AN ACT relating to the exemption of certain animal services from sales and use tax.

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AN ACT relating to the exemption of certain animal services from sales and use 1
tax. 2
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 3
Section 1. KRS 139.470 is amended to read as follows: 4
There are excluded from the computation of the amount of taxes imposed by this chapter: 5
(1) Gross receipts from the sale of, and the storage, use, or other consumption in this 6
state of, tangible personal property or digital property which this state is prohibited 7
from taxing under the Constitution or laws of the United States, or under the 8
Constitution of this state; 9
(2) Gross receipts from sales of, and the storage, use, or ot her consumption in this state 10
of: 11
(a) Nonreturnable and returnable containers when sold without the contents to 12
persons who place the contents in the container and sell the contents together 13
with the container; and 14
(b) Returnable containers when sold with the contents in connection with a reta il 15
sale of the contents or when resold for refilling; 16
As used in this section the term "returnable containers" means containers of a kind 17
customarily returned by the buyer of the contents for reuse. All other containers are 18
"nonreturnable containers"; 19
(3) Gross receipts from occasional sales of tangible personal property or digital 20
property and the storage, use, or other consumption in this state of tangible personal 21
property or digital property, the transfer of which to the purchaser is an occasional 22
sale; 23
(4) Gross receipts from sales of tangible personal property to a common carrier, 24
shipped by the retailer via the purchasing carrier under a bill of lading, whether the 25
freight is paid in advance or the shipment is made freight charges collect, to a point 26
outside this state and the property is actually transported to the out -of-state 27
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destination for use by the carrier in the conduct of its business as a common carrier; 1
(5) Gross receipts from sales of tangible personal property sold through coin -operated 2
bulk vending machines, if the sale amounts to fifty cents ($0.50) or less, if the 3
retailer is primarily engaged in making the sales and maintains records satisfactory 4
to the department. As used in this subsection, "bulk vending machine" means a 5
vending machine containing unsorted merchandise which, upon insertion of a coin, 6
dispenses the same in approximately equal portions, at random and without 7
selection by the customer; 8
(6) Gross receipts from sales to any cabinet, department, bureau, commission, board, or 9
other statutory or constitutional agency of the state and gross receipts from sales to 10
counties, cities, or special districts as defined in KRS 65.005. This exemption shall 11
apply only to purchases of tangible personal property, digital property, or servi ces 12
for use solely in the government function. A purchaser not qualifying as a 13
governmental agency or unit shall not be entitled to the exemption even though the 14
purchaser may be the recipient of public funds or grants; 15
(7) (a) Gross receipts from the sale of sewer services, water, and fuel to Kentucky 16
residents for use in heating, water heating, cooking, lighting, and other 17
residential uses if the sewer services, water, and fuel are purchased and 18
declared by the resident as used in his or her place of domicile. 19
(b) As used in this subsection: 20
1. "Fuel" shall include but not be limited to natural gas, electricity, fuel oil, 21
bottled gas, coal, coke, and wood; and 22
2. "Place of domicile" means the place where an individual has his or her 23
legal, true, fixed, and permanent home and principal establishment, and 24
to which, whenever the individual is absent, the individual has the 25
intention of returning. 26
(c) Determinations of eligibility for the exemption shall be made by the 27
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department. 1
(d) The exemption shall apply to charges for sewer service, water, and fuel billed 2
to an owner or operator of a multi -unit residential rental facility or mobile 3
home and recreational vehicle park if the owner or operator declares that the 4
sewer services, water, and fuel are purchased f or Kentucky residents to be 5
used in the resident's place of domicile. 6
(e) The exemption shall apply also to residential property which may be held by 7
legal or equitable title, by the entireties, jointly, in common, as a 8
condominium, or indirectly by the st ock ownership or membership 9
representing the owner's or member's proprietary interest in a corporation 10
owning a fee or a leasehold initially in excess of ninety -eight (98) years if the 11
sewer services, water, and fuel are purchased for and declared by the 12
Kentucky resident as used in his or her place of domicile; 13
(8) Gross receipts from sales to an out -of-state agency, organization, or institution 14
exempt from sales and use tax in its state of residence when that agency, 15
organization, or institution gives proof of its tax-exempt status to the retailer and the 16
retailer maintains a file of the proof; 17
(9) (a) Gross receipts derived from the sale of tangible personal property, as provided 18
in paragraph (b) of this subsection, to a manufacturer or industrial process or if 19
the property is to be directly used in the manufacturing or industrial 20
processing process of: 21
1. Tangible personal property at a plant facility; 22
2. Distilled spirits or wine at a plant facility or on the premises of a 23
distiller, rectifier, winery, or small farm winery licensed under KRS 24
243.030 that includes a retail establishment on the premises; or 25
