AN ACT relating to a sales and use tax exemption for diapers.

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AN ACT relating to a sales and use tax exemption for diapers. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 139.010 is amended to read as follows: 3
As used in this chapter, unless the context otherwise provides: 4
(1) (a) "Admissions" means the fees paid for: 5
1. The right of entrance to a display, program, sporting event, music 6
concert, per formance, play, show, movie, exhibit, fair, or other 7
entertainment or amusement event or venue; and 8
2. The privilege of using facilities or participating in an event or activity, 9
including but not limited to: 10
a. Bowling centers; 11
b. Skating rinks; 12
c. Health spas; 13
d. Swimming pools; 14
e. Tennis courts; 15
f. Weight training facilities; 16
g. Fitness and recreational sports centers; and 17
h. Golf courses, both public and private; 18
regardless of whether the fee paid is per use or in any other form, 19
including but not limited to an initiation fee, monthly fee, membership 20
fee, or combination thereof. 21
(b) "Admissions" does not include: 22
1. Any fee paid to enter or participate in a fishing tournament; or 23
2. Any fee paid for the use of a boat ramp for the purpose of allowing 24
boats to be launched into or hauled out from the water; 25
(2) "Advertising and promotional direct mail" mean s direct mail the primary purpose of 26
which is to attract public attention to a product, person, business, or organization, or 27
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to attempt to sell, popularize, or secure financial support for a product, person, 1
business, or organization. As used in this defi nition, "product" means tangible 2
personal property, an item transferred electronically, or a service; 3
(3) "Business" includes any activity engaged in by any person or caused to be engaged 4
in by that person with the object of gain, benefit, or advantage, ei ther direct or 5
indirect; 6
(4) "Commonwealth" means the Commonwealth of Kentucky; 7
(5) (a) "Cosmetic surgery services" means modifications to all areas of the head, 8
neck, and body to enhance appearance through surgical and medical 9
techniques. 10
(b) "Cosmetic su rgery services" does not include surgery services that are 11
medically necessary to reconstruct or correct dysfunctional areas of the face 12
and body due to birth disorders, trauma, burns, or disease; 13
(6) "Department" means the Department of Revenue; 14
(7) "Diaper" means an absorbent garment worn by humans who are incapable of, or 15
have difficulty, controlling their bladder or bowel movements; 16
(8)[(7)] (a) "Digital audio -visual works" means a series of related images which, 17
when shown in succession, impart an impr ession of motion, with 18
accompanying sounds, if any. 19
(b) "Digital audio -visual works" includes movies, motion pictures, musical 20
videos, news and entertainment programs, and live events. 21
(c) "Digital audio -visual works" does[shall] not include video greeting cards, 22
video games, and electronic games; 23
(9)[(8)] (a) "Digital audio works" means works that result from the fixation of a 24
series of musical, spoken, or other sounds. 25
(b) "Digital audio works" includes ringtones, recorded or live songs, music, 26
readings o f books or other written materials, speeches, or other sound 27
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recordings. 1
(c) "Digital audio works" does[shall] not include audio greeting cards sent by 2
electronic mail; 3
(10)[(9)] (a) "Digital books" means works that are generally recognized in the 4
ordinary and usual sense as books, including any literary work expressed in 5
words, numbers, or other verbal or numerical symbols or indicia if the literary 6
work is generally recognized in the ordinary or usual sense as a book. 7
(b) "Digital books" does[ shall] not include digital audio -visual works, digital 8
audio works, periodicals, magazines, newspapers, or other news or 9
information products, chat rooms, or weblogs; 10
(11)[(10)] (a) "Digital cod e" means a code which provides a purchaser with a right to 11
obtain one (1) or more types of digital property. A "digital code" may be 12
obtained by any means, including electronic mail messaging or by tangible 13
means, regardless of the code's designation as a song code, video code, or 14
book code. 15
(b) "Digital code" does[shall] not include a code that represents: 16
1. A stored monetary value that is deducted from a total as it is used by the 17
purchaser; or 18
2. A redeemable card, gift card, or gift certificate that en titles the holder to 19
select specific types of digital property; 20
(12)[(11)] (a) "Digital property" means any of the following which is transferred 21
electronically: 22
1. Digital audio works; 23
2. Digital books; 24
3. Finished artwork; 25
4. Digital photographs; 26
5. Periodicals; 27
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6. Newspapers; 1
7. Magazines; 2
8. Video greeting cards; 3
9. Audio greeting cards; 4
10. Video games; 5
11. Electronic games; or 6
12. Any digital code related to this property. 7
(b) "Digital property" does[shall] not include digital audio -visual works or 8
satellite radio programming; 9
(13)[(12)] (a) "Direct mail" means printed material delivered or distributed by United 10
States mail or other delivery service to a mass audience or to addressees on a 11
mailing list provided by the purchaser or at the direction of t he purchaser 12
when the cost of the items are not billed directly to the recipient. 13
(b) "Direct mail" includes tangible personal property supplied directly or 14
indirectly by the purchaser to the direct mail retailer for inclusion in the 15
package containing the printed material. 16
(c) "Direct mail" does not include multiple items of printed material delivered to 17
a single address; 18
(14)[(13)] "Directly used in the manufacturing or industrial processing process" means 19
the process that commences with the movement of r aw materials from storage into 20
a continuous, unbroken, integrated process and ends when the finished product is 21
packaged and ready for sale; 22
(15)[(14)] (a) "Executive employee recruitment services" means services provided by 23
a person to locate potential candidates to fill open senior -level management 24
positions. 25
(b) "Executive employee recruitment services" includes but is not limited to 26
making a detailed list of client requirements, researching and identifying 27
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potential candidates, performing prescreening interviews, and providing 1
contract and salary negotiations; 2
(16)[(15)] (a) "Extended warranty services" means services provided through a service 3
contract agreement between the contract provider and the purchaser where the 4
purchaser agrees to pay compensation for the contract and the provider agrees 5
to repair, replace, support, or maintain tangible personal property, digital 6
property, real property, or prewrit ten computer software access services 7
according to the terms of the contract. 8
(b) "Extended warranty services" does not include the sale of a service contract 9
agreement for tangible personal property to be used by a small telephone 10
utility as defined in KR S 278.516 or a Tier III CMRS provider as defined in 11
