AN ACT relating to an exemption of sales and use tax for aircraft.

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AN ACT relating to an exemption of sales and use tax for aircraft. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 139.470 is amended to read as follows: 3
There are excluded from the computation of the amount of taxes imposed by this chapter: 4
(1) Gross receipts from the sale of, and the storage, use, or other consumption in this 5
state of, tangible personal property or digital property which this state is prohibited 6
from taxing under the Constitution or laws of the United States, or under the 7
Constitution of this state; 8
(2) Gross receipts from sales of, and the storage, use, or other consumption in this state 9
of: 10
(a) Nonreturnable and returnable containers when sold without the contents to 11
persons who place the contents in the container and sell the contents together 12
with the container; and 13
(b) Returnable containers when sold with the contents in connection with a reta il 14
sale of the contents or when resold for refilling; 15
As used in this section the term "returnable containers" means containers of a kind 16
customarily returned by the buyer of the contents for reuse. All other containers are 17
"nonreturnable containers"; 18
(3) Gross receipts from occasional sales of tangible personal property or digital 19
property and the storage, use, or other consumption in this state of tangible personal 20
property or digital property, the transfer of which to the purchaser is an occasional 21
sale; 22
(4) Gross receipts from sales of tangible personal property to a common carrier, 23
shipped by the retailer via the purchasing carrier under a bill of lading, whether the 24
freight is paid in advance or the shipment is made freight charges collect, to a point 25
outside this state and the property is actually transported to the out -of-state 26
destination for use by the carrier in the conduct of its business as a common carrier; 27
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(5) Gross receipts from sales of tangible personal property sold through coin -operated 1
bulk vending machines, if the sale amounts to fifty cents ($0.50) or less, if the 2
retailer is primarily engaged in making the sales and maintains records satisfactory 3
to the department. As used in this subsection, "bulk vending machine" means a 4
vending machine containing unsorted merchandise which, upon insertion of a coin, 5
dispenses the same in approximately equal portions, at random and without 6
selection by the customer; 7
(6) Gross receipts from sales to any cabinet, department, bureau, commission, board, or 8
other statutory or constitutional agency of the state and gross receipts from sales to 9
counties, cities, or special districts as defined in KRS 65.005. This exemption shall 10
apply only to purchases of tangible personal property, digital property, or servi ces 11
for use solely in the government function. A purchaser not qualifying as a 12
governmental agency or unit shall not be entitled to the exemption even though the 13
purchaser may be the recipient of public funds or grants; 14
(7) (a) Gross receipts from the sale of sewer services, water, and fuel to Kentucky 15
residents for use in heating, water heating, cooking, lighting, and other 16
residential uses if the sewer services, water, and fuel are purchased and 17
declared by the resident as used in his or her place of domicile. 18
(b) As used in this subsection: 19
1. "Fuel" shall include but not be limited to natural gas, electricity, fuel oil, 20
bottled gas, coal, coke, and wood; and 21
2. "Place of domicile" means the place where an individual has his or her 22
legal, true, fixed, and permanent home and principal establishment, and 23
to which, whenever the individual is absent, the individual has the 24
intention of returning. 25
(c) Determinations of eligibility for the exemption shall be made by the 26
department. 27
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(d) The exemption shall apply to charges for sewer service, water, and fuel billed 1
to an owner or operator of a multi -unit residential rental facility or mobile 2
home and recreational vehicle park if the owner or operator declares that the 3
sewer services, water, and fuel are purchased f or Kentucky residents to be 4
used in the resident's place of domicile. 5
(e) The exemption shall apply also to residential property which may be held by 6
legal or equitable title, by the entireties, jointly, in common, as a 7
condominium, or indirectly by the st ock ownership or membership 8
representing the owner's or member's proprietary interest in a corporation 9
owning a fee or a leasehold initially in excess of ninety -eight (98) years if the 10
sewer services, water, and fuel are purchased for and declared by the 11
Kentucky resident as used in his or her place of domicile; 12
(8) Gross receipts from sales to an out -of-state agency, organization, or institution 13
exempt from sales and use tax in its state of residence when that agency, 14
organization, or institution gives proof of its tax-exempt status to the retailer and the 15
retailer maintains a file of the proof; 16
(9) (a) Gross receipts derived from the sale of tangible personal property, as provided 17
in paragraph (b) of this subsection, to a manufacturer or industrial process or if 18
the property is to be directly used in the manufacturing or industrial 19
processing process of: 20
1. Tangible personal property at a plant facility; 21
2. Distilled spirits or wine at a plant facility or on the premises of a 22
