Kentucky
Sales Tax Facts
SEPTEMBER 2022
This edition covers several of the services included in House Bill (HB) 8 that
become taxable as of January 1, 2023, in more detail than the summary
coverage in the June 2022 edition. The taxation of these additional services
creates signicant changes to guidance previously given to businesses on
how to handle both the sales and purchases of these services. Below are
some highlights for these new tax treatments.
In addition, please consult TaxAnswers .ky.gov for periodic postings of FAQs
developed in response to various questions the department has received
regarding HB 8 implementation.
2022 Sales and Use Tax Legislation HB 8
Changes to Selected Industries
Photography and photo nishing services
Kentucky Regulation 103 KAR 27:120, Photographers, Photo Finishers and
X-Ray Labs, interprets the sales and use tax law as it applies for periods
prior to January 1, 2023. Photographers are treated as primarily engaged in
the service of taking, developing, and printing original photographs and are
consumers of tangible personal property used to perform this professional
service. Additional prints sold by the photographer are taxable and materials
which become an ingredient or component part of these additional prints are
exempt for resale when purchased by the photographer.
Inside This Issue...
House Bill 8—Changes to Selected
Industries
Photography & photo nishing
services ......................................... 1-2
Rental of space for meetings,
conventions, etc. .............................. 2
Certain instructional, camp,
and training services ..................... 2-3
Interior decorating & design
services ............................................ 3
Labor to repair or alter apparel,
footwear, watches, etc. ..................... 4
Labor & services to repair or
maintain commercial
refrigeration equipment .................... 4
Extended warranty services .................. 5
Photography and photo nishing services, continued
However, currently nontaxable charges listed below become taxable at the beginning
of the new year:
Charges for sitting fees.
Charges for developing and printing original photographs.
Charges for developing negatives.
Charges for tinting or coloring pictures provided by the customer.
Eective for periods on or after January 1, 2023, KRS 139.010(30) denes
“photography and photonishing services” to mean
“(a) The taking, developing, or printing of an original photograph, or
image editing including shadow removal, tone adjustments, vertical
and horizontal alignment and cropping, composite image creation,
formatting, watermarking printing, and delivery of an original
photograph in the form of tangible personal property, digital property,
or other media.
(b) ‘Photography and photonishing services’ does
not include
photography services necessary for medical or dental health.”
In summary, photographers will become pure retailers and all charges by a
photographer as dened in the statute above will become subject to sales and use
tax. Examples of newly taxable photography services include wedding pictures,
family portraits, athletic pictures, etc. However, videography charges are not included
in the legislation as taxable photography services.
Rental of space for meetings, conventions, short-term business uses,
entertainment events, weddings, banquets, parties, and other short-term
social events
When the meaning of taxable admissions expanded in July 2018, the Department
received inquiries from dierent businesses about whether general facility rentals
were taxable. The answer then was no. However, starting on January 1, 2023, several
of these types of charges become taxable. Below are just a few examples of the types
of rental charges that will be subject to sales and use tax next year:
Hotel conference and ballrooms
Convention center space and related charges
Picnic shelters and other recreational spaces
Dining areas reserved for private parties
Certain Instructional, Camp, and Training Services
Many items excluded from the general admissions category in 2018 become taxable
services enumerated in KRS 139.200 when sold on or after January 1, 2023. The
Department previously issued guidance indicating that these charges were not
subject to sales tax because they were educational in nature. The primary
categories and examples of these instructional, camp and training services are
listed below:
Examples of newly taxable
photography services
include wedding pictures,
family portraits, athletic
pictures, etc.
2
Leisure, recreational, and athletic instructional services
Examples of services in this category include charges for youth to participate
in Little League, golf or tennis lessons. Other examples include individualized training
to increase skills in various recreational and sports disciplines.
Recreational camp tuition and fees
As the language implies, this category includes charges for camp enrollment
that include recreational activities. All types of camp tuition and related charges will
not become taxable. However, camps of all types, whether non-prot or for-prot, that
include recreation as more than 10% of planned activities for participants will become
taxable as of January 1, 2023.
Personal tness training services
Again, these types of services were excluded from the expanded admissions
that became taxable in 2018. However, instructor-led recreational classes or one-
on-one instruction for swimming lessons, tness classes, personal trainer exercise
instruction, yoga lessons, riding lessons, golf lessons, baseball hitting lessons, etc.
will be part of the expanded sales and use tax base.
There is a specic exemption for sales of admissions by nonprot organizations
under the provisions of KRS 139.495 and KRS 139.498, eective March 26, 2019.
However, the sale of personal fitness training services or leisure, recreational, and
athletic instructional services by these non-profit groups are taxable beginning on
January 1, 2023.
Interior decorating and design services
Prior to January 1, 2023:
Interior decorators and designers have traditionally operated as contractors under
Kentucky law (Kentucky Regulation 103 KAR 26:070). They have paid sales and use
tax on all the tangible personal property they install as improvements to real property
such as drapes, blinds, wallpaper, etc. They also did not collect sales and use tax on
their service charges to their customers.
On and after January 1, 2023:
Interior decorators and designers will charge sales and use tax to their customers
for their services. Because these services are subject to tax, the interior decorator
or designer may issue a resale certicate for the purchase of the tangible personal
property that transfers to the customer. Examples of these items include drapes,
blinds, wallpaper, etc. purchased and installed in fulllment of the interior decorating
and design services provided. Please note that if the interior decorating and design
provider performs a turn-key project and bills for all project charges, then all the
charges for services performed are subject to the 6% Kentucky sales and use tax.
