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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, performance, 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" means direct mail the primary purpose of 26
which is to attract public attention to a product, person, business, or organization, or 27 UNOFFICIAL COPY 24 RS BR 178
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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 definition, "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, either direct or 5
indirect; 6
(4) (a) "Clothing" means all human wearing apparel suitable for general use. 7
(b) "Clothing" does not include diapers; 8
(5) "Commonwealth" means the Commonwealth of Kentucky; 9
(6)[(5)] (a) "Cosmetic surgery services" means modifications to all areas of the 10
head, neck, and body to enhance appearance through surgical and medical 11
techniques. 12
(b) "Cosmetic surgery services" does not include surgery services that are 13
medically necessary to reconstruct or correct dysfunctional areas of the face 14
and body due to birth disorders, trauma, burns, or disease; 15
(7)[(6)] "Department" means the Department of Revenue; 16
(8) "Diaper" means an absorbent garment worn by humans who are incapable of or 17
have difficulty controlling their bladder or bowel movements; 18
(9)[(7)] (a) "Digital audio-visual works" means a series of related images which, 19
when shown in succession, impart an impression of motion, with 20
accompanying sounds, if any. 21
(b) "Digital audio-visual works" includes movies, motion pictures, musical 22
videos, news and entertainment programs, and live events. 23
(c) "Digital audio-visual works" shall not include video greeting cards, video 24
games, and electronic games; 25
(10)[(8)] (a) "Digital audio works" means works that result from the fixation of a 26
series of musical, spoken, or other sounds. 27 UNOFFICIAL COPY 24 RS BR 178
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(b) "Digital audio works" includes ringtones, recorded or live songs, music, 1
readings of books or other written materials, speeches, or other sound 2
recordings. 3
(c) "Digital audio works" shall not include audio greeting cards sent by electronic 4
mail; 5
(11)[(9)] (a) "Digital books" means works that are generally recognized in the 6
ordinary and usual sense as books, including any literary work expressed in 7
words, numbers, or other verbal or numerical symbols or indicia if the literary 8
work is generally recognized in the ordinary or usual sense as a book. 9
(b) "Digital books" shall not include digital audio-visual works, digital audio 10
works, periodicals, magazines, newspapers, or other news or information 11
products, chat rooms, or weblogs; 12
(12)[(10)] (a) "Digital code" means a code which provides a purchaser with a right to 13
obtain one (1) or more types of digital property. A "digital code" may be 14
obtained by any means, including electronic mail messaging or by tangible 15
means, regardless of the code's designation as a song code, video code, or 16
book code. 17
(b) "Digital code" shall not include a code that represents: 18
1. A stored monetary value that is deducted from a total as it is used by the 19
purchaser; or 20
2. A redeemable card, gift card, or gift certificate that entitles the holder to 21
select specific types of digital property; 22
(13)[(11)] (a) "Digital property" means any of the following which is transferred 23
electronically: 24
1. Digital audio works; 25
2. Digital books; 26
3. Finished artwork; 27 UNOFFICIAL COPY 24 RS BR 178
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4. Digital photographs; 1
5. Periodicals; 2
6. Newspapers; 3
7. Magazines; 4
8. Video greeting cards; 5
9. Audio greeting cards; 6
10. Video games; 7
11. Electronic games; or 8
12. Any digital code related to this property. 9
(b) "Digital property" shall not include digital audio-visual works or satellite 10
radio programming; 11
(14)[(12)] (a) "Direct mail" means printed material delivered or distributed by United 12
States mail or other delivery service to a mass audience or to addressees on a 13
mailing list provided by the purchaser or at the direction of the purchaser 14
when the cost of the items are not billed directly to the recipient. 15
(b) "Direct mail" includes tangible personal property supplied directly or 16
indirectly by the purchaser to the direct mail retailer for inclusion in the 17
package containing the printed material. 18
(c) "Direct mail" does not include multiple items of printed material delivered to 19
a single address; 20
(15)[(13)] "Directly used in the manufacturing or industrial processing process" means 21
the process that commences with the movement of raw materials from storage into 22
a continuous, unbroken, integrated process and ends when the finished product is 23
packaged and ready for sale; 24
(16)[(14)] (a) "Executive employee recruitment services" means services provided by 25
a person to locate potential candidates to fill open senior-level management 26
positions. 27 UNOFFICIAL COPY 24 RS BR 178
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(b) "Executive employee recruitment services" includes but is not limited to 1
making a detailed list of client requirements, researching and identifying 2