3. Malt beverages at a plant facility or on the premises of a brewer or 26
microbrewery licensed under KRS 243.040 that includes a retail 27
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establishment; 1
and which will be for sale. 2
(b) The following tangible personal property shall qualify for exemption under 3
this subsection: 4
1. Materials which enter into and become an ingredient or component part 5
of the manufactured product; 6
2. Other tangible personal prope rty which is directly used in the 7
manufacturing or industrial processing process, if the property has a 8
useful life of less than one (1) year. Specifically, these items are 9
categorized as follows: 10
a. Materials. This refers to the raw materials which become an 11
ingredient or component part of supplies or industrial tools exempt 12
under subdivisions b. and c. below; 13
b. Supplies. This category includes supplies such as lubricating and 14
compounding oils, grease, machine waste, abrasives, chemicals, 15
solvents, fluxes , anodes, filtering materials, fire brick, catalysts, 16
dyes, refrigerants, and explosives. The supplies indicated above 17
need not come in direct contact with a manufactured product to be 18
exempt. "Supplies" does not include repair, replacement, or spare 19
parts of any kind; and 20
c. Industrial tools. This group is limited to hand tools such as jigs, 21
dies, drills, cutters, rolls, reamers, chucks , saws, and spray guns 22
and to tools attached to a machine such as molds, grinding balls, 23
grinding wheels, dies, bits, and cutting blades. Normally, for 24
industrial tools to be considered directly used in the manufacturing 25
or industrial processing process, t hey shall come into direct 26
contact with the product being manufactured or processed; and 27
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3. Materials and supplies that are not reusable in the same manufacturing 1
or industrial processing process at the completion of a single 2
manufacturing or processing cy cle. A single manufacturing cycle shall 3
be considered to be the period elapsing from the time the raw materials 4
enter into the manufacturing process until the finished product emerges 5
at the end of the manufacturing process. 6
(c) The property described in paragraph (b) of this subsection shall be regarded as 7
having been purchased for resale. 8
(d) For purposes of this subsection, a manufacturer or industrial processor 9
includes an individual or business entity that performs only part of the 10
manufacturing or ind ustrial processing activity, and the person or business 11
entity need not take title to tangible personal property that is incorporated 12
into, or becomes the product of, the activity. 13
(e) The exemption provided in this subsection does not include repair, 14
replacement, or spare parts; 15
(10) Any water use fee paid or passed through to the Kentucky River Authority by 16
facilities using water from the Kentucky River basin to the Kentucky River 17
Authority in accordance with KRS 151.700 to 151.730 and administrative 18
regulations promulgated by the authority; 19
(11) Gross receipts from the sale of newspaper inserts or catalogs purchased for storage, 20
use, or other consumption outside this state and delivered by the retailer's own 21
vehicle to a location outside this state, or de livered to the United States Postal 22
Service, a common carrier, or a contract carrier for delivery outside this state, 23
regardless of whether the carrier is selected by the purchaser or retailer or an agent 24
or representative of the purchaser or retailer, or whether the F.O.B. is retailer's 25
shipping point or purchaser's destination. 26
(a) As used in this subsection: 27
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1. "Catalogs" means tangible personal property that is printed to the special 1
order of the purchaser and composed substantially of information 2
regarding goods and services offered for sale; and 3
2. "Newspaper inserts" means printed materials that are placed in or 4
distributed with a newspaper of general circulation. 5
(b) The retailer shall be responsible for establishing that delivery was made to a 6
non-Kentucky location through shipping documents or other credible 7
evidence as determined by the department; 8
(12) Gross receipts from the sale of water used in the raising of equine as a business; 9
(13) Gross receipts from the sale of metal retail fixtures manuf actured in this state and 10
purchased for storage, use, or other consumption outside this state and delivered by 11
the retailer's own vehicle to a location outside this state, or delivered to the United 12
States Postal Service, a common carrier, or a contract ca rrier for delivery outside 13
this state, regardless of whether the carrier is selected by the purchaser or retailer or 14
an agent or representative of the purchaser or retailer, or whether the F.O.B. is the 15
retailer's shipping point or the purchaser's destination. 16
(a) As used in this subsection, "metal retail fixtures" means check stands and 17
belted and nonbelted checkout counters, whether made in bulk or pursuant to 18
specific purchaser specifications, that are to be used directly by the purchaser 19
or to be distributed by the purchaser. 20
(b) The retailer shall be responsible for establishing that delivery was made to a 21
non-Kentucky location through shipping documents or other credible 22
evidence as determined by the department; 23
(14) Gross receipts from the sale of une nriched or enriched uranium purchased for 24
ultimate storage, use, or other consumption outside this state and delivered to a 25
common carrier in this state for delivery outside this state, regardless of whether the 26
carrier is selected by the purchaser or reta iler, or is an agent or representative of the 27