KRS 65.7621 to deliver communications services as defined in KRS 136.602 12
or broadband; 13
(17)[(16)] (a) "Finished artwork" means final art that is used for actual reproduction 14
by photomechanical or other processes or for display purposes. 15
(b) "Finished artwork" includes: 16
1. Assemblies; 17
2. Charts; 18
3. Designs; 19
4. Drawings; 20
5. Graphs; 21
6. Illustrative materials; 22
7. Lettering; 23
8. Mechanicals; 24
9. Paintings; and 25
10. Paste-ups; 26
(18)[(17)] (a) "Gross receipts" and "s ales price" mean the total amount or 27
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consideration, including cash, credit, property, and services, for which 1
tangible personal property, digital property, or services are sold, leased, or 2
rented, valued in money, whether received in money or otherwise, wi thout 3
any deduction for any of the following: 4
1. The retailer's cost of the tangible personal property, digital property, or 5
services sold; 6
2. The cost of the materials used, labor or service cost, interest, losses, all 7
costs of transportation to the retai ler, all taxes imposed on the retailer, or 8
any other expense of the retailer; 9
3. Charges by the retailer for any services necessary to complete the sale; 10
4. Delivery charges, which are defined as charges by the retailer for the 11
preparation and delivery to a location designated by the purchaser 12
including transportation, shipping, postage, handling, crating, and 13
packing; 14
5. Any amount for which credit is given to the purchaser by the retailer, 15
other than credit for tangible personal property or digital property traded 16
when the tangible personal property or digital property traded is of like 17
kind and character to the property purchased and the property traded is 18
held by the retailer for resale; and 19
6. The amount charged for labor or services rendered in install ing or 20
applying the tangible personal property, digital property, or service sold. 21
(b) "Gross receipts" and "sales price" [shall ]include consideration received by 22
the retailer from a third party if: 23
1. The retailer actually receives consideration from a t hird party and the 24
consideration is directly related to a price reduction or discount on the 25
sale to the purchaser; 26
2. The retailer has an obligation to pass the price reduction or discount 27
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through to the purchaser; 1
3. The amount of consideration attributable to the sale is fixed and 2
determinable by the retailer at the time of the sale of the item to the 3
purchaser; and 4
4. One (1) of the following criteria is met: 5
a. The purchaser presents a coupon, certificate, or other 6
documentation to the retailer to claim a price reduction or discount 7
where the coupon, certificate, or documentation is authorized, 8
distributed, or granted by a third party with the understanding that 9
the third party will reimburse any seller to whom the c oupon, 10
certificate, or documentation is presented; 11
b. The price reduction or discount is identified as a third -party price 12
reduction or discount on the invoice received by the purchaser or 13
on a coupon, certificate, or other documentation presented by the 14
purchaser; or 15
c. The purchaser identifies himself or herself to the retailer as a 16
member of a group or organization entitled to a price reduction or 17
discount. A "preferred customer" card that is available to any 18
patron does not constitute membership in such a group. 19
(c) "Gross receipts" and "sales price" do[shall] not include: 20
1. Discounts, including cash, term, or coupons that are not reimbursed by a 21
third party and that are allowed by a retailer and taken by a purchaser on 22
a sale; 23
2. Interest, financing, a nd carrying charges from credit extended on the 24
sale of tangible personal property, digital property, or services, if the 25
amount is separately stated on the invoice, bill of sale, or similar 26
document given to the purchaser; 27
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3. Any taxes legally imposed dir ectly on the purchaser that are separately 1
stated on the invoice, bill of sale, or similar document given to the 2
purchaser; or 3
4. Local alcohol regulatory license fees authorized under KRS 243.075 that 4
are separately stated on the invoice, bill of sale, or similar document 5
given to the purchaser. 6
(d) As used in this subsection, "third party" means a person other than the 7
purchaser; 8
(19)[(18)] "In this state" or "in the state" means within the exterior limits of the 9
Commonwealth and includes all territory wi thin these limits owned by or ceded to 10
the United States of America; 11
(20)[(19)] "Industrial processing" includes: 12
(a) Refining; 13
(b) Extraction of minerals, ores, coal, clay, stone, petroleum, or natural gas; 14
(c) Mining, quarrying, fabricating, and industrial assembling; 15
(d) The processing and packaging of raw materials, in -process materials, and 16
finished products; and 17
(e) The processing and packaging of farm and dairy products for sale; 18
(21)[(20)] (a) "Lease or rental" means any transfer of possession or co ntrol of tangible 19
personal property for a fixed or indeterminate term for consideration. A lease 20
or rental shall include future options to: 21
1. Purchase the property; or 22
2. Extend the terms of the agreement and agreements covering trailers 23
where the amount of consideration may be increased or decreased by 24
reference to the amount realized upon sale or disposition of the property 25
as defined in 26 U.S.C. sec. 7701(h)(1). 26
(b) "Lease or rental" does[shall] not include: 27
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1. A transfer of possession or control of pr operty under a security 1
agreement or deferred payment plan that requires the transfer of title 2
upon completion of the required payments; 3
2. A transfer of possession or control of property under an agreement that 4
requires the transfer of title upon completi on of the required payments 5
and payment of an option price that does not exceed the greater of one 6
hundred dollars ($100) or one percent (1%) of the total required 7
payments; or 8
3. Providing tangible personal property and an operator for the tangible 9
personal property for a fixed or indeterminate period of time. To qualify 10
for this exclusion, the operator must be necessary for the equipment to 11
perform as designed, and the operator must do more than maintain, 12
inspect, or setup the tangible personal property. 13
(c) This definition shall apply regardless of the classification of a transaction 14
under generally accepted accounting principles, the Internal Revenue Code, or 15
other provisions of federal, state, or local law; 16
(22)[(21)] (a) "Lobbying services" means the act of promoting or securing passage of 17
legislation or an attempt to influence or sway a public official or other public 18
servant toward a desired action, including but not limited to the support of or 19
opposition to a project or the passage, amendment, defeat, approval, or veto of 20
any legislation, regulation, rule, or ordinance; 21
(b) "Lobbying services" includes but is not limited to the performance of 22
activities described as executive agency lobbying activities as defined in KRS 23
11A.201, activities described under the definition of lobby in KRS 6.611, and 24