potential candidates, performing prescreening interviews, and providing 3
contract and salary negotiations; 4
(17)[(15)] (a) "Extended warranty services" means services provided through a service 5
contract agreement between the contract provider and the purchaser where the 6
purchaser agrees to pay compensation for the contract and the provider agrees 7
to repair, replace, support, or maintain tangible personal property, digital 8
property, real property, or prewritten computer software access services 9
according to the terms of the contract. 10
(b) "Extended warranty services" does not include the sale of a service contract 11
agreement for tangible personal property to be used by a small telephone 12
utility as defined in KRS 278.516 or a Tier III CMRS provider as defined in 13
KRS 65.7621 to deliver communications services as defined in KRS 136.602 14
or broadband; 15
(18)[(16)] (a) "Finished artwork" means final art that is used for actual reproduction 16
by photomechanical or other processes or for display purposes. 17
(b) "Finished artwork" includes: 18
1. Assemblies; 19
2. Charts; 20
3. Designs; 21
4. Drawings; 22
5. Graphs; 23
6. Illustrative materials; 24
7. Lettering; 25
8. Mechanicals; 26
9. Paintings; and 27 UNOFFICIAL COPY 24 RS BR 178
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10. Paste-ups; 1
(19)[(17)] (a) "Gross receipts" and "sales price" mean the total amount or 2
consideration, including cash, credit, property, and services, for which 3
tangible personal property, digital property, or services are sold, leased, or 4
rented, valued in money, whether received in money or otherwise, without 5
any deduction for any of the following: 6
1. The retailer's cost of the tangible personal property, digital property, or 7
services sold; 8
2. The cost of the materials used, labor or service cost, interest, losses, all 9
costs of transportation to the retailer, all taxes imposed on the retailer, or 10
any other expense of the retailer; 11
3. Charges by the retailer for any services necessary to complete the sale; 12
4. Delivery charges, which are defined as charges by the retailer for the 13
preparation and delivery to a location designated by the purchaser 14
including transportation, shipping, postage, handling, crating, and 15
packing; 16
5. Any amount for which credit is given to the purchaser by the retailer, 17
other than credit for tangible personal property or digital property traded 18
when the tangible personal property or digital property traded is of like 19
kind and character to the property purchased and the property traded is 20
held by the retailer for resale; and 21
6. The amount charged for labor or services rendered in installing or 22
applying the tangible personal property, digital property, or service sold. 23
(b) "Gross receipts" and "sales price" shall include consideration received by the 24
retailer from a third party if: 25
1. The retailer actually receives consideration from a third party and the 26
consideration is directly related to a price reduction or discount on the 27 UNOFFICIAL COPY 24 RS BR 178
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sale to the purchaser; 1
2. The retailer has an obligation to pass the price reduction or discount 2
through to the purchaser; 3
3. The amount of consideration attributable to the sale is fixed and 4
determinable by the retailer at the time of the sale of the item to the 5
purchaser; and 6
4. One (1) of the following criteria is met: 7
a. The purchaser presents a coupon, certificate, or other 8
documentation to the retailer to claim a price reduction or discount 9
where the coupon, certificate, or documentation is authorized, 10
distributed, or granted by a third party with the understanding that 11
the third party will reimburse any seller to whom the coupon, 12
certificate, or documentation is presented; 13
b. The price reduction or discount is identified as a third-party price 14
reduction or discount on the invoice received by the purchaser or 15
on a coupon, certificate, or other documentation presented by the 16
purchaser; or 17
c. The purchaser identifies himself or herself to the retailer as a 18
member of a group or organization entitled to a price reduction or 19
discount. A "preferred customer" card that is available to any 20
patron does not constitute membership in such a group. 21
(c) "Gross receipts" and "sales price" shall not include: 22
1. Discounts, including cash, term, or coupons that are not reimbursed by a 23
third party and that are allowed by a retailer and taken by a purchaser on 24
a sale; 25
2. Interest, financing, and carrying charges from credit extended on the 26
sale of tangible personal property, digital property, or services, if the 27 UNOFFICIAL COPY 24 RS BR 178
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amount is separately stated on the invoice, bill of sale, or similar 1
document given to the purchaser; 2
3. Any taxes legally imposed directly on the purchaser that are separately 3
stated on the invoice, bill of sale, or similar document given to the 4
purchaser; or 5
4. Local alcohol regulatory license fees authorized under KRS 243.075 that 6
are separately stated on the invoice, bill of sale, or similar document 7
given to the purchaser. 8