distiller, rectifier, winery, or small farm winery licensed under KRS 23
243.030 that includes a retail establishment on the premises; or 24
3. Malt beverages at a plant facility or on the premises of a brewer or 25
microbrewery licensed under KRS 243.040 that includes a retail 26
establishment; 27
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and which will be for sale. 1
(b) The following tangible personal property shall qualify for exemption under 2
this subsection: 3
1. Materials which enter into and become an ingredient or component part 4
of the manufactured product; 5
2. Other tangible personal prope rty which is directly used in the 6
manufacturing or industrial processing process, if the property has a 7
useful life of less than one (1) year. Specifically, these items are 8
categorized as follows: 9
a. Materials. This refers to the raw materials which become an 10
ingredient or component part of supplies or industrial tools exempt 11
under subdivisions b. and c. below; 12
b. Supplies. This category includes supplies such as lubricating and 13
compounding oils, grease, machine waste, abrasives, chemicals, 14
solvents, fluxes , anodes, filtering materials, fire brick, catalysts, 15
dyes, refrigerants, and explosives. The supplies indicated above 16
need not come in direct contact with a manufactured product to be 17
exempt. "Supplies" does not include repair, replacement, or spare 18
parts of any kind; and 19
c. Industrial tools. This group is limited to hand tools such as jigs, 20
dies, drills, cutters, rolls, reamers, chucks, saws, and spray guns 21
and to tools attached to a machine such as molds, grinding balls, 22
grinding wheels, dies, bits, and cutting blades. Norma lly, for 23
industrial tools to be considered directly used in the manufacturing 24
or industrial processing process, they shall come into direct 25
contact with the product being manufactured or processed; and 26
3. Materials and supplies that are not reusable in the same manufacturing 27
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or industrial processing process at the completion of a single 1
manufacturing or processing cycle. A single manufacturing cycle shall 2
be considered to be the period elapsing from the time the raw materials 3
enter into the manufacturing pr ocess until the finished product emerges 4
at the end of the manufacturing process. 5
(c) The property described in paragraph (b) of this subsection shall be regarded as 6
having been purchased for resale. 7
(d) For purposes of this subsection, a manufacturer or i ndustrial processor 8
includes an individual or business entity that performs only part of the 9
manufacturing or industrial processing activity, and the person or business 10
entity need not take title to tangible personal property that is incorporated 11
into, or becomes the product of, the activity. 12
(e) The exemption provided in this subsection does not include repair, 13
replacement, or spare parts; 14
(10) Any water use fee paid or passed through to the Kentucky River Authority by 15
facilities using water from the Kentu cky River basin to the Kentucky River 16
Authority in accordance with KRS 151.700 to 151.730 and administrative 17
regulations promulgated by the authority; 18
(11) Gross receipts from the sale of newspaper inserts or catalogs purchased for storage, 19
use, or other c onsumption outside this state and delivered by the retailer's own 20
vehicle to a location outside this state, or delivered to the United States Postal 21
Service, a common carrier, or a contract carrier for delivery outside this state, 22
regardless of whether the carrier is selected by the purchaser or retailer or an agent 23
or representative of the purchaser or retailer, or whether the F.O.B. is retailer's 24
shipping point or purchaser's destination. 25
(a) As used in this subsection: 26
1. "Catalogs" means tangible personal property that is printed to the special 27
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order of the purchaser and composed substantially of information 1
regarding goods and services offered for sale; and 2
2. "Newspaper inserts" means printed materials that are placed in or 3
distributed with a newspaper of general circulation. 4
(b) The retailer shall be responsible for establishing that delivery was made to a 5
non-Kentucky location through shipping documents or other credible 6
evidence as determined by the department; 7
(12) Gross receipts from the sale of water used in the raising of equine as a business; 8
(13) Gross receipts from the sale of metal retail fixtures manufactured in this state and 9
purchased for storage, use, or other consumption outside this state and delivered by 10
the retailer's own vehicle to a location outside this state, or delivered to the United 11
States Postal Service, a common carrier, or a contract carrier for delivery outside 12
this state, regardless of whether the carrier is selected by the purchaser or retailer or 13
an agent or representative of the purchaser or retailer, or whether the F.O.B. is the 14
retailer's shipping point or the purchaser's destination. 15
(a) As used in this subsection, "metal retail fixtures" means check stands and 16
belted and nonbelted checkout counters, whether made in bul k or pursuant to 17
specific purchaser specifications, that are to be used directly by the purchaser 18
or to be distributed by the purchaser. 19
(b) The retailer shall be responsible for establishing that delivery was made to a 20
non-Kentucky location through shippi ng documents or other credible 21
evidence as determined by the department; 22