any similar activities performed at the local, state, or federal levels; 25
(23)[(22)] (a) "Machinery for new and expanded industry" means machinery: 26
1. Directly used in the manufacturing or industrial processing process of: 27
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a. Tangible personal property at a plant facility; 1
b. Distilled spirits or wine at a plant facility or on the premises of a 2
distiller, rectifier, winery, or small farm winery licensed under 3
KRS 243.030 that incl udes a retail establishment on the premises; 4
or 5
c. Malt beverages at a plant facility or on the premises of a brewer or 6
microbrewery licensed under KRS 243.040 that includes a retail 7
establishment; 8
2. Which is incorporated for the first time into: 9
a. A plant facility established in this state; or 10
b. Licensed premises located in this state; and 11
3. Which does not replace machinery in the plant facility or licensed 12
premises unless that machinery purchased to replace existing machinery: 13
a. Increases the consump tion of recycled materials at the plant 14
facility by not less than ten percent (10%); 15
b. Performs different functions; 16
c. Is used to manufacture a different product; or 17
d. Has a greater productive capacity, as measured in units of 18
production, than the machinery being replaced. 19
(b) "Machinery for new and expanded industry" does not include repair, 20
replacement, or spare parts of any kind, regardless of whether the purchase of 21
repair, replacement, or spare parts is required by the manufacturer or seller as 22
a condition of sale or as a condition of warranty; 23
(24)[(23)] "Manufacturing" means any process through which material having little or 24
no commercial value for its intended use before processing has appreciable 25
commercial value for its intended use after processing by the machinery; 26
(25)[(24)] "Marketplace" means any physical or electronic means through which one (1) 27
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or more retailers may advertise and sell tangible personal property, digital property, 1
or services, or lease tangible personal property or digital property, such as a catalog, 2
internet website, or television or radio broadcast, regardless of whether the tangible 3
personal property, digital property, or retailer is physically present in this state; 4
(26)[(25)] (a) "Marketplace provider" means a person, including any affiliate of the 5
person, that facilitates a retail sale by satisfying subparagraphs 1. and 2. of 6
this paragraph as follows: 7
1. The person directly or indirectly: 8
a. Lists, makes available, or advertises tangible personal property, 9
digital property, or services for sale by a marketplace retailer in a 10
marketplace owned, operated, or controlled by the person; 11
b. Facilitates the sale of a marketplace retailer's product through a 12
marketplace by transmitting or otherwise communicating an offer 13
or acceptance of a retail sale of tangible personal property, digital 14
property, or services between a marketplace retailer and a 15
purchaser in a forum including a shop, store, booth, catalog, 16
internet site, or similar forum; 17
c. Owns, rents, licenses, makes avai lable, or operates any electronic 18
or physical infrastructure or any property, process, method, 19
copyright, trademark, or patent that connects marketplace retailers 20
to purchasers for the purpose of making retail sales of tangible 21
personal property, digital property, or services; 22
d. Provides a marketplace for making retail sales of tangible personal 23
property, digital property, or services, or otherwise facilitates retail 24
sales of tangible personal property, digital property, or services, 25
regardless of ownershi p or control of the tangible personal 26
property, digital property, or services, that are the subject of the 27
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retail sale; 1
e. Provides software development or research and developm ent 2
activities related to any activity described in this subparagraph, if 3
the software development or research and development activities 4
are directly related to the physical or electronic marketplace 5
provided by a marketplace provider; 6
f. Provides or offe rs fulfillment or storage services for a marketplace 7
retailer; 8
g. Sets prices for a marketplace retailer's sale of tangible personal 9
property, digital property, or services; 10
h. Provides or offers customer service to a marketplace retailer or a 11
marketplace retailer's customers, or accepts or assists with taking 12
orders, returns, or exchanges of tangible personal property, digital 13
property, or services sold by a marketplace retailer; or 14
i. Brands or otherwise identifies sales as those of the marketplace 15
provider; and 16
2. The person directly or indirectly: 17
a. Collects the sales price or purchase price of a retail sale of tangible 18
personal property, digital property, or services; 19
b. Provides payment processing services for a retail sale of tangible 20
personal property, digital property, or services; 21
c. Through terms and conditions, agreements, or arrangements with a 22
third party, collects payment in connection with a retail sale of 23
tangible personal property, digital property, or services from a 24
purchaser and transmit s that payment to the marketplace retailer, 25
regardless of whether the person collecting and transmitting the 26
payment receives compensation or other consideration in exchange 27
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for the service; or 1
d. Provides a virtual currency that purchasers are allowed or required 2
to use to purchase tangible personal property, digital property, or 3
services. 4
(b) "Marketplace provider" includes but is not limited to a person that satisfies the 5
requirements of this subsection through the ownership, operation, or control 6
of a d igital distribution service, digital distribution platform, online portal, or 7
application store; 8
(27)[(26)] "Marketplace retailer" means a seller that makes retail sales through any 9
marketplace owned, operated, or controlled by a marketplace provider; 10
(28)[(27)] (a) "Occasional sale" includes: 11
1. A sale of tangible personal property or digital property not held or used 12
by a seller in the course of an activity for which he or she is required to 13
hold a seller's permit, provided such sale is not one (1) of a s eries of 14
sales sufficient in number, scope, and character to constitute an activity 15
requiring the holding of a seller's permit. In the case of the sale of the 16
entire, or a substantial portion of the nonretail assets of the seller, the 17
number of previous sa les of similar assets shall be disregarded in 18
determining whether or not the current sale or sales shall qualify as an 19
occasional sale; or 20
2. Any transfer of all or substantially all the tangible personal property or 21
digital property held or used by a person in the course of such an activity 22
when after such transfer the real or ultimate ownership of such property 23
is substantially similar to that which existed before such transfer. 24
(b) For the purposes of this subsection, stockholders, bondholders, partners, or 25
other persons holding an interest in a corporation or other entity are regarded 26
