KRS § 139.470 — KY Code / Title XI / Chapter 139 / Section 139.470
139.470 Exempt transactions
Status: in_force

139.470 Exempt transactions.

There are excluded from the computation of the amount of taxes imposed by this chapter:

(1) Gross receipts from the sale of, and the storage, use, or other consumption in this

state of, tangible personal property or digital property which this state is prohibited

from taxing under the Constitution or laws of the United States, or under the

Constitution of this state;

(2) Gross receipts from sales of, and the storage, use, or other consumption in this state

of:

(a) Nonreturnable and returnable containers when sold without the contents to

persons who place the contents in the container and sell the contents together

with the container; and

(b) Returnable containers when sold with the contents in connection with a retail

sale of the contents or when resold for refilling;

As used in this section the term "returnable containers" means containers of a kind

customarily returned by the buyer of the contents for reuse. All other containers are

"nonreturnable containers";

(3) Gross receipts from occasional sales of tangible personal property or digital

property and the storage, use, or other consumption in this state of tangible personal

property or digital property, the transfer of which to the purchaser is an occasional

sale;

(4) Gross receipts from sales of tangible personal property to a common carrier,

shipped by the retailer via the purchasing carrier under a bill of lading, whether the

freight is paid in advance or the shipment is made freight charges collect, to a point

outside this state and the property is actually transported to the out-of-state

destination for use by the carrier in the conduct of its business as a common carrier;

(5) Gross receipts from sales of tangible personal property sold through coin-operated

bulk vending machines, if the sale amounts to fifty cents ($0.50) or less, if the

retailer is primarily engaged in making the sales and maintains records satisfactory

to the department. As used in this subsection, "bulk vending machine" means a

vending machine containing unsorted merchandise which, upon insertion of a coin,

dispenses the same in approximately equal portions, at random and without

selection by the customer;

(6) Gross receipts from sales to any cabinet, department, bureau, commission, board, or

other statutory or constitutional agency of the state and gross receipts from sales to

counties, cities, or special districts as defined in KRS 65.005. This exemption shall

apply only to purchases of tangible personal property, digital property, or services

for use solely in the government function. A purchaser not qualifying as a

governmental agency or unit shall not be entitled to the exemption even though the

purchaser may be the recipient of public funds or grants;

(7) (a) Gross receipts from the sale of sewer services, water, and fuel to Kentucky

residents for use in heating, water heating, cooking, lighting, and other

residential uses if the sewer services, water, and fuel are purchased and

declared by the resident as used in his or her place of domicile.

(b) As used in this subsection:

1. "Fuel" shall include but not be limited to natural gas, electricity, fuel oil,

bottled gas, coal, coke, and wood; and

2. "Place of domicile" means the place where an individual has his or her

legal, true, fixed, and permanent home and principal establishment, and

to which, whenever the individual is absent, the individual has the

intention of returning.

(c) Determinations of eligibility for the exemption shall be made by the

department.

(d) The exemption shall apply to charges for sewer service, water, and fuel billed

to an owner or operator of a multi-unit residential rental facility or mobile

home and recreational vehicle park if the owner or operator declares that the

sewer services, water, and fuel are purchased for Kentucky residents to be

used in the resident's place of domicile.

(e) The exemption shall apply also to residential property which may be held by

legal or equitable title, by the entireties, jointly, in common, as a

condominium, or indirectly by the stock ownership or membership

representing the owner's or member's proprietary interest in a corporation

owning a fee or a leasehold initially in excess of ninety-eight (98) years if the

sewer services, water, and fuel are purchased for and declared by the

Kentucky resident as used in his or her place of domicile;

(8) Gross receipts from sales to an out-of-state agency, organization, or institution

exempt from sales and use tax in its state of residence when that agency,

organization, or institution gives proof of its tax-exempt status to the retailer and the

retailer maintains a file of the proof;

(9) (a) Gross receipts derived from the sale of tangible personal property, as provided

in paragraph (b) of this subsection, to a manufacturer or industrial processor if

the property is to be directly used in the manufacturing or industrial

processing process of:

1. Tangible personal property at a plant facility;

2. Distilled spirits or wine at a plant facility or on the premises of a

distiller, rectifier, winery, or small farm winery licensed under KRS

243.030 that includes a retail establishment on the premises; or

3. Malt beverages at a plant facility or on the premises of a brewer or

microbrewery licensed under KRS 243.040 that includes a retail

establishment;

and which will be for sale.

