KRS § 139.480 — KY Code / Title XI / Chapter 139 / Section 139.480
139.480 Property exempt. (See LRC Note below)
Status: in_force

139.480 Property exempt. (See LRC Note below)

Any other provision of this chapter to the contrary notwithstanding, the terms "sale at

retail," "retail sale," "use," "storage," and "consumption," as used in this chapter, shall not

include the sale, use, storage, or other consumption of:

(1) Locomotives or rolling stock, including materials for the construction, repair, or

modification thereof, or fuel or supplies for the direct operation of locomotives and

trains, used or to be used in interstate commerce;

(2) Coal for the manufacture of electricity;

(3) (a) All energy or energy-producing fuels used in the course of manufacturing,

processing, mining, or refining and any related distribution, transmission, and

transportation services for this energy that are billed to the user, to the extent

that the cost of the energy or energy-producing fuels used, and related

distribution, transmission, and transportation services for this energy that are

billed to the user exceed three percent (3%) of the cost of production.

(b) Cost of production shall be computed on the basis of a plant facility, which

shall include all operations within the continuous, unbroken, integrated

manufacturing or industrial processing process that ends with a product

packaged and ready for sale.

(c) A person who performs a manufacturing or industrial processing activity for a

fee and does not take ownership of the tangible personal property that is

incorporated into, or becomes the product of, the manufacturing or industrial

processing activity is a toller. For periods on or after July 1, 2018, the costs of

the tangible personal property shall be excluded from the toller's cost of

production at a plant facility with tolling operations in place as of July 1,

2018.

(d) For plant facilities that begin tolling operations after July 1, 2018, the costs of

tangible personal property shall be excluded from the toller's cost of

production if the toller:

1. Maintains a binding contract for periods after July 1, 2018, that governs

the terms, conditions, and responsibilities with a separate legal entity,

which holds title to the tangible personal property that is incorporated

into, or becomes the product of, the manufacturing or industrial

processing activity;

2. Maintains accounting records that show the expenses it incurs to fulfill

the binding contract that include but are not limited to energy or energy-

producing fuels, materials, labor, procurement, depreciation,

maintenance, taxes, administration, and office expenses;

3. Maintains separate payroll, bank accounts, tax returns, and other records

that demonstrate its independent operations in the performance of its

tolling responsibilities;

4. Demonstrates one (1) or more substantial business purposes for the

tolling operations germane to the overall manufacturing, industrial

processing activities, or corporate structure at the plant facility. A

business purpose is a purpose other than the reduction of sales tax

liability for the purchases of energy and energy-producing fuels; and

5. Provides information to the department upon request that documents

fulfillment of the requirements in subparagraphs 1. to 4. of this

paragraph and gives an overview of its tolling operations with an

explanation of how the tolling operations relate and connect with all

other manufacturing or industrial processing activities occurring at the

plant facility;

(4) Livestock of a kind the products of which ordinarily constitute food for human

consumption, provided the sales are made for breeding or dairy purposes and by or

to a person regularly engaged in the business of farming;

(5) Poultry for use in breeding or egg production;

(6) Farm work stock for use in farming operations;

(7) Seeds, the products of which ordinarily constitute food for human consumption or

are to be sold in the regular course of business, and commercial fertilizer to be

applied on land, the products from which are to be used for food for human

consumption or are to be sold in the regular course of business; provided the sales

are made to farmers who are regularly engaged in the occupation of tilling and

cultivating the soil for the production of crops as a business, or who are regularly

engaged in the occupation of raising and feeding livestock or poultry or producing

milk for sale; and provided further that tangible personal property so sold is to be

used only by those persons designated above who are so purchasing;

(8) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals to be

used in the production of crops as a business, or in the raising and feeding of

livestock or poultry, the products of which ordinarily constitute food for human

consumption;

(9) Feed, including pre-mixes and feed additives, for livestock or poultry of a kind the

products of which ordinarily constitute food for human consumption;

(10) Machinery for new and expanded industry;

(11) Farm machinery. As used in this section, the term "farm machinery":

(a) Means machinery used exclusively and directly in the occupation of:

1. Tilling the soil for the production of crops as a business;

2. Raising and feeding livestock or poultry for sale; or

3. Producing milk for sale;

(b) Includes machinery, attachments, and replacements therefor, repair parts, and

replacement parts which are used or manufactured for use on, or in the

operation of farm machinery and which are necessary to the operation of the

machinery, and are customarily so used, including but not limited to combine

header wagons, combine header trailers, or any other implements specifically

designed and used to move or transport a combine head; and

(c) Does not include:

1. Automobiles;

2. Trucks;

3. Trailers, except combine header trailers; or

4. Truck-trailer combinations;

(12) Tombstones and other memorial grave markers;

(13) On-farm facilities used exclusively for grain or soybean storing, drying, processing,

or handling. The exemption applies to the equipment, machinery, attachments,

repair and replacement parts, and any materials incorporated into the construction,

renovation, or repair of the facilities;

(14) On-farm facilities used exclusively for raising poultry or livestock. The exemption

shall apply to the equipment, machinery, attachments, repair and replacement parts,

and any materials incorporated into the construction, renovation, or repair of the

facilities. The exemption shall apply but not be limited to vent board equipment,

waterer and feeding systems, brooding systems, ventilation systems, alarm systems,

and curtain systems. In addition, the exemption shall apply whether or not the seller

is under contract to deliver, assemble, and incorporate into real estate the

equipment, machinery, attachments, repair and replacement parts, and any materials

incorporated into the construction, renovation, or repair of the facilities;

(15) Gasoline, special fuels, liquefied petroleum gas, and natural gas used exclusively

and directly to:

(a) Operate farm machinery as defined in subsection (11) of this section;

(b) Operate on-farm grain or soybean drying facilities as defined in subsection

(13) of this section;

(c) Operate on-farm poultry or livestock facilities defined in subsection (14) of

this section;

(d) Operate on-farm ratite facilities defined in subsection (23) of this section;

(e) Operate on-farm llama or alpaca facilities as defined in subsection (25) of this

section; or

(f) Operate on-farm dairy facilities;

(16) Textbooks, including related workbooks and other course materials, purchased for

use in a course of study conducted by an institution which qualifies as a nonprofit

educational institution under KRS 139.495. The term "course materials" means only

those items specifically required of all students for a particular course but shall not

include notebooks, paper, pencils, calculators, tape recorders, or similar student

aids;

(17) Any property which has been certified as an alcohol production facility as defined

in KRS 247.910;

(18) Aircraft, repair and replacement parts therefor, and supplies, except fuel, for the

direct operation of aircraft in interstate commerce and used exclusively for the

conveyance of property or passengers for hire. Nominal intrastate use shall not

subject the property to the taxes imposed by this chapter;

(19) Any property which has been certified as a fluidized bed energy production facility

as defined in KRS 211.390;

(20) (a) 1. Any property to be incorporated into the construction, rebuilding,

modification, or expansion of a blast furnace or any of its components or

appurtenant equipment or structures as part of an approved supplemental

project, as defined by KRS 154.26-010; and

2. Materials, supplies, and repair or replacement parts purchased for use in

the operation and maintenance of a blast furnace and related carbon

steel-making operations as part of an approved supplemental project, as

defined by KRS 154.26-010.

(b) The exemptions provided in this subsection shall be effective for sales made:

1. On and after July 1, 2018; and

2. During the term of a supplemental project agreement entered into

pursuant to KRS 154.26-090;

(21) Beginning on October 1, 1986, food or food products purchased for human

consumption with food coupons issued by the United States Department of

Agriculture pursuant to the Food Stamp Act of 1977, as amended, and required to

be exempted by the Food Security Act of 1985 in order for the Commonwealth to

continue participation in the federal food stamp program;

(22) Machinery or equipment purchased or leased by a business, industry, or

organization in order to collect, source separate, compress, bale, shred, or otherwise

handle waste materials if the machinery or equipment is primarily used for

recycling purposes;

(23) Ratite birds and eggs to be used in an agricultural pursuit for the breeding and

production of ratite birds, feathers, hides, breeding stock, eggs, meat, and ratite by-

products, and the following items used in this agricultural pursuit:

(a) Feed and feed additives;

(b) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals;

and

(c) On-farm facilities, including equipment, machinery, attachments, repair and

replacement parts, and any materials incorporated into the construction,

renovation, or repair of the facilities. The exemption shall apply to incubation

systems, egg processing equipment, waterer and feeding systems, brooding

systems, ventilation systems, alarm systems, and curtain systems. In addition,

the exemption shall apply whether or not the seller is under contract to

deliver, assemble, and incorporate into real estate the equipment, machinery,

attachments, repair and replacement parts, and any materials incorporated into

the construction, renovation, or repair of the facilities;