as having the "real or ultimate ownership" of the tangible personal property or 27
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digital property of such corporation or other entity; 1
(29)[(28)] (a) "Other direct mail" mea ns any direct mail that is not advertising and 2
promotional direct mail, regardless of whether advertising and promotional 3
direct mail is included in the same mailing. 4
(b) "Other direct mail" includes but is not limited to: 5
1. Transactional direct mail that contains personal information specific to 6
the addressee, including but not limited to invoices, bills, statements of 7
account, and payroll advices; 8
2. Any legally required mailings, including but not limited to privacy 9
notices, tax reports, and stockholder reports; and 10
3. Other nonpromotional direct mail delivered to existing or former 11
shareholders, customers, employees, or agents, including but not limited 12
to newsletters and informational pieces. 13
(c) "Other direct mail" does not include the development of billing information or 14
the provision of any data processing service that is more than incidental to the 15
production of printed material; 16
(30)[(29)] "Person" includes any individual, firm, copartnership, joint venture, 17
association, social club, fraternal org anization, corporation, estate, trust, business 18
trust, receiver, trustee, syndicate, cooperative, assignee, governmental unit or 19
agency, or any other group or combination acting as a unit; 20
(31)[(30)] "Permanent," as the term applies to digital property, me ans perpetual or for an 21
indefinite or unspecified length of time; 22
(32)[(31)] (a) "Photography and photofinishing services" means: 23
1. The taking, developing, or printing of an original photograph; or 24
2. Image editing, including shadow removal, tone adjustments, vertical and 25
horizontal alignment and cropping, composite image creation, 26
formatting, watermarking printing, and delivery of an original 27
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photograph in the form of tangible personal property, digita l property, or 1
other media. 2
(b) "Photography and photofinishing services" does not include photography 3
services necessary for medical or dental health; 4
(33)[(32)] "Plant facility" means a single location that is exclusively dedicated to 5
manufacturing or in dustrial processing activities. A location shall be deemed to be 6
exclusively dedicated to manufacturing or industrial processing activities even if 7
retail sales are made there, provided that the retail sales are incidental to the 8
manufacturing or industrial processing activities occurring at the location. The term 9
"plant facility" shall not include any restaurant, grocery store, shopping center, or 10
other retail establishment; 11
(34)[(33)] (a) "Prewritten computer software" means: 12
1. Computer software, including prewritten upgrades, that are not designed 13
and developed by the author or other creator to the specifications of a 14
specific purchaser; 15
2. Software designed and developed by the author or other creator to the 16
specifications of a specific purchaser when i t is sold to a person other 17
than the original purchaser; or 18
3. Any portion of prewritten computer software that is modified or 19
enhanced in any manner, where the modification or enhancement is 20
designed and developed to the specifications of a specific purch aser, 21
unless there is a reasonable, separately stated charge on an invoice or 22
other statement of the price to the purchaser for the modification or 23
enhancement. 24
(b) When a person modifies or enhances computer software of which the person 25
is not the author or creator, the person shall be deemed to be the author or 26
creator only of the modifications or enhancements the person actually made. 27
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(c) The combining of two (2) or more prewritten computer software programs or 1
portions thereof does not cause the combina tion to be other than prewritten 2
computer software; 3
(35)[(34)] "Prewritten computer software access services" means the right of access to 4
prewritten computer software where the object of the transaction is to use the 5
prewritten computer software while pos session of the prewritten computer software 6
is maintained by the seller or a third party, wherever located, regardless of whether 7
the charge for the access or use is on a per use, per user, per license, subscription, or 8
some other basis; 9
(36)[(35)] (a) "Purchase" means any transfer of title or possession, exchange, barter, 10
lease, or rental, conditional or otherwise, in any manner or by any means 11
whatsoever, of: 12
1. Tangible personal property; 13
2. An extended warranty service; 14
3. Digital property transferred electronically; or 15
4. Services included in KRS 139.200; 16
for a consideration. 17
(b) "Purchase" includes: 18
1. When performed outside this state or when the customer gives a resale 19
certificate, the producing, fabricating, processing, printing, or imprinting 20
of t angible personal property for a consideration for consumers who 21
furnish either directly or indirectly the materials used in the producing, 22
fabricating, processing, printing, or imprinting; 23
2. A transaction whereby the possession of tangible personal proper ty or 24
digital property is transferred but the seller retains the title as security 25
for the payment of the price; and 26
3. A transfer for a consideration of the title or possession of tangible 27
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personal property or digital property which has been produced, 1
fabricated, or printed to the special order of the customer, or of any 2
publication; 3
(37)[(36)] "Recycled materials" means materials which have been recovered or diverted 4
from the solid waste stream and reused or returned to use in the form of raw 5
materials or products; 6
(38)[(37)] "Recycling purposes" means those activities undertaken in which materials 7
that would otherwise become solid waste are collected, separated, or processed in 8
order to be reused or returned to use in the form of raw materials or products; 9
(39)[(38)] "Remote retailer" means a retailer with no physical presence in this state; 10
(40)[(39)] (a) "Repair, replacement, or spare parts" means any tangible personal 11
property used to maintain, restore, mend, or repair machinery or equipment. 12
(b) "Repair, replacement, or spare parts" does not include machine oils, grease, or 13
industrial tools; 14
(41)[(40)] (a) "Retailer" means: 15
1. Every person engaged in the business of making retail sales of tangible 16
personal property, digital property, or furnishing any services in a retail 17
sale included in KRS 139.200; 18
2. Every person engaged in the business of making sales at auction of 19
tangible personal property or digital property owned by the person or 20
others for storage, use or other consumption, except as provided in 21
paragraph (c) of this subsection; 22
3. Every person making more than two (2) retail sales of tangible personal 23
property, digital property, or services included in KRS 139.200 during 24
any twelve (12) month period, including sales made in the capacity of 25
assignee for the benefit of creditors, or receiver or trustee in bankruptcy; 26