(b) The following tangible personal property shall qualify for exemption under

this subsection:

1. Materials which enter into and become an ingredient or component part

of the manufactured product;

2. Other tangible personal property which is directly used in the

manufacturing or industrial processing process, if the property has a

useful life of less than one (1) year. Specifically, these items are

categorized as follows:

a. Materials. This refers to the raw materials which become an

ingredient or component part of supplies or industrial tools exempt

under subdivisions b. and c. below;

b. Supplies. This category includes supplies such as lubricating and

compounding oils, grease, machine waste, abrasives, chemicals,

solvents, fluxes, anodes, filtering materials, fire brick, catalysts,

dyes, refrigerants, and explosives. The supplies indicated above

need not come in direct contact with a manufactured product to be

exempt. "Supplies" does not include repair, replacement, or spare

parts of any kind; and

c. Industrial tools. This group is limited to hand tools such as jigs,

dies, drills, cutters, rolls, reamers, chucks, saws, and spray guns

and to tools attached to a machine such as molds, grinding balls,

grinding wheels, dies, bits, and cutting blades. Normally, for

industrial tools to be considered directly used in the manufacturing

or industrial processing process, they shall come into direct

contact with the product being manufactured or processed; and

3. Materials and supplies that are not reusable in the same manufacturing

or industrial processing process at the completion of a single

manufacturing or processing cycle. A single manufacturing cycle shall

be considered to be the period elapsing from the time the raw materials

enter into the manufacturing process until the finished product emerges

at the end of the manufacturing process.

(c) The property described in paragraph (b) of this subsection shall be regarded as

having been purchased for resale.

(d) For purposes of this subsection, a manufacturer or industrial processor

includes an individual or business entity that performs only part of the

manufacturing or industrial processing activity, and the person or business

entity need not take title to tangible personal property that is incorporated

into, or becomes the product of, the activity.

(e) The exemption provided in this subsection does not include repair,

replacement, or spare parts;

(10) Any water use fee paid or passed through to the Kentucky River Authority by

facilities using water from the Kentucky River basin to the Kentucky River

Authority in accordance with KRS 151.700 to 151.730 and administrative

regulations promulgated by the authority;

(11) Gross receipts from the sale of newspaper inserts or catalogs purchased for storage,

use, or other consumption outside this state and delivered by the retailer's own

vehicle to a location outside this state, or delivered to the United States Postal

Service, a common carrier, or a contract carrier for delivery outside this state,

regardless of whether the carrier is selected by the purchaser or retailer or an agent

or representative of the purchaser or retailer, or whether the F.O.B. is retailer's

shipping point or purchaser's destination.

(a) As used in this subsection:

1. "Catalogs" means tangible personal property that is printed to the special

order of the purchaser and composed substantially of information

regarding goods and services offered for sale; and

2. "Newspaper inserts" means printed materials that are placed in or

distributed with a newspaper of general circulation.

(b) The retailer shall be responsible for establishing that delivery was made to a

non-Kentucky location through shipping documents or other credible

evidence as determined by the department;

(12) Gross receipts from the sale of water used in the raising of equine as a business;

(13) Gross receipts from the sale of metal retail fixtures manufactured in this state and

purchased for storage, use, or other consumption outside this state and delivered by

the retailer's own vehicle to a location outside this state, or delivered to the United

States Postal Service, a common carrier, or a contract carrier for delivery outside

this state, regardless of whether the carrier is selected by the purchaser or retailer or

an agent or representative of the purchaser or retailer, or whether the F.O.B. is the

retailer's shipping point or the purchaser's destination.

(a) As used in this subsection, "metal retail fixtures" means check stands and

belted and nonbelted checkout counters, whether made in bulk or pursuant to

specific purchaser specifications, that are to be used directly by the purchaser

or to be distributed by the purchaser.