(14) Gross receipts from the sale of unenriched or enriched uranium purchased for 23
ultimate storage, use, or other consumption outside this state and delivered to a 24
common carrier in this state for delivery outside this state, regardless of whether the 25
carrier is selected by the purchaser or retailer, or is an agent or representative of the 26
purchaser or retailer, or whether the F.O.B. is the retailer's shipping point or 27
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purchaser's destination; 1
(15) Amounts received from a tobacco buydown. As used in this subsection, "buydown" 2
means an agreement whereby an amount, whether paid in money, credit, or 3
otherwise, is received by a retailer from a manufacturer or wholesaler based upon 4
the quantity and unit price of tobacco products sold at retail that requires the retailer 5
to reduce the selling price of the product to the purchaser without the use of a 6
manufacturer's or wholesaler's coupon or redemption certificate; 7
(16) Gross receipts from the sale of tangible personal property or digital property 8
returned by a purchaser when the full sales price is refunded either in cash or credit. 9
This exclusion shall not apply if the purchaser, in order to obtain the refund, is 10
required to purchase other tan gible personal property or digital property at a price 11
greater than the amount charged for the property that is returned; 12
(17) Gross receipts from the sales of gasoline and special fuels subject to tax under KRS 13
Chapter 138; 14
(18) The amount of any tax impo sed by the United States upon or with respect to retail 15
sales, whether imposed on the retailer or the consumer, not including any 16
manufacturer's excise or import duty; 17
(19) Gross receipts from the sale of any motor vehicle as defined in KRS 138.450 which 18
is: 19
(a) Sold to a Kentucky resident, registered for use on the public highways, and 20
upon which any applicable tax levied by KRS 138.460 has been paid; or 21
(b) Sold to a nonresident of Kentucky if the nonresident registers the motor 22
vehicle in a state that: 23
1. Allows residents of Kentucky to purchase motor vehicles without 24
payment of that state's sales tax at the time of sale; or 25
2. Allows residents of Kentucky to remove the vehicle from that state 26
within a specific period for subsequent registration and use i n Kentucky 27
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without payment of that state's sales tax; 1
(20) Gross receipts from the sale of a semi -trailer as defined in KRS 189.010(12) and 2
trailer as defined in KRS 189.010(17); 3
(21) Gross receipts from the collection of: 4
(a) Any fee or charge levied by a local government pursuant to KRS 65.760; 5
(b) The charge imposed by KRS 65.7629(3); 6
(c) The fee imposed by KRS 65.7634; and 7
(d) The service charge imposed by KRS 65.7636; 8
(22) Gross receipts derived from charges for labor or services to apply, install, repair, or 9
maintain tangible personal property directly used in manufacturing or industrial 10
processing process of: 11
(a) Tangible personal property at a plant facility; 12
(b) Distilled spirit s or wine at a plant facility or on the premises of a distiller, 13
rectifier, winery, or small farm winery licensed under KRS 243.030; or 14
(c) Malt beverages at a plant facility or on the premises of a brewer or 15
microbrewery licensed under KRS 243.040; 16
that is not otherwise exempt under subsection (9) of this section or KRS 17
139.480(10), if the charges for labor or services are separately stated on the invoice, 18
bill of sale, or similar document given to purchaser; 19
(23) (a) For persons selling services included in KRS 139.200(2)(g) to (ax) prior to 20
January 1, 2025, gross receipts derived from the sale of those services if the 21
gross receipts were less than twelve thousand dollars ($12,000) during 22
calendar year 2024. When gross receipts from these services exceed twelve 23
thousand dollars ($12,000) in a calendar year: 24
1. All gross receipts over twelve thousand dollars ($12,000) are taxable in 25
that calendar year; and 26
2. All gross receipts are subject to tax in subsequent calendar years. 27
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(b) The exemption provided in t his subsection shall not apply to a person also 1
engaged in the business of selling tangible personal property, digital property, 2
or services included in KRS 139.200(2)(a) to (f);[ and] 3
(24) (a) For persons that first begin making sales of services included in KRS 4
139.200(2)(g) to (ax) on or after January 1, 2025, gross receipts derived from 5
the sale of those services if the gross receipts are less than twelve thousand 6
dollars ($12,000) within the first calendar year of operation. When gross 7
receipts from th ese services exceed twelve thousand dollars ($12,000) in a 8
calendar year: 9
1. All gross receipts over twelve thousand dollars ($12,000) are taxable in 10
that calendar year; and 11
2. All gross receipts are subject to tax in subsequent calendar years. 12
(b) The exemption provided in this subsection shall not apply to a person that is 13
also engaged in the business of selling tangible personal property, digital 14
property, or services included in KRS 139.200(2)(a) to (f); and 15
(25) Gross receipts derived from the sale of aircraft delivered in this state to a 16
nonresident of Kentucky that is: 17
(a) Purchased for usage or other consumption outside of this state; 18
(b) Not to be registered or based in this state; and 19
(c) Transported out of this state within thirty days (30) days of purchase. 20
Section 2. This Act takes effect August 1, 2026. 21