4. Any person conducting a race meeting under the provi sion of KRS 27
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Chapter 230, with respect to horses which are claimed during the 1
meeting. 2
(b) When the department determines that it is necessary for the efficient 3
administration of this chapter to regard any salesmen, representatives, 4
peddlers, or canvassers as the agents of the dealers, distributors, supervisors or 5
employers under whom they operate or from whom they obtain the tangible 6
personal property, digital property, or services sold by them, irrespective of 7
whether they are making sales on their own beh alf or on behalf of the dealers, 8
distributors, supervisors or employers, the department may so regard them and 9
may regard the dealers, distributors, supervisors or employers as retailers for 10
purposes of this chapter. 11
(c) 1. Any person making sales at a cha ritable auction for a qualifying entity 12
shall not be a retailer for purposes of the sales made at the charitable 13
auction if: 14
a. The qualifying entity, not the person making sales at the auction, is 15
sponsoring the auction; 16
b. The purchaser of tangible personal property at the auction directly 17
pays the qualifying entity sponsoring the auction for the property 18
and not the person making the sales at the auction; and 19
c. The qualifying entity, not the person making sales at the auction, is 20
responsible for the col lection, control, and disbursement of the 21
auction proceeds. 22
2. If the conditions set forth in subparagraph 1. of this paragraph are met, 23
the qualifying entity sponsoring the auction shall be the retailer for 24
purposes of the sales made at the charitable auction. 25
3. For purposes of this paragraph, "qualifying entity" means a resident: 26
a. Church; 27
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b. School; 1
c. Civic club; or 2
d. Any other nonprofit charitable, religious, or educational 3
organization; 4
(42)[(41)] "Retail sale" means any sale, lease, or rental for any purpose other than resale, 5
sublease, or subrent; 6
(43)[(42)] (a) "Ringtones" means digitized sound files that are downloaded onto a 7
device and that may be used to alert the customer with respect to a 8
communication. 9
(b) "Ringtones" does[shall] not includ e ringback tones or other digital files that 10
are not stored on the purchaser's communications device; 11
(44)[(43)] (a) "Sale" means: 12
1. The furnishing of any services included in KRS 139.200; or 13
2. Any transfer of title or possession, exchange, barter, lease , or rental, 14
conditional or otherwise, in any manner or by any means whatsoever, 15
of: 16
a. Tangible personal property; or 17
b. Digital property transferred electronically; 18
for a consideration. 19
(b) "Sale" includes but is not limited to: 20
1. The producing, fabricating, processing, printing, or imprinting of 21
tangible personal property or digital property for a consideration for 22
purchasers who furnish, either directly or indirectly, the materials used 23
in the producing, fabricating, processing, printing, or imprinting; 24
2. A transaction whereby the possession of tangible personal property or 25
digital property is transferred, but the seller retains the title as security 26
for the payment of the price; and 27
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3. A transfer for a consideration of the title or possession of tangible 1
personal property or digital property which has been produced, 2
fabricated, or printed to the special order of the purchaser. 3
(c) This definition shall apply regardless of the classificatio n of a transaction 4
under generally accepted accounting principles, the Internal Revenue Code, or 5
other provisions of federal, state, or local law; 6
(45)[(44)] "Seller" includes every person engaged in the business of selling tangible 7
personal property, digital property, or services of a kind, the gross receipts from the 8
retail sale of which are required to be included in the measure of the sales tax, and 9
every person engaged in making sales for resale; 10
(46)[(45)] (a) "Storage" includes any keeping or retenti on in this state for any purpose 11
except sale in the regular course of business or subsequent use solely outside 12
this state of tangible personal property, digital property, or prewritten 13
computer software access services purchased from a retailer. 14
(b) "Storage" does not include the keeping, retaining, or exercising any right or 15
power over tangible personal property for the purpose of subsequently 16
transporting it outside the state for use thereafter solely outside the state, or 17
for the purpose of being proces sed, fabricated, or manufactured into, attached 18
to, or incorporated into, other tangible personal property to be transported 19
outside the state and thereafter used solely outside the state; 20
(47)[(46)] "Tangible personal property" means personal property whi ch may be seen, 21
weighed, measured, felt, or touched, or which is in any other manner perceptible to 22
the senses and includes natural, artificial, and mixed gas, electricity, water, steam, 23
and prewritten computer software; 24
(48)[(47)] "Taxpayer" means any person liable for tax under this chapter; 25
(49)[(48)] "Telemarketing services" means services provided via telephone, facsimile, 26
electronic mail, text messages, or other modes of communications to another 27
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person, which are unsolicited by that person, for the purposes of: 1
(a) 1. Promoting products or services; 2
2. Taking orders; or 3
3. Providing information or assistance regarding the products or services; 4
or 5
(b) Soliciting contributions; 6
(50)[(49)] "Transferred electronically" means accessed or obtained by the pu rchaser by 7
means other than tangible storage media; and 8
(51)[(50)] (a) "Use" includes the exercise of: 9
1. Any right or power over tangible personal property or digital property 10
incident to the ownership of that property, or by any transaction in 11
which possession is given, or by any transaction involving digital 12
property or tangible personal property where the right of access is 13
granted; or 14
2. Any right or power to benefit from any services subject to tax under 15
KRS 139.200(2)(p) to (ax). 16
(b) "Use" does not include the keeping, retaining, or exercising any right or 17
power over: 18
1. Tangible personal property or digital property for the purpose of: 19
a. Selling tangible personal property or digital property in the regular 20
course of business; or 21
b. Subsequently transporting tangible personal property outside the 22
state for use thereafter solely outside the state, or for the purpose 23
of being processed, fabricated, or manufactured into, attached to, 24
or incorporated into, other tangible personal property to be 25
transported outside the state and thereafter used solely outside the 26
state; or 27
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2. Prewritten computer software acces s services purchased for use outside 1
the state and transferred electronically outside the state for use thereafter 2
solely outside the state. 3
Section 2. KRS 139.480 is amended to read as follows: 4
Any other provision of this chapter to the contrary notwithstanding, the terms "sale at 5
retail," "retail sale," "use," "storage," and "consumption," as used in this chapter, shall not 6