(b) The retailer shall be responsible for establishing that delivery was made to a

non-Kentucky location through shipping documents or other credible

evidence as determined by the department;

(14) Gross receipts from the sale of unenriched or enriched uranium purchased for

ultimate storage, use, or other consumption outside this state and delivered to a

common carrier in this state for delivery outside this state, regardless of whether the

carrier is selected by the purchaser or retailer, or is an agent or representative of the

purchaser or retailer, or whether the F.O.B. is the retailer's shipping point or

purchaser's destination;

(15) Amounts received from a tobacco buydown. As used in this subsection, "buydown"

means an agreement whereby an amount, whether paid in money, credit, or

otherwise, is received by a retailer from a manufacturer or wholesaler based upon

the quantity and unit price of tobacco products sold at retail that requires the retailer

to reduce the selling price of the product to the purchaser without the use of a

manufacturer's or wholesaler's coupon or redemption certificate;

(16) Gross receipts from the sale of tangible personal property or digital property

returned by a purchaser when the full sales price is refunded either in cash or credit.

This exclusion shall not apply if the purchaser, in order to obtain the refund, is

required to purchase other tangible personal property or digital property at a price

greater than the amount charged for the property that is returned;

(17) Gross receipts from the sales of gasoline and special fuels subject to tax under KRS

Chapter 138;

(18) The amount of any tax imposed by the United States upon or with respect to retail

sales, whether imposed on the retailer or the consumer, not including any

manufacturer's excise or import duty;

(19) Gross receipts from the sale of any motor vehicle as defined in KRS 138.450 which

is:

(a) Sold to a Kentucky resident, registered for use on the public highways, and

upon which any applicable tax levied by KRS 138.460 has been paid; or

(b) Sold to a nonresident of Kentucky if the nonresident registers the motor

vehicle in a state that:

1. Allows residents of Kentucky to purchase motor vehicles without

payment of that state's sales tax at the time of sale; or

2. Allows residents of Kentucky to remove the vehicle from that state

within a specific period for subsequent registration and use in Kentucky

without payment of that state's sales tax;

(20) Gross receipts from the sale of a semi-trailer as defined in KRS 189.010(12) and

trailer as defined in KRS 189.010(17);

(21) Gross receipts from the collection of:

(a) Any fee or charge levied by a local government pursuant to KRS 65.760;

(b) The charge imposed by KRS 65.7629(3);

(c) The fee imposed by KRS 65.7634; and

(d) The service charge imposed by KRS 65.7636;

(22) Gross receipts derived from charges for labor or services to apply, install, repair, or

maintain tangible personal property directly used in manufacturing or industrial

processing process of:

(a) Tangible personal property at a plant facility;

(b) Distilled spirits or wine at a plant facility or on the premises of a distiller,

rectifier, winery, or small farm winery licensed under KRS 243.030; or

(c) Malt beverages at a plant facility or on the premises of a brewer or

microbrewery licensed under KRS 243.040;

that is not otherwise exempt under subsection (9) of this section or KRS

139.480(10), if the charges for labor or services are separately stated on the invoice,

bill of sale, or similar document given to purchaser;

(23) (a) For persons selling services included in KRS 139.200(2)(g) to (ax) prior to

January 1, 2025, gross receipts derived from the sale of those services if the

gross receipts were less than twelve thousand dollars ($12,000) during

calendar year 2024. When gross receipts from these services exceed twelve

thousand dollars ($12,000) in a calendar year:

1. All gross receipts over twelve thousand dollars ($12,000) are taxable in

that calendar year; and

2. All gross receipts are subject to tax in subsequent calendar years.

(b) The exemption provided in this subsection shall not apply to a person also

engaged in the business of selling tangible personal property, digital property,

or services included in KRS 139.200(2)(a) to (f); and

(24) (a) For persons that first begin making sales of services included in KRS

139.200(2)(g) to (ax) on or after January 1, 2025, gross receipts derived from

the sale of those services if the gross receipts are less than twelve thousand

dollars ($12,000) within the first calendar year of operation. When gross

receipts from these services exceed twelve thousand dollars ($12,000) in a

calendar year:

1. All gross receipts over twelve thousand dollars ($12,000) are taxable in

that calendar year; and

2. All gross receipts are subject to tax in subsequent calendar years.

(b) The exemption provided in this subsection shall not apply to a person that is

also engaged in the business of selling tangible personal property, digital

property, or services included in KRS 139.200(2)(a) to (f).