For example, all the improvements to real property performed by or on behalf of the
decorator and designer and billed to the customer are considered the retail sale of
interior decoration and design services.
3
Labor to repair or alter apparel, footwear, watches, or jewelry when no tangible personal
property is sold in that transaction
Prior to January 1, 2023:
In general, repair labor charges where the material used for repairs is less than 10% of the total charges
are not treated as retail transactions. See Kentucky Regulation 103 KAR 27:150 for more information.
On and after January 1, 2023:
Transactions including only service charges to repair or alter apparel, footwear, watches, or jewelry
are subject to sales and use tax. In addition, repair charges for apparel, footwear, watches, or jewelry
where the material used for repairs is less than 10% of the total charges are also taxable because these
transactions no longer qualify as a bundled transaction under the provisions of KRS 139.215. Both the
materials used for repair or alteration and the labor charges are taxable so there is not a combination of
taxable and nontaxable products in the transaction.
Labor and services to repair or maintain commercial refrigeration equipment and systems
when no tangible personal property is sold in that transaction including service calls and trip
charges.
“Services performed on commercial refrigeration equipment and systems” is another category of services
becoming taxable as of January 1, 2023. Regardless of whether the commercial refrigeration equipment
and systems are free standing or xtures to real property, any charges to repair or perform maintenance
on the units become subject to sales and use tax. Below are examples of charges that become taxable.
If the service provider installs parts (even if the parts represent less than 10% of the total charge)
while performing the repair or maintenance, both the material and labor charges are taxable. See
section on apparel, footwear, watches, or jewelry for why the bundling rule in KRS 139.215 does not
apply to this new category of taxable services.
If the provider only performs labor to complete the repair or maintenance, then the labor only charges
are still taxable.
If the only charge is for the service call itself, then the service call charge for commercial refrigeration
equipment and systems is still taxable.
This treatment of newly taxable services applies to repair and maintenance of commercial refrigeration
equipment, but it does not apply to the sale and installation of new commercial refrigeration equipment.
If the transaction is for an original installation, then the new provisions of HB 8 regarding commercial
refrigeration do not apply. Instead, tax treatment will depend upon whether the equipment and system
are xtures to real property or remain free standing tangible personal property after installation. See
Kentucky Regulation 103 KAR 26:070 for longstanding guidance on treatment of xtures to real property.
4
Extended warranty services
Prior to January 1, 2023:
The denition of “Extended warranty services” applies only if:
1. The service contract agreement is sold or purchased on or after July 1, 2018; and
2. The tangible personal property or digital property for which the service contract agreement is provided is subject to tax
under this chapter or under KRS 138.460.
Based on this language, if the tangible personal property or digital property sold is exempt from Kentucky sales tax then the
exemption extends to the extended warranty.
On or after January 1, 2023:
The denition for taxable “extended warranty services” found in KRS 139.010 includes extended warranty services covering
real property (in addition to the previously taxable extended warranty services covering tangible personal property and digital
property). Also, language limiting the taxability of extended warranty service only to those contracts covering property subject to
tax under KRS 139 or motor vehicle usage tax under KRS 138.460 has been removed. See chart below illustrating the impact
of the expanded “extended warranty services” denition.
Prior Treatment New Treatment
Extended warranty on water heater Exempt Taxable
Extended warranty on garage door Exempt Taxable
Extended warranty on building roong Exempt Taxable
Extended warranty on dishwasher Exempt Taxable
Extended warranty on farm tractor Exempt Taxable
Extended warranty on a semi-tractor and/or trailer Exempt Taxable
Extended warranty services “means services provided through a service contract agreement between the contract provider
and the purchaser where the purchaser agrees to pay compensation for the contract and the provider agrees to repair, replace,
support, or maintain tangible personal property, digital property, or real property according to the terms of the contract” (KRS
139.010(14). Since the upfront charges for contracts to perform the extended warranty services are taxable, the service provider
performing the extended warranty services may purchase the items used to complete the warranty services under a resale
exemption without the payment of tax if the items are transferred to and remain with the customer.
All entity-based exemptions will still be valid so the purchase of an extended warranty by a tax-exempt purchaser, such as a
charitable organization or a government entity, will still be exempt from sales and use tax.
5
This newsletter is intended to provide practical information to assist persons in fullling their sales and use tax obligations to
the Commonwealth.
This newsletter is archived on the Department of Revenue website at revenue.ky.gov and future editions may be accessed
at the website.
To submit additional questions or suggestions for future topics, please contact us at:
Kentucky Sales Tax Facts
Division of Sales and Use Tax
Station 53, P.O. Box 181
Frankfort, KY 40602-0181
Phone: (502) 564-5170
Fax: (502) 564-2041
Website: revenue.ky.gov
The Kentucky Department of Revenue does not discriminate on the basis of race, color, national origin, sex, age, religion,
disability, sexual orientation, gender identity, veteran status, genetic information or ancestry in employment or the provision
of services.
Andy Beshear, Governor
Commonwealth of Kentucky
Holly M. Johnson, Secretary
Finance and Administration Cabinet
Thomas B. Miller, Commissioner
Department of Revenue