include the sale, use, storage, or other consumption of: 7
(1) Locomotives or rolling stock, including materials for the construction, repair, or 8
modification thereof, or fuel or supplies for the direct operation of locomotives and 9
trains, used or to be used in interstate commerce; 10
(2) Coal for the manufacture of electricity; 11
(3) (a) All energy or energy -producing fuels used in the course of manufacturing, 12
processing, mining, or refining and any related distribution, transmission, and 13
transportation services for this energy that are billed to the user, to the extent 14
that the cost of the energy or energy -producing fuels used, and related 15
distribution, transmission, and transportation services for this energy that are 16
billed to the user exceed three percent (3%) of the cost of production. 17
(b) Cost of production shall be computed on the basis of a plant facility, which 18
shall include all operations within the continuous, unbroken, integrated 19
manufacturing or industrial processing process that ends with a product 20
packaged and ready for sale. 21
(c) A person who performs a manufacturing or industrial processing activity for a 22
fee and does not take ownership of the tangible personal property that is 23
incorporated into, or becomes the product of, the manufacturing or industrial 24
processing activity is a toller. For periods on or after July 1, 2018, the costs of 25
the tangible personal property shall be excluded from the toller's cost of 26
production at a plant facility with tolling operations in place as of July 1, 27
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2018. 1
(d) For plant facilities that beg in tolling operations after July 1, 2018, the costs of 2
tangible personal property shall be excluded from the toller's cost of 3
production if the toller: 4
1. Maintains a binding contract for periods after July 1, 2018, that governs 5
the terms, conditions, and responsibilities with a separate legal entity, 6
which holds title to the tangible personal property that is incorporated 7
into, or becomes the product of, the manufacturing or industrial 8
processing activity; 9
2. Maintains accounting records that show the expe nses it incurs to fulfill 10
the binding contract that include but are not limited to energy or energy -11
producing fuels, materials, labor, procurement, depreciation, 12
maintenance, taxes, administration, and office expenses; 13
3. Maintains separate payroll, bank accounts, tax returns, and other records 14
that demonstrate its independent operations in the performance of its 15
tolling responsibilities; 16
4. Demonstrates one (1) or more substantial business purposes for the 17
tolling operations germane to the overall manufact uring, industrial 18
processing activities, or corporate structure at the plant facility. A 19
business purpose is a purpose other than the reduction of sales tax 20
liability for the purchases of energy and energy-producing fuels; and 21
5. Provides information to th e department upon request that documents 22
fulfillment of the requirements in subparagraphs 1. to 4. of this 23
paragraph and gives an overview of its tolling operations with an 24
explanation of how the tolling operations relate and connect with all 25
other manufac turing or industrial processing activities occurring at the 26
plant facility; 27
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(4) Livestock of a kind the products of which ordinarily constitute food for human 1
consumption, provided the sales are made for breeding or dairy purposes and by or 2
to a person regularly engaged in the business of farming; 3
(5) Poultry for use in breeding or egg production; 4
(6) Farm work stock for use in farming operations; 5
(7) Seeds, the products of which ordinarily constitute food for human consumption or 6
are to be sold in the regu lar course of business, and commercial fertilizer to be 7
applied on land, the products from which are to be used for food for human 8
consumption or are to be sold in the regular course of business; provided the sales 9
are made to farmers who are regularly eng aged in the occupation of tilling and 10
cultivating the soil for the production of crops as a business, or who are regularly 11
engaged in the occupation of raising and feeding livestock or poultry or producing 12
milk for sale; and provided further that tangible personal property so sold is to be 13
used only by those persons designated above who are so purchasing; 14
(8) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals to be 15
used in the production of crops as a business, or in the raising an d feeding of 16
livestock or poultry, the products of which ordinarily constitute food for human 17
consumption; 18
(9) Feed, including pre -mixes and feed additives, for livestock or poultry of a kind the 19
products of which ordinarily constitute food for human consumption; 20
(10) Machinery for new and expanded industry; 21
(11) Farm machinery. As used in this section, the term "farm machinery": 22
(a) Means machinery used exclusively and directly in the occupation of: 23
1. Tilling the soil for the production of crops as a business; 24
2. Raising and feeding livestock or poultry for sale; or 25
3. Producing milk for sale; 26
(b) Includes machinery, attachments, and replacements therefor, repair parts, and 27
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replacement parts which are used or manufactured for use on, or in the 1
operation of farm machinery and which are necessary to the operation of the 2
machinery, and are customarily so used, including but not limited to combine 3
header wagons, combine header trailers, or any other implements specifically 4
designed and used to move or transport a combine head; and 5
(c) Does not include: 6
1. Automobiles; 7
2. Trucks; 8
3. Trailers, except combine header trailers; or 9
4. Truck-trailer combinations; 10
(12) Tombstones and other memorial grave markers; 11
(13) On-farm facilities used exclusively for grain or soybean storing, drying, processing, 12
or handling. The exemption applies to the equipment, machiner y, attachments, 13
repair and replacement parts, and any materials incorporated into the construction, 14
renovation, or repair of the facilities; 15
(14) On-farm facilities used exclusively for raising poultry or livestock. The exemption 16
shall apply to the equipme nt, machinery, attachments, repair and replacement parts, 17
and any materials incorporated into the construction, renovation, or repair of the 18
facilities. The exemption shall apply but not be limited to vent board equipment, 19
waterer and feeding systems, broo ding systems, ventilation systems, alarm systems, 20
and curtain systems. In addition, the exemption shall apply whether or not the seller 21
is under contract to deliver, assemble, and incorporate into real estate the 22
equipment, machinery, attachments, repair and replacement parts, and any materials 23
incorporated into the construction, renovation, or repair of the facilities; 24
(15) Gasoline, special fuels, liquefied petroleum gas, and natural gas used exclusively 25
and directly to: 26
(a) Operate farm machinery as defined in subsection (11) of this section; 27
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(b) Operate on -farm grain or soybean drying facilities as defined in subsection 1
