Kentucky Enacts Exemption for Specified Services if Certain Conditions Are Met

Kentucky has enacted legislation that exempts specified services from taxation if one of the following conditions is met:

• The services were sold prior to January 1, 2019 and gross receipts from the sales were less than $6000 in calendar year 2018; or
• The services are sold from January 1, 2019 forward and gross receipts from the sales are less than $6000 in the first calendar year of operation.

Under either of the above circumstances, if gross receipts from the sales exceed $6000 in a calendar year, all gross receipts over $6000 are taxable in that calendar year, and all gross receipts are subject to tax in subsequent calendar years. The specified services this exemption applies to are:

• landscaping services,
• janitorial services,
• small animal veterinary services,
• pet care services,
• industrial laundry services,
• non-coin-operated laundry and dry cleaning services,
• linen supply services,
• indoor skin tanning services,
• non-medical diet and weight reducing services,
• limousine services with a driver, and
• extended warranty services

The burden of proving that these services are not taxable is on the seller unless they take from the purchaser a fully completed resale certificate, Streamlined Sales and Use Tax Agreement exemption certificate, or a certificate showing the property is purchased under a direct pay authorization. Kentucky had previously enacted legislation that expanded its sales tax base to subject these specified services to sales tax, effective July 1, 2018.

The exemption for sales under $6000 does not apply if a person also sells tangible personal property, digital property, or services related to any of the following:

• The rental of any room or rooms, lodgings, campsites, or accommodations furnished by any hotel, motel, inn, tourist camp, tourist cabin, campgrounds, recreational vehicle parks, or any other place in which rooms, lodgings, campsites, or accommodations are regularly furnished to transients for a consideration.
• Sewer services;
• Sales of specified admissions;
• Prepaid calling service and prepaid wireless calling service;
• Intrastate, interstate, and international communications services, except pay telephone services; or
• Distribution, transmission, or transportation services for natural gas that is for storage, use, or other consumption in Kentucky, if not for residential use or resale.

The burden of proving that these services are not taxable is on the seller unless they take from the purchaser a fully completed exemption certificate or Streamlined Sales and Use Tax Agreement exemption certificate.

The legislation excludes from “extended warranty services” sales of service contracts for tangible personal property to be used by a small telephone utility or a Tier III CMRS provider to deliver communications services or broadband. (H.B. 354, Laws 2019, effective July 1, 2019)