Taxation of Services in Kentucky to Expand

Date October 7, 2022
Categories

I played a lot of golf with a former colleague and the matches were quite competitive. Looking for an edge, I took lessons from a well-known local professional. These lessons allowed me to prevail more often than not in our friendly contests. Fortunately for me, the golf lessons always took place in Pennsylvania, a state that taxes relatively few services. Golfers in Kentucky will not be as lucky come January 1, 2023 when the state expands its taxation of services.

As previously reported here – Kentucky is expanding its sales tax base to include many more services in 2023. One of the most significant changes is the pending taxation of instructional, camp and training services. Training services including golf lessons, swimming lessons, yoga lessons, fitness classes and other instructor-led recreational classes and will be subject to Kentucky sales tax. Notably, camps where recreational activities represent more than 10% of planned activities will also be subject to tax even when operated by a nonprofit organization. The changes will increase the cost of these services to consumers, but more significantly, result in tax compliance responsibilities for the providers of these services. Service providers should review their obligations and register for sales tax with the Kentucky Department of Revenue (“Department”), if required.

The tax changes scheduled for 2023 are not limited to instruction and recreational activities. The Department’s recent publication here – addresses several types of transactions that will be taxable in the new year. The publication provides guidance and examples of services that may be taxable come January 1, 2023. Additional taxable services include photography, interior decorating and design, and certain repair, maintenance, and warranty services. The Department’s publication also discusses the pending taxation on the rental of space for meetings, weddings, etc. Rental charges related to hotel conference rooms, convention centers, picnic shelters and recreational spaces will be taxable in the new year.

Kentucky vendors and service providers should continue to monitor the Department of Revenue website for guidance on services subject to tax on January 1, 2023. If you have questions on Kentucky’s sales tax changes or other SALT matters, please contact the HBK SALT Advisory Group at hbksalt@hbkcpa.com.

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Kentucky Tax Changes

Date April 20, 2022
Categories

Kentucky’s legislature overrode Gov. Andy Beshear’s veto to enact several tax changes. The most significant change is the expansion of sales and use tax to many more services. The state legislature also created a tax amnesty program commencing in the Fall 2022.

The broadening of the state’s sales and use tax base to services, not previously subject to tax, is noteworthy as it will impact many taxpayers operating in Kentucky. The state has gradually increased the number of services it taxes since 2018 when only a handful of services were subject to tax. The state added several services in 2018 to its list of taxable services, but this current round of additions is the most substantial yet. A partial list of the newly taxable services in Kentucky includes photography, marketing, executive recruitment, web site hosting and design, security system monitoring, rental of space for meetings, entertainment, weddings, etc., household moving, and prewritten computer software access (SaaS). The complete listing of services subject to sales tax in Kentucky may be viewed here.

Kentucky will offer a tax amnesty program this year from October 1st through November 29th. The tax amnesty program applies to qualified tax liabilities established between October 1, 2011, and before December 1, 2021. The program applies to taxes, fees, interest, and penalties. Participating taxpayers will have penalty waived and will be responsible for one-half the interest normally due. The tax amnesty program applies to all taxes administered by the Department but does not include ad valorem taxes on real or personal property. The Kentucky Department of Revenue will be releasing more information on its tax amnesty program in the future. Please check the Department’s website or the HBK SALT page for updates.

If you have questions on Kentucky’s tax changes or other SALT matters, please contact HBK’s SALT Advisory Group at hbksalt@hbkcpa.com.

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