(13) of this section; 2
(c) Operate on -farm poultry or livestock facilities defined in subsection (14) of 3
this section; 4
(d) Operate on-farm ratite facilities defined in subsection (23) of this section; 5
(e) Operate on-farm llama or alpaca facilities as defined in subsection (25) of this 6
section; or 7
(f) Operate on-farm dairy facilities; 8
(16) Textbooks, including related workbooks and other cou rse materials, purchased for 9
use in a course of study conducted by an institution which qualifies as a nonprofit 10
educational institution under KRS 139.495. The term "course materials" means only 11
those items specifically required of all students for a parti cular course but shall not 12
include notebooks, paper, pencils, calculators, tape recorders, or similar student 13
aids; 14
(17) Any property which has been certified as an alcohol production facility as defined 15
in KRS 247.910; 16
(18) Aircraft, repair and replacemen t parts therefor, and supplies, except fuel, for the 17
direct operation of aircraft in interstate commerce and used exclusively for the 18
conveyance of property or passengers for hire. Nominal intrastate use shall not 19
subject the property to the taxes imposed by this chapter; 20
(19) Any property which has been certified as a fluidized bed energy production facility 21
as defined in KRS 211.390; 22
(20) (a) 1. Any property to be incorporated into the construction, rebuilding, 23
modification, or expansion of a blast furnace or any of its components or 24
appurtenant equipment or structures as part of an approved supplemental 25
project, as defined in[by] KRS 154.26-010; and 26
2. Materials, supplies, and repair or replacement parts purchased for use in 27
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the operation and maintenance of a blast furnace and related carbon 1
steel-making operations as part of an approved supplemental project, as 2
defined in[by] KRS 154.26-010. 3
(b) The exemptions provided in this subsection shall be effective for sales made: 4
1. On and after July 1, 2018; and 5
2. During the term of a supplemental project agreement entered into 6
pursuant to KRS 154.26-090; 7
(21) Beginning on October 1, 1986, food or food products purchased for human 8
consumption with food coupons issued by the United States Department of 9
Agriculture pursuant to the Food Stamp Act of 1977, as amended, and required to 10
be exempted by the Food Security Act of 1985 in order for the Commonwealth to 11
continue participation in the federal food stamp program; 12
(22) Machinery or equipment purchased or leased by a business, industry, or 13
organization in order to collect, source separate, compress, bale, shred, or otherwise 14
handle waste materials if the machinery or equipment is primarily used for 15
recycling purposes; 16
(23) Ratite birds and eggs to be used in an agricultural pursuit for the breeding and 17
production of ratite birds, feathers, hides, breeding stock, eggs, meat, and ratite by -18
products, and the following items used in this agricultural pursuit: 19
(a) Feed and feed additives; 20
(b) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals; 21
and 22
(c) On-farm facilities, including equipment, machinery, attachments, repair and 23
replacement parts, and any materials incorporated into the construction, 24
renovation, or repair of the facilities. The exemption shall apply to incubation 25
systems, egg processing equipment, waterer and feeding systems, brooding 26
systems, ventilation systems, alarm systems, and curtain systems. In addition, 27
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the exemption shall apply wh ether or not the seller is under contract to 1
deliver, assemble, and incorporate into real estate the equipment, machinery, 2
attachments, repair and replacement parts, and any materials incorporated into 3
the construction, renovation, or repair of the facilities; 4
(24) Embryos and semen that are used in the reproduction of livestock, if the products of 5
these embryos and semen ordinarily constitute food for human consumption, and if 6
the sale is made to a person engaged in the business of farming; 7
(25) Llamas and alpacas to be used as beasts of burden or in an agricultural pursuit for 8
the breeding and production of hides, breeding stock, fiber and wool products, 9
meat, and llama and alpaca by -products, and the following items used in this 10
pursuit: 11
(a) Feed and feed additives; 12
(b) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals; 13
and 14
(c) On-farm facilities, including equipment, machinery, attachments, repair and 15
replacement parts, and any materials incorporated into the construction, 16
renovation, or repair of the facilities. The exemption shall apply to waterer 17
and feeding systems, ventilation systems, and alarm systems. In addition, the 18
exemption shall apply whether or not the seller is under contract to deliver, 19
assemble, and incorporate i nto real estate the equipment, machinery, 20
attachments, repair and replacement parts, and any materials incorporated into 21
the construction, renovation, or repair of the facilities; 22
(26) Baling twine and baling wire for the baling of hay and straw; 23
(27) Water sold to a person regularly engaged in the business of farming and used in the: 24
(a) Production of crops; 25
(b) Production of milk for sale; or 26
(c) Raising and feeding of: 27
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1. Livestock or poultry, the products of which ordinarily constitute food 1
for human consumption; or 2
2. Ratites, llamas, alpacas, buffaloes[buffalo], cervids or aquatic 3
organisms; 4
(28) Buffaloes[Buffalos] to be used as beasts of burden or in an agricultural pursuit for 5
the production of hides, breeding stock, meat, and buffalo by -products, a nd the 6
following items used in this pursuit: 7
(a) Feed and feed additives; 8
(b) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals; 9
and 10
(c) On-farm facilities, including equipment, machinery, attachments, repair and 11
replacement part s, and any materials incorporated into the construction, 12
renovation, or repair of the facilities. The exemption shall apply to waterer 13
and feeding systems, ventilation systems, and alarm systems. In addition, the 14
exemption shall apply whether or not the se ller is under contract to deliver, 15
assemble, and incorporate into real estate the equipment, machinery, 16
attachments, repair and replacement parts, and any materials incorporated into 17
the construction, renovation, or repair of the facilities; 18
(29) Aquatic o rganisms sold directly to or raised by a person regularly engaged in the 19
business of producing products of aquaculture, as defined in KRS 260.960, for sale, 20
and the following items used in this pursuit: 21
(a) Feed and feed additives; 22
(b) Water; 23
(c) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals; 24
and 25
(d) On-farm facilities, including equipment, machinery, attachments, repair and 26
replacement parts, and any materials incorporated into the construction, 27
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renovation, or repair of the f acilities and, any gasoline, special fuels, liquefied 1
petroleum gas, or natural gas used to operate the facilities. The exemption 2