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purchaser or retailer, or whether the F.O.B. is the retailer's shipping point or 1
purchaser's destination; 2
(15) Amounts received from a tobacco buydown. As used in this subsection, "buydown" 3
means an agreement w hereby an amount, whether paid in money, credit, or 4
otherwise, is received by a retailer from a manufacturer or wholesaler based upon 5
the quantity and unit price of tobacco products sold at retail that requires the retailer 6
to reduce the selling price of t he product to the purchaser without the use of a 7
manufacturer's or wholesaler's coupon or redemption certificate; 8
(16) Gross receipts from the sale of tangible personal property or digital property 9
returned by a purchaser when the full sales price is refunded either in cash or credit. 10
This exclusion shall not apply if the purchaser, in order to obtain the refund, is 11
required to purchase other tangible personal property or digital property at a price 12
greater than the amount charged for the property that is returned; 13
(17) Gross receipts from the sales of gasoline and special fuels subject to tax under KRS 14
Chapter 138; 15
(18) The amount of any tax imposed by the United States upon or with respect to retail 16
sales, whether imposed on the retailer or the consumer, n ot including any 17
manufacturer's excise or import duty; 18
(19) Gross receipts from the sale of any motor vehicle as defined in KRS 138.450 which 19
is: 20
(a) Sold to a Kentucky resident, registered for use on the public highways, and 21
upon which any applicable tax levied by KRS 138.460 has been paid; or 22
(b) Sold to a nonresident of Kentucky if the nonresident registers the motor 23
vehicle in a state that: 24
1. Allows residents of Kentucky to purchase motor vehicles without 25
payment of that state's sales tax at the time of sale; or 26
2. Allows residents of Kentucky to remove the vehicle from that state 27
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within a specific period for subsequent registration and use in Kentucky 1
without payment of that state's sales tax; 2
(20) Gross receipts from the sale of a semi -trailer as defi ned in KRS 189.010(12) and 3
trailer as defined in KRS 189.010(17); 4
(21) Gross receipts from the collection of: 5
(a) Any fee or charge levied by a local government pursuant to KRS 65.760; 6
(b) The charge imposed by KRS 65.7629(3); 7
(c) The fee imposed by KRS 65.7634; and 8
(d) The service charge imposed by KRS 65.7636; 9
(22) Gross receipts derived from charges for labor or services to apply, install, repair, or 10
maintain tangible personal property di rectly used in manufacturing or industrial 11
processing process of: 12
(a) Tangible personal property at a plant facility; 13
(b) Distilled spirits or wine at a plant facility or on the premises of a distiller, 14
rectifier, winery, or small farm winery licensed under KRS 243.030; or 15
(c) Malt beverages at a plant facility or on the premises of a brewer or 16
microbrewery licensed under KRS 243.040; 17
that is not otherwise exempt under subsection (9) of this section or KRS 18
139.480(10), if the charges for labor or services are separately stated on the invoice, 19
bill of sale, or similar document given to purchaser; 20
(23) (a) For persons selling services included in KRS 139.200(2)(g) to (ax) prior to 21
January 1, 2025, gross receipts derived from the sale of those services if the 22
gross receipts were less than twelve thousand dollars ($12,000) during 23
calendar year 2024. When gross receipts from these services exceed twelve 24
thousand dollars ($12,000) in a calendar year: 25
1. All gross receipts over twelve thousand dollars ($12,000) are taxable in 26
that calendar year; and 27
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2. All gross receipts are subject to tax in subsequent calendar years. 1
(b) The exemption provided in this subsection shall not apply to a person also 2
engaged in the business of selling tangible personal property, digital property, 3
or services included in KRS 139.200(2)(a) to (f);[ and] 4
(24) (a) For persons that first begin making sales of services included in KRS 5
139.200(2)(g) to (ax) on or after January 1, 2025, gross receipts derived from 6
the sale of those services if t he gross receipts are less than twelve thousand 7
dollars ($12,000) within the first calendar year of operation. When gross 8
receipts from these services exceed twelve thousand dollars ($12,000) in a 9
calendar year: 10
1. All gross receipts over twelve thousand d ollars ($12,000) are taxable in 11
that calendar year; and 12
2. All gross receipts are subject to tax in subsequent calendar years. 13
(b) The exemption provided in this subsection shall not apply to a person that is 14
also engaged in the business of selling tangibl e personal property, digital 15
property, or services included in KRS 139.200(2)(a) to (f); 16
(25) Gross receipts derived from charges for small animal veterinarian services to 17
spay, neuter, or vaccinate an animal, which are charged by either: 18
(a) A local government animal shelter or nonprofit animal welfare organization 19
to an individual; or 20
(b) A veterinarian for his or her services provided to a local government animal 21
shelter or nonprofit animal welfare organization if the veterinarian: 22
1. Is volunteering his or her services at a free or reduced rate to the 23
shelter or organization; or 24
2. Has contracted with the shelter or organization to perform the listed 25
procedures as part of the shelter's or organization's continuing 26
mission; and 27
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(26) Gross receipts derived from the transfer or adoption fees of a pet to an individual 1
from a local government animal shelter or nonprofit animal welfare 2
organization. 3
Section 2. This Act applies to transactions occurring on or after August 1, 2026. 4