AN ACT relating to a sales and use tax holiday and declaring an emergency.

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AN ACT relating to a sales and use tax holiday and declaring an emergency. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
SECTION 1. A NEW SECTION OF KRS CHAPTER 139 IS CREATED TO 3
READ AS FOLLOWS: 4
(1) As used in this section: 5
(a) "Clothing" means all human wearing apparel suitable for general use: 6
1. "Clothing" includes but is not limited to: 7
a. Aprons, household and shop; 8
b. Athletic supporters; 9
c. Bathing suits and caps and beach capes and coats; 10
d. Belts and suspenders; 11
e. Boots, overshoes, shoes, steel -toed shoes, sandals, slippers, 12
sneakers, and shoelaces and insoles for shoes; 13
f. Coats and jackets; 14
g. Costumes; 15
h. Disposable and cloth diapers for children or adults and rubber 16
pants; 17
i. Formal wear; 18
j. Garters, garter belts, and girdles; 19
k. Gloves and mittens for general use; 20
l. Hats, caps, ear muffs, and scarves; 21
m. Hosiery, pantyhose, socks, footlets, and stockings; 22
n. Lab coats; 23
o. Neckties; 24
p. Rainwear; 25
q. Underwear; 26
r. Uniforms, athletic and nonathletic; and 27
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s. Wedding apparel. 1
2. "Clothing" does not include: 2
a. Belt buckles sold separately; 3
b. Costume masks sold separately; 4
c. Patches and emblems sold separately; 5
d. Sewing equipment and supplies, including but not limited to 6
knitting needles, patterns, pins, scissors, sewing needles, tape 7
measures, and thimbles; and 8
e. Sewing materials that become part of "clothing," including but 9
not limited to buttons, fabric, lace, thread, yarn, and zippers; 10
(b) 1. "Clothing accessories or equipment" means items worn on the person 11
or in conjunction with clothing and is mutually exclusive of apparel 12
within the definition of "clothing." 13
2. "Clothing accessories or equipment" includes but is not limited to: 14
a. Briefcases; 15
b. Cosmetics; 16
c. Hair notions, including but not limited to barrettes, hair bows, 17
and hair nets; 18
d. Handbags; 19
e. Jewelry; 20
f. Nonprescription sunglasses; 21
g. Umbrellas; 22
h. Wallets; 23
i. Watches; and 24
j. Wigs and hair pieces; 25
(c) 1. "Eligible property" means any item of tangible personal property 26
purchased by an individual exclusively for personal use or 27
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consumption which meets the following requirements: 1
a. The price of the item does not exceed three thousand dollars 2
($3,000); except 3
b. If clothing or clothing accessories or equipment, the price of the 4
item does not exceed two hundred dollars ($200); 5
2. "Eligible property" does not include: 6
a. Any tangible personal property purchased for business use; 7
b. A lease or rental of tangible personal property; 8
c. Alcoholic beverages, as defined in KRS 139.485; 9
d. Cigarettes, tobacco products, or vapor products, as defined in 10
KRS 138.130; 11
e. A motor vehicle, as defined in KRS 138.655; 12
f. A motorboat, as defined in KRS 235.010; 13
g. Prepared food, as defined in KRS 139.485; 14
h. A product containing: 15
i. Marijuana, as defined in KRS 138.870, or 16
ii. Kratom or kratom extract, as defined in KRS 217.2201; or 17
i. Any service listed in KRS 139.200(2); 18
(d) "Layaway sale" means a transaction in which property is set aside for 19
future delivery to a customer who makes a deposit, agrees to pay the 20
balance of the purchase price over a period of time, and, at the end of the 21
payment period, receives the property. An order is accepted for layaway by 22
the seller when the seller removes the property from normal inventory or 23
clearly identifies the property as sold to the purchaser; 24
(e) "Purchase" has the same meaning as in KRS 139 .010, excluding lease or 25
rental as defined in KRS 139.010; 26
(f) "Rain check" means the seller allows a customer to purchase an item at a 27
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certain price at a later time because the particular item was out of stock; 1
(g) "Sale" has the same meaning as in KRS 13 9.010, excluding lease or rental 2
as defined in KRS 139.010; and 3
(h) "Sales tax holiday" means the period beginning 12:01 a.m. on the first 4
Friday in August and continuing until 12 midnight the following Sunday 5
each year. 6
(2) Notwithstanding any other provi sion of this chapter to the contrary, the taxes 7
imposed by this chapter shall not apply to the sale or purchase of eligible property 8
during a sales tax holiday. 9
(3) The exemption provided in this section shall be subject to the following 10
provisions: 11
(a) The sale of eligible property shall qualify for exemption if: 12
1. The property is both delivered to and paid for by the purchaser during 13
the sales tax holiday exemption period; or 14
2. The purchaser orders and pays for the eligible property, and the seller 15
accepts the order, during the sales tax holiday for immediate 16
shipment, even if delivery is made after the sales tax holiday. The 17
seller accepts the order when the seller has taken action to fill the 18
order for immediate shipment. Actions to fill an order inclu de 19
placement of an "in date" stamp on a mail order or assignment of an 20
"order number" to an order submitted by telephone or electronically. 21
An order is for immediate shipment when the customer does not 22
request delayed shipment. An order is for immediate sh ipment, 23
notwithstanding that the shipment may be delayed because of a 24
backlog of orders or because stock is currently unavailable to, or on 25
back order by, the seller; 26
(b) A sale of eligible property under a layaway sale qualifies for exemption 27