(d) As used in this subsection, "third party" means a person other than the 9
purchaser; 10
(20)[(18)] "In this state" or "in the state" means within the exterior limits of the 11
Commonwealth and includes all territory within these limits owned by or ceded to 12
the United States of America; 13
(21)[(19)] "Industrial processing" includes: 14
(a) Refining; 15
(b) Extraction of minerals, ores, coal, clay, stone, petroleum, or natural gas; 16
(c) Mining, quarrying, fabricating, and industrial assembling; 17
(d) The processing and packaging of raw materials, in-process materials, and 18
finished products; and 19
(e) The processing and packaging of farm and dairy products for sale; 20
(22)[(20)] (a) "Lease or rental" means any transfer of possession or control of tangible 21
personal property for a fixed or indeterminate term for consideration. A lease 22
or rental shall include future options to: 23
1. Purchase the property; or 24
2. Extend the terms of the agreement and agreements covering trailers 25
where the amount of consideration may be increased or decreased by 26
reference to the amount realized upon sale or disposition of the property 27 UNOFFICIAL COPY 24 RS BR 178
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as defined in 26 U.S.C. sec. 7701(h)(1). 1
(b) "Lease or rental" shall not include: 2
1. A transfer of possession or control of property under a security 3
agreement or deferred payment plan that requires the transfer of title 4
upon completion of the required payments; 5
2. A transfer of possession or control of property under an agreement that 6
requires the transfer of title upon completion of the required payments 7
and payment of an option price that does not exceed the greater of one 8
hundred dollars ($100) or one percent (1%) of the total required 9
payments; or 10
3. Providing tangible personal property and an operator for the tangible 11
personal property for a fixed or indeterminate period of time. To qualify 12
for this exclusion, the operator must be necessary for the equipment to 13
perform as designed, and the operator must do more than maintain, 14
inspect, or setup the tangible personal property. 15
(c) This definition shall apply regardless of the classification of a transaction 16
under generally accepted accounting principles, the Internal Revenue Code, or 17
other provisions of federal, state, or local law; 18
(23)[(21)] (a) "Lobbying services" means the act of promoting or securing passage of 19
legislation or an attempt to influence or sway a public official or other public 20
servant toward a desired action, including but not limited to the support of or 21
opposition to a project or the passage, amendment, defeat, approval, or veto of 22
any legislation, regulation, rule, or ordinance; 23
(b) "Lobbying services" includes but is not limited to the performance of 24
activities described as executive agency lobbying activities as defined in KRS 25
11A.201, activities described under the definition of lobby in KRS 6.611, and 26
any similar activities performed at the local, state, or federal levels; 27 UNOFFICIAL COPY 24 RS BR 178
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(24)[(22)] (a) "Machinery for new and expanded industry" means machinery: 1
1. Directly used in the manufacturing or industrial processing process of: 2
a. Tangible personal property at a plant facility; 3
b. Distilled spirits or wine at a plant facility or on the premises of a 4
distiller, rectifier, winery, or small farm winery licensed under 5
KRS 243.030 that includes a retail establishment on the premises; 6
or 7
c. Malt beverages at a plant facility or on the premises of a brewer or 8
microbrewery licensed under KRS 243.040 that includes a retail 9
establishment; 10
2. Which is incorporated for the first time into: 11
a. A plant facility established in this state; or 12
b. Licensed premises located in this state; and 13
3. Which does not replace machinery in the plant facility or licensed 14
premises unless that machinery purchased to replace existing machinery: 15
a. Increases the consumption of recycled materials at the plant 16
facility by not less than ten percent (10%); 17
b. Performs different functions; 18
c. Is used to manufacture a different product; or 19
d. Has a greater productive capacity, as measured in units of 20
production, than the machinery being replaced. 21
(b) "Machinery for new and expanded industry" does not include repair, 22
replacement, or spare parts of any kind, regardless of whether the purchase of 23
repair, replacement, or spare parts is required by the manufacturer or seller as 24
a condition of sale or as a condition of warranty; 25
(25)[(23)] "Manufacturing" means any process through which material having little or 26
no commercial value for its intended use before processing has appreciable 27 UNOFFICIAL COPY 24 RS BR 178
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commercial value for its intended use after processing by the machinery; 1
(26)[(24)] "Marketplace" means any physical or electronic means through which one (1) 2
or more retailers may advertise and sell tangible personal property, digital property, 3
or services, or lease tangible personal property or digital property, such as a catalog, 4
