The Kentucky Department of Revenue (DOR) has issued a new Sales Tax Facts summarizing recent legislation impacting the sales and use tax. This includes taxation of services, changes to taxation of extended warranty services, applications for the film refund credit, and farmer exemption numbers, among other changes.
Expansion of Taxable Services
The sales and use tax base has been expanded to include a number of new services, effective January 1, 2023.
Key Highlights:
- Newly taxable services may be purchased for resale.
- “Limousine services” have been removed as a service subject to sales tax.
- Effective January 1, 2023, limousine service providers are subject to a 6% excise tax on the gross receipts of:
- Vehicle rentals
- Peer-to-peer car sharing rentals
- Ride share services
- Taxicab services
- Limousine services
The 6% excise tax applies to any vehicle rental or service listed that originates in Kentucky.
Extended Warranty Services
Effective January 1, 2023, “extended warranty services” is amended to mean:
“Services provided through a service contract agreement between the contract provider and the purchaser where the purchaser agrees to pay compensation for the contract and the provider agrees to repair, replace, support, or maintain tangible personal property, digital property, or real property according to the terms of the contract.”
The intent is to include all contracts for tangible personal property and digital property, regardless of whether the property itself is taxable or exempt.
Example:
Separately charged extended warranties purchased on exempt property such as:
- Farm equipment
- Machinery for new expanded industry
- Motor vehicles sold to certain out-of-state residents
These will no longer be exempt from sales and use tax.
Film Refund Credit Applications
DOR will begin receiving new registration applications (Form 51A241) for the film refund credit, which was temporarily suspended, on or after July 1, 2022, for film productions that begin after that date.
Agriculture Exemption License Number
The deadline for farmers to obtain their agriculture exemption license number has been extended until January 1, 2023.
Expiration Details:
- All agriculture exemption license numbers will expire on December 31, 2026.
- Licenses will expire every four years thereafter.
(Kentucky Sales Tax Facts No. 06/01/2022, 06/01/2022.)
Frequently Asked Questions
What services became taxable under Kentucky’s updated sales and use tax?
The expanded sales and use tax now includes a range of new services as of January 1, 2023. However, “limousine services” have been removed from this list and are now taxed under a separate excise structure.
How are limousine and vehicle-related services taxed now?
Starting January 1, 2023, limousine services, along with vehicle rentals, ride shares, and taxicabs, are subject to a 6% excise tax on gross receipts, provided the transaction originates in Kentucky.
What does the updated definition of extended warranty services include?
Extended warranty services now cover contracts where the provider agrees to repair, replace, support, or maintain both tangible and digital property. These are taxable regardless of whether the covered item is itself tax-exempt.
Are extended warranties on exempt property still tax-free?
No. Extended warranties for otherwise exempt property, like farm equipment or out-of-state vehicle sales, are now taxable if the warranty is separately charged.
When do agricultural exemption licenses expire?
Agricultural exemption license numbers must be obtained by January 1, 2023, and will expire on December 31, 2026. After that, they will expire every four years.