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Sales and Use Tax Assessed on Painting Purchased Out-of-State


In Schilling v. Department of Revenue, Order No. K-20344 (KBTA Jul. 16, 2009), the Kentucky Board of Tax Appeals (“Board”) held that the Kentucky Department of Revenue (“Department”) properly assessed sales and use tax on a painting purchased and shipped from out-of-state to a Kentucky resident. J. Baxter Schilling (“Taxpayer”) purchased “The Shepherdess,” by painter Winslow Homer, in New York on May 31, 2000. The painting was shipped from a gallery in Rhode Island to Taxpayer’s residence in Kentucky. The Department assessed Kentucky sales and use tax against the purchase of the painting and the Taxpayer appealed.

The only invoice presented to the Board was a cancelled check for $150,000 which stated, “payment in full.” There was no record provided of any payment of sales, excise or other tax for the painting. The Board held that pursuant to KRS 139.310 and KRS 139.330, the Department had the power to tax the sale of the painting when it was brought into Kentucky if the sale had not been taxed in another state. The Board further held that the burden of proving payment of tax for the purchase of the painting was on Taxpayer. Since Taxpayer produced no evidence of having paid tax on the painting, the Board held that he was liable for sales and use tax in the amount of $9,000. 

If you have questions about this topic or any other legal issue, please contact any member of the firm's State and Local Tax Team.

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