Internet website, or television or radio broadcast, regardless of whether the tangible 5
personal property, digital property, or retailer is physically present in this state; 6
(27)[(25)] (a) "Marketplace provider" means a person, including any affiliate of the 7
person, that facilitates a retail sale by satisfying subparagraphs 1. and 2. of 8
this paragraph as follows: 9
1. The person directly or indirectly: 10
a. Lists, makes available, or advertises tangible personal property, 11
digital property, or services for sale by a marketplace retailer in a 12
marketplace owned, operated, or controlled by the person; 13
b. Facilitates the sale of a marketplace retailer's product through a 14
marketplace by transmitting or otherwise communicating an offer 15
or acceptance of a retail sale of tangible personal property, digital 16
property, or services between a marketplace retailer and a 17
purchaser in a forum including a shop, store, booth, catalog, 18
Internet site, or similar forum; 19
c. Owns, rents, licenses, makes available, or operates any electronic 20
or physical infrastructure or any property, process, method, 21
copyright, trademark, or patent that connects marketplace retailers 22
to purchasers for the purpose of making retail sales of tangible 23
personal property, digital property, or services; 24
d. Provides a marketplace for making retail sales of tangible personal 25
property, digital property, or services, or otherwise facilitates retail 26
sales of tangible personal property, digital property, or services, 27 UNOFFICIAL COPY 24 RS BR 178
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regardless of ownership or control of the tangible personal 1
property, digital property, or services, that are the subject of the 2
retail sale; 3
e. Provides software development or research and development 4
activities related to any activity described in this subparagraph, if 5
the software development or research and development activities 6
are directly related to the physical or electronic marketplace 7
provided by a marketplace provider; 8
f. Provides or offers fulfillment or storage services for a marketplace 9
retailer; 10
g. Sets prices for a marketplace retailer's sale of tangible personal 11
property, digital property, or services; 12
h. Provides or offers customer service to a marketplace retailer or a 13
marketplace retailer's customers, or accepts or assists with taking 14
orders, returns, or exchanges of tangible personal property, digital 15
property, or services sold by a marketplace retailer; or 16
i. Brands or otherwise identifies sales as those of the marketplace 17
provider; and 18
2. The person directly or indirectly: 19
a. Collects the sales price or purchase price of a retail sale of tangible 20
personal property, digital property, or services; 21
b. Provides payment processing services for a retail sale of tangible 22
personal property, digital property, or services; 23
c. Through terms and conditions, agreements, or arrangements with a 24
third party, collects payment in connection with a retail sale of 25
tangible personal property, digital property, or services from a 26
purchaser and transmits that payment to the marketplace retailer, 27 UNOFFICIAL COPY 24 RS BR 178
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regardless of whether the person collecting and transmitting the 1
payment receives compensation or other consideration in exchange 2
for the service; or 3
d. Provides a virtual currency that purchasers are allowed or required 4
to use to purchase tangible personal property, digital property, or 5
services. 6
(b) "Marketplace provider" includes but is not limited to a person that satisfies the 7
requirements of this subsection through the ownership, operation, or control 8
of a digital distribution service, digital distribution platform, online portal, or 9
application store; 10
(28)[(26)] "Marketplace retailer" means a seller that makes retail sales through any 11
marketplace owned, operated, or controlled by a marketplace provider; 12
(29)[(27)] (a) "Occasional sale" includes: 13
1. A sale of tangible personal property or digital property not held or used 14
by a seller in the course of an activity for which he or she is required to 15
hold a seller's permit, provided such sale is not one (1) of a series of 16
sales sufficient in number, scope, and character to constitute an activity 17
requiring the holding of a seller's permit. In the case of the sale of the 18
entire, or a substantial portion of the nonretail assets of the seller, the 19
number of previous sales of similar assets shall be disregarded in 20
determining whether or not the current sale or sales shall qualify as an 21
occasional sale; or 22
2. Any transfer of all or substantially all the tangible personal property or 23
digital property held or used by a person in the course of such an activity 24
when after such transfer the real or ultimate ownership of such property 25
is substantially similar to that which existed before such transfer. 26
(b) For the purposes of this subsection, stockholders, bondholders, partners, or 27 UNOFFICIAL COPY 24 RS BR 178
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other persons holding an interest in a corporation or other entity are regarded 1