(24) Embryos and semen that are used in the reproduction of livestock, if the products of

these embryos and semen ordinarily constitute food for human consumption, and if

the sale is made to a person engaged in the business of farming;

(25) Llamas and alpacas to be used as beasts of burden or in an agricultural pursuit for

the breeding and production of hides, breeding stock, fiber and wool products,

meat, and llama and alpaca by-products, and the following items used in this

pursuit:

(a) Feed and feed additives;

(b) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals;

and

(c) On-farm facilities, including equipment, machinery, attachments, repair and

replacement parts, and any materials incorporated into the construction,

renovation, or repair of the facilities. The exemption shall apply to waterer

and feeding systems, ventilation systems, and alarm systems. In addition, the

exemption shall apply whether or not the seller is under contract to deliver,

assemble, and incorporate into real estate the equipment, machinery,

attachments, repair and replacement parts, and any materials incorporated into

the construction, renovation, or repair of the facilities;

(26) Baling twine and baling wire for the baling of hay and straw;

(27) Water sold to a person regularly engaged in the business of farming and used in the:

(a) Production of crops;

(b) Production of milk for sale; or

(c) Raising and feeding of:

1. Livestock or poultry, the products of which ordinarily constitute food

for human consumption; or

2. Ratites, llamas, alpacas, buffalo, cervids or aquatic organisms;

(28) Buffalos to be used as beasts of burden or in an agricultural pursuit for the

production of hides, breeding stock, meat, and buffalo by-products, and the

following items used in this pursuit:

(a) Feed and feed additives;

(b) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals;

and

(c) On-farm facilities, including equipment, machinery, attachments, repair and

replacement parts, and any materials incorporated into the construction,

renovation, or repair of the facilities. The exemption shall apply to waterer

and feeding systems, ventilation systems, and alarm systems. In addition, the

exemption shall apply whether or not the seller is under contract to deliver,

assemble, and incorporate into real estate the equipment, machinery,

attachments, repair and replacement parts, and any materials incorporated into

the construction, renovation, or repair of the facilities;

(29) Aquatic organisms sold directly to or raised by a person regularly engaged in the

business of producing products of aquaculture, as defined in KRS 260.960, for sale,

and the following items used in this pursuit:

(a) Feed and feed additives;

(b) Water;

(c) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals;

and

(d) On-farm facilities, including equipment, machinery, attachments, repair and

replacement parts, and any materials incorporated into the construction,

renovation, or repair of the facilities and, any gasoline, special fuels, liquefied

petroleum gas, or natural gas used to operate the facilities. The exemption

shall apply, but not be limited to: waterer and feeding systems; ventilation,

aeration, and heating systems; processing and storage systems; production

systems such as ponds, tanks, and raceways; harvest and transport equipment

and systems; and alarm systems. In addition, the exemption shall apply

whether or not the seller is under contract to deliver, assemble, and

incorporate into real estate the equipment, machinery, attachments, repair and

replacement parts, and any materials incorporated into the construction,

renovation, or repair of the facilities;

(30) Members of the genus cervidae permitted by KRS Chapter 150 that are used for the

production of hides, breeding stock, meat, and cervid by-products, and the

following items used in this pursuit:

(a) Feed and feed additives;

(b) Insecticides, fungicides, herbicides, rodenticides, and other chemicals; and

(c) On-site facilities, including equipment, machinery, attachments, repair and

replacement parts, and any materials incorporated into the construction,

renovation, or repair of the facilities. In addition, the exemption shall apply

whether or not the seller is under contract to deliver, assemble, and

incorporate into real estate the equipment, machinery, attachments, repair and

replacement parts, and any materials incorporated into the construction,

renovation, or repair of the facilities;

(31) (a) Repair or replacement parts for the direct operation or maintenance of a motor

vehicle, including any towed unit, used exclusively in interstate commerce for

the conveyance of property or passengers for hire, provided the motor vehicle

is licensed for use on the highway and its declared gross vehicle weight with

any towed unit is forty-four thousand and one (44,001) pounds or greater.

