Key figures
Kentucky payables
2026, with sources
Contractors
Kentucky asks for 1099 information only when Kentucky tax was withheld from the payment, filed by January 31. It does not require general withholding on payments to nonresident contractors.
Classification matters for unemployment insurance: the Office of Unemployment Insurance does not require wages to be reported for genuine independent contractors, but it determines status case by case on the worker’s relationship to the business, and misclassification is illegal. Local occupational license taxes can also reach self-employed contractors’ net profits, which is their obligation rather than the payer’s.
Use tax at a flat 6%
Kentucky has no local sales or use taxes, so use tax is a flat 6% wherever in the state the item is used. Because prewritten computer software access services are taxable, a Kentucky startup’s software stack is in scope: $50,000 a year of SaaS from vendors that do not collect Kentucky tax means $3,000 of use tax, reported to the Department of Revenue.
Since August 1, 2026 the list of taxable services also includes data brokering services, which matters for a company buying data sets of personal data.
Deadlines
- January 311099s showing Kentucky tax withheld, with the annual withholding statements
The federal baseline
This page covers what Kentucky adds. The federal rules underneath it apply here too.
Common questions
Do we file 1099s with Kentucky?
Only those showing Kentucky tax withheld. The Department of Revenue asks for 1099 data only when Kentucky income tax was withheld, due January 31 with the year’s withholding statements.
Do we owe Kentucky use tax on our SaaS subscriptions?
Yes, if the vendor did not charge Kentucky tax. Prewritten computer software access services are on Kentucky’s list of taxable services, so a subscription bought from an out-of-state vendor that does not collect carries 6% use tax, with no local add-on.
Payables next door
- ILIllinois payablesIllinois asks for 1099s only where Illinois tax was withheld but wants contractors on the new-hire report, and Chicago taxes the cloud software your Chicago staff use.
- INIndiana payablesIndiana reconciles W-2s and 1099s with Indiana withholding on the WH-3 by January 31 and charges 7% use tax on untaxed goods, but not on remotely accessed software.
- MOMissouri payablesMissouri wants its own copy of 1099s for Missouri-source payments of $1,200 or more, by February 28, filed directly with the DOR.
- OHOhio payablesOhio taxes the business software you buy, so untaxed SaaS invoices carry use tax; 1099s go to Ohio only when they report Ohio withholding.
- TNTennessee payablesTennessee has no state 1099 filing and no contractor withholding; the payables issue is use tax, which reaches the SaaS tools a startup buys because remotely accessed software is taxable here.
- VAVirginia payablesVirginia presumes workers are employees, requires new independent contractors to be reported within 20 days, and wants 1099s only when Virginia tax was withheld. SaaS purchases carry no use tax.
- WVWest Virginia payablesWest Virginia treats contractors paid $2,500 or more as reportable new hires, due within 14 days. Its sales tax reaches many services and prewritten software, so use tax on purchases needs a process.
Founder guides on this
- PeopleContractor or employee? Classification for startupsContractor or employee depends on control, not the contract. The IRS test, state rules, 1099s, payroll registration and the cost of getting it wrong.
- Sales taxSales tax nexus for startups: when you owe tax in a stateSince Wayfair, selling into a state can create a sales tax obligation. How economic nexus works, why SaaS is taxable in some states and when to register.
More of the Kentucky guide
- AccountingAccounting and state tax in KentuckyCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in KentuckySales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayrollPayroll taxes and employer rules in KentuckyWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in KentuckyRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in KentuckyCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.