as having the "real or ultimate ownership" of the tangible personal property or 2
digital property of such corporation or other entity; 3
(30)[(28)] (a) "Other direct mail" means any direct mail that is not advertising and 4
promotional direct mail, regardless of whether advertising and promotional 5
direct mail is included in the same mailing. 6
(b) "Other direct mail" includes but is not limited to: 7
1. Transactional direct mail that contains personal information specific to 8
the addressee, including but not limited to invoices, bills, statements of 9
account, and payroll advices; 10
2. Any legally required mailings, including but not limited to privacy 11
notices, tax reports, and stockholder reports; and 12
3. Other nonpromotional direct mail delivered to existing or former 13
shareholders, customers, employees, or agents, including but not limited 14
to newsletters and informational pieces. 15
(c) "Other direct mail" does not include the development of billing information or 16
the provision of any data processing service that is more than incidental to the 17
production of printed material; 18
(31)[(29)] "Person" includes any individual, firm, copartnership, joint venture, 19
association, social club, fraternal organization, corporation, estate, trust, business 20
trust, receiver, trustee, syndicate, cooperative, assignee, governmental unit or 21
agency, or any other group or combination acting as a unit; 22
(32)[(30)] "Permanent," as the term applies to digital property, means perpetual or for an 23
indefinite or unspecified length of time; 24
(33)[(31)] (a) "Photography and photofinishing services" means: 25
1. The taking, developing, or printing of an original photograph; or 26
2. Image editing, including shadow removal, tone adjustments, vertical and 27 UNOFFICIAL COPY 24 RS BR 178
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horizontal alignment and cropping, composite image creation, 1
formatting, watermarking printing, and delivery of an original 2
photograph in the form of tangible personal property, digital property, or 3
other media. 4
(b) "Photography and photofinishing services" does not include photography 5
services necessary for medical or dental health; 6
(34)[(32)] "Plant facility" means a single location that is exclusively dedicated to 7
manufacturing or industrial processing activities. A location shall be deemed to be 8
exclusively dedicated to manufacturing or industrial processing activities even if 9
retail sales are made there, provided that the retail sales are incidental to the 10
manufacturing or industrial processing activities occurring at the location. The term 11
"plant facility" shall not include any restaurant, grocery store, shopping center, or 12
other retail establishment; 13
(35)[(33)] (a) "Prewritten computer software" means: 14
1. Computer software, including prewritten upgrades, that are not designed 15
and developed by the author or other creator to the specifications of a 16
specific purchaser; 17
2. Software designed and developed by the author or other creator to the 18
specifications of a specific purchaser when it is sold to a person other 19
than the original purchaser; or 20
3. Any portion of prewritten computer software that is modified or 21
enhanced in any manner, where the modification or enhancement is 22
designed and developed to the specifications of a specific purchaser, 23
unless there is a reasonable, separately stated charge on an invoice or 24
other statement of the price to the purchaser for the modification or 25
enhancement. 26
(b) When a person modifies or enhances computer software of which the person 27 UNOFFICIAL COPY 24 RS BR 178
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is not the author or creator, the person shall be deemed to be the author or 1
creator only of the modifications or enhancements the person actually made. 2
(c) The combining of two (2) or more prewritten computer software programs or 3
portions thereof does not cause the combination to be other than prewritten 4
computer software; 5
(36)[(34)] "Prewritten computer software access services" means the right of access to 6
prewritten computer software where the object of the transaction is to use the 7
prewritten computer software while possession of the prewritten computer software 8
is maintained by the seller or a third party, wherever located, regardless of whether 9
the charge for the access or use is on a per use, per user, per license, subscription, or 10
some other basis; 11
(37)[(35)] (a) "Purchase" means any transfer of title or possession, exchange, barter, 12
lease, or rental, conditional or otherwise, in any manner or by any means 13
whatsoever, of: 14
1. Tangible personal property; 15
2. An extended warranty service; 16
3. Digital property transferred electronically; or 17
4. Services included in KRS 139.200; 18
for a consideration. 19
(b) "Purchase" includes: 20
1. When performed outside this state or when the customer gives a resale 21
certificate, the producing, fabricating, processing, printing, or imprinting 22
of tangible personal property for a consideration for consumers who 23
furnish either directly or indirectly the materials used in the producing, 24
fabricating, processing, printing, or imprinting; 25
2. A transaction whereby the possession of tangible personal property or 26