Nominal intrastate use shall not subject the property to the taxes imposed by

this chapter; and

(b) Repair or replacement parts for the direct operation and maintenance of a

motor vehicle operating under a charter bus certificate issued by the

Transportation Cabinet under KRS Chapter 281, or under similar authority

granted by the United States Department of Transportation.

(c) For the purposes of this subsection, "repair or replacement parts" means tires,

brakes, engines, transmissions, drive trains, chassis, body parts, and their

components. "Repair or replacement parts" shall not include fuel, machine

oils, hydraulic fluid, brake fluid, grease, supplies, or accessories not essential

to the operation of the motor vehicle itself, except when sold as part of the

assembled unit, such as cigarette lighters, radios, lighting fixtures not

otherwise required by the manufacturer for operation of the vehicle, or tool or

utility boxes;

(32) Food donated by a retail food establishment or any other entity regulated under

KRS 217.127 to a nonprofit organization for distribution to the needy;

(33) Drugs and over-the-counter drugs, as defined in KRS 139.472, that are purchased

by a person regularly engaged in the business of farming and used in the treatment

of cattle, sheep, goats, swine, poultry, ratite birds, llamas, alpacas, buffalo, aquatic

organisms, or cervids;

(34) (a) Building materials, fixtures, or supplies purchased by a construction

contractor if:

1. Fulfilled by a construction contract for a sewer or water project with:

a. A municipally owned water utility organized under KRS Chapter

96;

b. A water district or water commission formed or organized under

KRS Chapter 74;

c. A sanitation district established under KRS Chapter 220 or formed

pursuant to KRS Chapter 65;

d. A nonprofit corporation created under KRS 58.180 to act on behalf

of a governmental agency in the acquisition and financing of

public projects;

e. Regional wastewater commissions formed under KRS Chapter

278;

f. A municipally owned joint sewer agency formed under KRS

Chapter 76; or

g. Any other governmental agency; and

2. The building materials, fixtures, or supplies:

a. Will be permanently incorporated into a structure or improvement

to real property, or will be completely consumed, in fulfilling a

construction contract for the purpose of furnishing water or sewer

services to the general public; and

b. Would be exempt if purchased directly by the entities listed in

subparagraph 1. of this paragraph.

(b) As used in this subsection, "construction contract" means a:

1. Lump sum contract;

2. Cost plus contract;

3. Materials only contract;

4. Labor and materials contract; or

5. Any other type of contract.

(c) The exemption provided in this subsection shall apply without regard to the

payment arrangement between the construction contractor, the retailer, and

the entities listed in paragraph (a)1. of this subsection or to the place of

delivery for the building materials, fixtures, or supplies;

(35) (a) On or after February 25, 2022, the rental of space for meetings, conventions,

short-term business uses, entertainment events, weddings, banquets, parties,

and other short-term social events, as referenced in KRS 139.200, if the tax

established in KRS 139.200 is paid by the primary lessee to the lessor.

(b) For the purpose of this subsection, "primary lessee" means the person who

leases the space and who has a contract with the lessor of the space only if:

1. The contract between the lessor and the lessee specifies that the lessee

may sublease, subrent, or otherwise sell the space; and

2. The space is then sublet, subrented, or otherwise sold to exhibitors,

vendors, sponsors, or other entities and persons who will use the space

associated with the event to be conducted under the primary lease;

(36) Prewritten computer software access services sold to or purchased by a retailer that

develops prewritten computer software for print technology and uses and sells

prewritten computer software access services for print technology;

(37) (a) Currency or bullion.

(b) As used in this subsection:

1. "Bullion":

a. Means bars, ingots, or coins, which are:

i. Made of gold, silver, platinum, palladium, or a combination

of these metals;

ii. Valued based on the content of the metal and not its form;

and

iii. Used, or have been used, as a medium of exchange, security,

or commodity by any state, the United States government, or

a foreign nation; and

b. Does not include medallions or coins that are incorporated into a

pendant or other jewelry; and

2. "Currency":

a. Means a coin or currency made of gold, silver, platinum,

palladium, or other metal or paper money that is or has been used

as legal tender and is sold based on its value as a collectible item

rather than the value as a medium of exchange; and

b. Does not include a coin or currency that has been incorporated into

jewelry; and

(38) Medicinal cannabis as defined in KRS 218B.010 when sold, used, stored, or

consumed in accordance with KRS Chapter 218B.