The Kentucky Department of Revenue (DOR) has stated in a recent newsletter that the state’s sales and use tax exemptions for traditional manufacturing do not apply to block chain production. The DOR explains the block chain process, stating that computer equipment is used to create and add a new block to the block chain network by repeated attempts “to manufacture” a specific string of computer commands that can execute a prescribed complex mathematical solution. The DOR notes that there is no indication that there is a sale of the blocks of data that become a permanent part of a public digital ledger. Kentucky’s manufacturing exemptions require the manufacturing or industrial processing of tangible personal property for the production of a tangible product for sale. Production of block chain or bit coins are not the production of tangible personal property, so machinery and supplies used in their production do not qualify for the manufacturing exemption. (Kentucky Sales Tax Facts, December 2020, Kentucky DOR)