6) A model 3 seller that has signed a performance agreement establishing a performance standard for that system is liable for the failure of the system to meet <br>the performance standard. (7) A purchaser shall not be subject to the additional tax, related penalties imposed under KRS 131.180, or related interest provided under KRS 131.183 for having <br>failed to pay the correct amount of sales or use tax on specific transactions if: <br>(a) The purchaser's seller or certified service provider relied on erroneous data provided by the department on tax rates, boundaries, or taxing jurisdiction <br>assignments; (b) The purchaser holds a direct pay authorization and relied on erroneous data provided by the department on tax rates, boundaries, or taxing jurisdiction <br>assignments; or (c) The purchaser, purchaser's seller, or purchaser's certified service provider relied on erroneous data in the taxability matrix completed and made available <br>to the public by the department. The relief prescribed in this paragraph for <br>additional tax and related interest provided under KRS 131.183 shall be <br>limited to the department's erroneous classification in the taxability matrix as <br>"taxable" or "exempt," "included in sales price" or "excluded from sales <br>price," or "included in the definition" or "excluded in the definition." Effective: August 1, 2008 <br>History: Amended 2008 Ky. Acts ch. 95, sec. 3, effective August 1, 2008. -- Amended 2007 Ky. Acts ch. 141, sec. 12, effective July 1, 2007. -- Created 2001 Ky. Acts <br>ch. 6, sec. 9, effective June 21, 2001. Legislative Research Commission Note (7/1/2007). A manifest clerical or typographical error in this section has been corrected by the Reviser of Statutes under the authority <br>of KRS 7.136. ]]>