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under this section if: 1
1. Final payment on a layaway order is made by, and the eligible 2
property is given to, the purchaser during the sales tax holiday; or 3
2. The purchaser selects the eligible property, and the retailer accepts the 4
order for the property, during the sales tax holiday, for immediate 5
delivery upon full payment, even if delivery is made after the sales tax 6
holiday; 7
(c) 1. A discount by the seller reduces the sales price of the property and the 8
discounted sales price determines whether the sales price is within the 9
sales tax holiday price threshold. 10
2. A coupon that reduces the sales price is treated as a discount if the 11
seller is not reimbursed for the coupon amount by a person other than 12
the purchaser. 13
3. If a discount applies to the total amount paid b y a purchaser rather 14
than to the sales price of a particular item and the purchaser has 15
purchased both eligible property and taxable property, the seller shall 16
allocate the discount based on the total sales price of the taxable 17
property compared to the tot al sales price of all property sold in that 18
same transaction; 19
(d) Articles that are normally sold as a single unit shall continue to be sold in 20
that manner. Articles that are normally sold as a single unit, such as a pair 21
of shoes, shall not be priced and sold separately in order to obtain the 22
exemption; 23
(e) Eligible property purchased with the use of a rain check during the sales tax 24
holiday shall qualify for the exemption regardless of when the rain check 25
was issued. Issuance of a rain check during the sa les tax holiday shall not 26
qualify the eligible property for the exemption if the property is actually 27
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purchased after the sales tax holiday; 1
(f) The procedure for an exchange of eligible property shall be as follows: 2
1. If an item of eligible property is p urchased during the sales tax 3
holiday but the purchaser later exchanges the item for similar eligible 4
property, even if a different size, different color, or other feature, no 5
additional tax is due, even if the exchange is made after the sales tax 6
holiday; 7
2. If an item of eligible property is purchased during the sales tax 8
holiday but the purchaser returns the item and receives credit on the 9
purchase of a different item, the appropriate sales tax is due on the 10
sale of the newly purchased item if not otherw ise exempt under this 11
chapter; and 12
3. If an item of eligible property is purchased during the sales tax 13
holiday but during the sales tax holiday the purchaser returns the item 14
and receives credit on the purchase of a different item of eligible 15
property, no sales tax is due on the sale of the new item if the new item 16
is purchased during the sales tax holiday; 17
(g) Delivery charges as defined in KRS 139.010 shall be included in the sales 18
price of eligible property. For purposes of determining a sales tax holid ay 19
price threshold, if all property in a shipment is eligible property and within 20
the sales tax holiday price threshold, then the seller is not required to 21
allocate the delivery charges to determine whether the price threshold is 22
exceeded, and the shipment shall be considered a sale of eligible property. If 23
a shipment includes eligible property and taxable property, including 24
eligible property with a sales price in excess of the price threshold, the seller 25
shall allocate the delivery charges by using: 26
1. A percentage based on the total sales price of the taxable property 27
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compared to the total sales price of all property in the shipment; or 1
2. A percentage based on the total weight of the taxable property 2
compared to the total weight of all property in the shipment. The seller 3
shall tax the percentage of the delivery charge allocated to the taxable 4
property, but the seller is not required to tax the percentage allocated 5
to the eligible property; 6
(h) 1. If, within sixty (60) days immediately following the sales tax holiday, a 7
purchaser returns an item to the seller that would have qualified as 8
exempt eligible property if purchased during the sales tax holiday, the 9
seller may issue a credit or refund of the tax paid only if: 10
a. The purchaser provides to the seller a receipt or invoice 11
indicating that the tax was paid; or 12
b. The seller has sufficient documentation that indicates that sales 13
tax was paid on the specific returned item. 14
2. The sixty (60) day time period is not intended to change a seller's 15
policy on the time period during which the seller will accept returns; 16
and 17
(i) If the purchaser and the seller are located in different time zones, the time 18
zone of the seller's location determines the authorized time period 19
applicable to the sales tax holiday. 20
Section 2. The first sales tax holiday will occur on August 7 to August 9, 2026. 21
Section 3. Whereas Kentucky is a full member state of the Streamlined Sales 22
and Use Tax Agreement, a multistate agreement providing for simplification of the 23
nation's varying sales tax laws, an d whereas Kentucky is required by the agreement to 24
provide notification to both sellers and purchasers located within and without Kentucky 25
of the implementation of a sales tax holiday exemption period at least 60 days prior to the 26
first day of the calendar month in which the exemption period will begin, an emergency 27
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is declared to exist, and this Act takes effect upon its passage and approval by the 1
Governor or upon its otherwise becoming a law. 2