shall apply, but not be limited to: waterer and feeding systems; ventilation, 3
aeration, and heating systems; processing and st orage systems; production 4
systems such as ponds, tanks, and raceways; harvest and transport equipment 5
and systems; and alarm systems. In addition, the exemption shall apply 6
whether or not the seller is under contract to deliver, assemble, and 7
incorporate into real estate the equipment, machinery, attachments, repair and 8
replacement parts, and any materials incorporated into the construction, 9
renovation, or repair of the facilities; 10
(30) Members of the genus cervidae permitted by KRS Chapter 150 that are use d for the 11
production of hides, breeding stock, meat, and cervid by -products, and the 12
following items used in this pursuit: 13
(a) Feed and feed additives; 14
(b) Insecticides, fungicides, herbicides, rodenticides, and other chemicals; and 15
(c) On-site facilities, including equipment, machinery, attachments, repair and 16
replacement parts, and any materials incorporated into the construction, 17
renovation, or repair of t he facilities. In addition, the exemption shall apply 18
whether or not the seller is under contract to deliver, assemble, and 19
incorporate into real estate the equipment, machinery, attachments, repair and 20
replacement parts, and any materials incorporated int o the construction, 21
renovation, or repair of the facilities; 22
(31) (a) Repair or replacement parts for the direct operation or maintenance of a motor 23
vehicle, including any towed unit, used exclusively in interstate commerce for 24
the conveyance of property o r passengers for hire, provided the motor vehicle 25
is licensed for use on the highway and its declared gross vehicle weight with 26
any towed unit is forty -four thousand and one (44,001) pounds or greater. 27
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Nominal intrastate use shall not subject the property to the taxes imposed by 1
this chapter; and 2
(b) Repair or replacement parts for the direct operation and maintenance of a 3
motor vehicle operating under a charter bus certificate issued by the 4
Transportation Cabinet under KRS Chapter 281, or under similar aut hority 5
granted by the United States Department of Transportation. 6
(c) For the purposes of this subsection, "repair or replacement parts" means tires, 7
brakes, engines, transmissions, drive trains, chassis, body parts, and their 8
components. "Repair or replac ement parts" shall not include fuel, machine 9
oils, hydraulic fluid, brake fluid, grease, supplies, or accessories not essential 10
to the operation of the motor vehicle itself, except when sold as part of the 11
assembled unit, such as cigarette lighters, radios , lighting fixtures not 12
otherwise required by the manufacturer for operation of the vehicle, or tool or 13
utility boxes; 14
(32) Food donated by a retail food establishment or any other entity regulated under 15
KRS 217.127 to a nonprofit organization for distribution to the needy; 16
(33) Drugs and over -the-counter drugs, as defined in KRS 139.472, that are purchased 17
by a person regularly engaged in the business of farming and used in the treatment 18
of cattle, sheep, goats, swine, poultry, ratite birds, llamas, alpaca s, 19
buffaloes[buffalo], aquatic organisms, or cervids; 20
(34) (a) Building materials, fixtures, or supplies purchased by a construction 21
contractor if: 22
1. Fulfilled by a construction contract for a sewer or water project with: 23
a. A municipally owned water util ity organized under KRS Chapter 24
96; 25
b. A water district or water commission formed or organized under 26
KRS Chapter 74; 27
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c. A sanitation district established under KRS Chapter 220 or formed 1
pursuant to KRS Chapter 65; 2
d. A nonprofit corporation created under KRS 58.180 to act on behalf 3
of a governmental agency in the acquisition and financing of 4
public projects; 5
e. Regional wastewater commissions formed under KRS Chapter 6
278; 7
f. A municipally owned joint sewer agency formed under KRS 8
Chapter 76; or 9
g. Any other governmental agency; and 10
2. The building materials, fixtures, or supplies: 11
a. Will be permanently incorporated into a structure or improvement 12
to real property, or will be completely consumed, in fulfilling a 13
construction contract for the purpose of fur nishing water or sewer 14
services to the general public; and 15
b. Would be exempt if purchased directly by the entities listed in 16
subparagraph 1. of this paragraph. 17
(b) As used in this subsection, "construction contract" means a: 18
1. Lump sum contract; 19
2. Cost plus contract; 20
3. Materials only contract; 21
4. Labor and materials contract; or 22
5. Any other type of contract. 23
(c) The exemption provided in this subsection shall apply without regard to the 24
payment arrangement between the construction contractor, the retailer, and 25
the entities listed in paragraph (a)1. of this subsection or to the place of 26
delivery for the building materials, fixtures, or supplies; 27
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(35) (a) On or after February 25, 2022, the rental of space for meetings, conventions, 1
short-term business uses, entertainment events, weddings, banquets, parties, 2
and other short -term social events, as referenced in KRS 139 .200, if the tax 3
established in KRS 139.200 is paid by the primary lessee to the lessor. 4
(b) For the purpose of this subsection, "primary lessee" means the person who 5
leases the space and who has a contract with the lessor of the space only if: 6
1. The contract between the lessor and the lessee specifies that the lessee 7
may sublease, subrent, or otherwise sell the space; and 8
2. The space is then sublet, subrented, or otherwise sold to exhibitors, 9
vendors, sponsors, or other entities and persons who will use the space 10
associated with the event to be conducted under the primary lease; 11
(36) Prewritten computer software access services sold to or purchased by a retailer that 12
develops prewritten computer software for print technology and uses and sells 13
prewritten computer software access services for print technology; 14
(37) (a) Currency or bullion. 15
(b) As used in this subsection: 16
1. "Bullion": 17
a. Means bars, ingots, or coins, which are: 18
i. Made of gold, silver, platinum, palladium, or a combination 19
of these metals; 20
ii. Valued based on the content of the metal and not its form; 21
and 22
iii. Used, or have been used, as a medium of exchange, security, 23
or commodity by any state, the United States government, or 24
a foreign nation; and 25
b. Does not include medallions or coins th at are incorporated into a 26
pendant or other jewelry; and 27
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2. "Currency": 1
a. Means a coin or currency made of gold, silver, platinum, 2
palladium, or other metal or paper money that is or has been used 3
as legal tender and is sold based on its value as a colle ctible item 4
rather than the value as a medium of exchange; and 5
b. Does not include a coin or currency that has been incorporated into 6
jewelry;[ and] 7
(38) Medicinal cannabis as defined in KRS 218B.010 when sold, used, stored, or 8
consumed in accordance with KRS Chapter 218B; and 9
(39) Diapers, including disposable diapers, on or after August 1, 2026. 10