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A permanent regulation has been adopted that requires vendors entering into contracts to supply taxable goods and services to the Commonwealth of Kentucky to register with the Kentucky Department of Revenue for a sales and use tax number. Under this regulation, any affiliates of the vendor must also register for a sales and use tax number. Failure by the vendor to submit the required documentation or to remain registered and in compliance for the duration of the contract will constitute a material breach of the contract, resulting in termination, unless the Secretary of the Finance and Administration Cabinet makes a written determination that the continuation of the contract is necessary to protect the interests of the Commonwealth. (200 KAR 5:390, Kentucky Finance and Administration Cabinet, effective December 5, 2008)


Effective April 1, 2009, Kentucky will no longer allow a sales tax exemption for the sale of packaged distilled spirits, wine and malt beverages not consumed on the premises licensed for their sale. These sales will now be subject to the 6% Kentucky sales and use tax. Deductions previously taken for sales of beer, alcoholic beverages, or packaged liquor will no longer be allowed beginning with the filing of the April 1, 2009 sales and use tax return. This change does not affect the sale of alcohol by the drink which remains subject to the 6% sales and use tax. (Sales Tax Changes for Packages Liquors and Tobacco Tax Modifications, Kentucky Department of Revenue, February 20, 2009)


A Kentucky court found that parts and supplies used in the fulfillment of maintenance contract obligations were subject to sales and use tax as a retail sale. The court stated that since no tangible personal property is transferred at the time of the sale of the maintenance contract, it is not subject to tax. When parts are used in the fulfillment of the maintenance contract obligations and transferred to the purchaser of the contract, the parts are subject to tax. (Department of Revenue v. Duplicator Sales and Service, Inc. Kentucky Court of Appeals, August 17, 2007)


The Kentucky Board of Tax Appeals held that a company that operated pay phones was providing communications services subject to Kentucky sales tax. The company’s products, including: 1) a dialing mechanism to allow consumers to direct signals of their voices to a specific location, 2) a device that could transmit and receive voice communications, and 3) an outlet for the dial tone, were taxable intrastate telephonic communication services. The fact that the company did not provide the entire service, because it had to obtain dial tones from a phone company and might route calls to an operator or through a long distance company’s computers, did not change the fact that the company was providing communication service. (Phone-Tech, Inc. v. Finance and Administration Cabinet, Department of Revenue, Kentucky Board of Tax Appeals, File NO. K05-R-33)


Mailers engaged in business in Kentucky are relieved from collecting use tax on direct mail advertising materials printed out of state and delivered out of state to the U.S. Postal Service for mass mailing to third-party Kentucky residents who are not purchasers of the advertising materials if the commercial printers or mailers: 1) maintain records relating to those sales to assist the Department in the collection of use tax; and 2) file informative reports if requested by the Department. Thus, if printers and mailers comply with the record maintenance requirement, the purchaser of the printing or direct mail advertising materials will have the sole responsibility for reporting and paying the use tax imposed. Effective July 12, 2006. (Ch. 251, H.B. 557, Laws 2006)



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