Beginning January 1, 2023, several additional services are now subject to Kentucky sales and use tax. Businesses that offer these services to Kentucky-based customers must now collect the 6% sales tax on their invoices.
Businesses located outside of Kentucky but providing these services to customers located in Kentucky may also be required to collect sales tax under the state’s economic nexus statute.
Additionally, taxpayers receiving the benefit of these services in Kentucky are subject to a 6% use tax liability should the vendor not collect the sales tax on the invoice.
A $6,000 de minimis threshold found in KRS 139.470(23) applies to otherwise taxable services. Any provider of these new taxable services that exceeds $6,000 in gross receipts in 2021 or 2022 must be registered for the collection of the sales and use tax beginning on January 1, 2023.
Businesses can register for an account to remit tax to the Kentucky Department of Revenue here.
A complete list of the services now subject to sales/use tax is provided below. The Kentucky Department of Revenue has issued additional informal guidance on a number of these new services. Click on the links in the list for additional information.
An overview of the new services subject to tax, including other provisions in the new law, can be found here.
Additionally, the Department of Revenue is maintaining a website with frequently asked questions here.
Newly Taxable Services per KRS 139.200, effective January 1, 2023:
- Body modification services, including tattooing, piercing, scarification, branding, tongue splitting, transdermal and subdermal implants, ear pointing, teeth pointing, and any other modifications that are not necessary for medical or dental health
- Bodyguard services
- Condominium time-share exchange services
- Cosmetic surgery services– Excludes reconstruction of facial and body defects due to birth disorders, trauma, burns, or disease.
- Executive employee recruitment services
- Expanded definition of extended warranty services subject to tax
- Facsimile transmission services
- Household moving services
- Interior decorating and design services
- Labor and services to repair or maintain commercial refrigeration equipment and systems when no tangible personal property is sold in that transaction including service calls and trip charges
- Labor to repair or alter apparel, footwear, watches, or jewelry when no tangible personal property is sold in that transaction
- Lapidary services, including cutting, polishing, and engraving precious stones
- Leisure, recreational, and athletic instructional services (additional information also here)
- Lobbying services
- Marketing services
- Massage services, except when medically necessary
- Parking services-Excludes any parking services at an educational institution.
- Personal background check services
- Personal fitness training services (additional information also here)
- Photography and photofinishing services-Excludes photography services necessary for medical or dental health (additional information also here)
- Prewritten computer software access services
- Private investigation services
- Private mailroom services-Includes presorting mail and packages by postal code, address barcoding, tracking, delivery to postal service, and private mailbox rental.
- Process server services
- Public opinion and research polling services
- Recreational camp tuition and fees (additional information also here)
- Rental of space for meetings, conventions, short-term business uses, entertainment events, weddings, banquets, parties, and other short-term social events (additional information also here)
- Repossession of tangible personal property services
- Residential and nonresidential security system monitoring services
- Road and travel services provided by automobile clubs as defined in KRS 281.010
- Social event planning and coordination services
- Specialized design services, including the design of clothing, costumes, fashion, furs, jewelry, shoes, textiles, and lighting
- Telemarketing services
- Testing services, except testing for medical, educational, or veterinary reasons
- Web site design and development services
- Web site hosting services
Please contact John Rittichier, CPA at 502.882.8484 or jrittichier@hsccpa.com or Aaron Wilzbacher, CPA at 812.491.1322 or awilzbacher@hsccpa.com with questions regarding these new provisions.