digital property is transferred but the seller retains the title as security 27 UNOFFICIAL COPY 24 RS BR 178
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for the payment of the price; and 1
3. A transfer for a consideration of the title or possession of tangible 2
personal property or digital property which has been produced, 3
fabricated, or printed to the special order of the customer, or of any 4
publication; 5
(38)[(36)] "Recycled materials" means materials which have been recovered or diverted 6
from the solid waste stream and reused or returned to use in the form of raw 7
materials or products; 8
(39)[(37)] "Recycling purposes" means those activities undertaken in which materials 9
that would otherwise become solid waste are collected, separated, or processed in 10
order to be reused or returned to use in the form of raw materials or products; 11
(40)[(38)] "Remote retailer" means a retailer with no physical presence in this state; 12
(41)[(39)] (a) "Repair, replacement, or spare parts" means any tangible personal 13
property used to maintain, restore, mend, or repair machinery or equipment. 14
(b) "Repair, replacement, or spare parts" does not include machine oils, grease, or 15
industrial tools; 16
(42)[(40)] (a) "Retailer" means: 17
1. Every person engaged in the business of making retail sales of tangible 18
personal property, digital property, or furnishing any services in a retail 19
sale included in KRS 139.200; 20
2. Every person engaged in the business of making sales at auction of 21
tangible personal property or digital property owned by the person or 22
others for storage, use or other consumption, except as provided in 23
paragraph (c) of this subsection; 24
3. Every person making more than two (2) retail sales of tangible personal 25
property, digital property, or services included in KRS 139.200 during 26
any twelve (12) month period, including sales made in the capacity of 27 UNOFFICIAL COPY 24 RS BR 178
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assignee for the benefit of creditors, or receiver or trustee in bankruptcy; 1
4. Any person conducting a race meeting under the provision of KRS 2
Chapter 230, with respect to horses which are claimed during the 3
meeting. 4
(b) When the department determines that it is necessary for the efficient 5
administration of this chapter to regard any salesmen, representatives, 6
peddlers, or canvassers as the agents of the dealers, distributors, supervisors or 7
employers under whom they operate or from whom they obtain the tangible 8
personal property, digital property, or services sold by them, irrespective of 9
whether they are making sales on their own behalf or on behalf of the dealers, 10
distributors, supervisors or employers, the department may so regard them and 11
may regard the dealers, distributors, supervisors or employers as retailers for 12
purposes of this chapter. 13
(c) 1. Any person making sales at a charitable auction for a qualifying entity 14
shall not be a retailer for purposes of the sales made at the charitable 15
auction if: 16
a. The qualifying entity, not the person making sales at the auction, is 17
sponsoring the auction; 18
b. The purchaser of tangible personal property at the auction directly 19
pays the qualifying entity sponsoring the auction for the property 20
and not the person making the sales at the auction; and 21
c. The qualifying entity, not the person making sales at the auction, is 22
responsible for the collection, control, and disbursement of the 23
auction proceeds. 24
2. If the conditions set forth in subparagraph 1. of this paragraph are met, 25
the qualifying entity sponsoring the auction shall be the retailer for 26
purposes of the sales made at the charitable auction. 27 UNOFFICIAL COPY 24 RS BR 178
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3. For purposes of this paragraph, "qualifying entity" means a resident: 1
a. Church; 2
b. School; 3
c. Civic club; or 4
d. Any other nonprofit charitable, religious, or educational 5
organization; 6
(43)[(41)] "Retail sale" means any sale, lease, or rental for any purpose other than resale, 7
sublease, or subrent; 8
(44)[(42)] (a) "Ringtones" means digitized sound files that are downloaded onto a 9
device and that may be used to alert the customer with respect to a 10
communication. 11
(b) "Ringtones" shall not include ringback tones or other digital files that are not 12
stored on the purchaser's communications device; 13
(45)[(43)] (a) "Sale" means: 14
1. The furnishing of any services included in KRS 139.200; 15
2. Any transfer of title or possession, exchange, barter, lease, or rental, 16
conditional or otherwise, in any manner or by any means whatsoever, 17
of: 18
a. Tangible personal property; or 19
b. Digital property transferred electronically; 20
for a consideration. 21
(b) "Sale" includes but is not limited to: 22
1. The producing, fabricating, processing, printing, or imprinting of 23
tangible personal property or digital property for a consideration for 24
purchasers who furnish, either directly or indirectly, the materials used 25
in the producing, fabricating, processing, printing, or imprinting; 26
2. A transaction whereby the possession of tangible personal property or 27 UNOFFICIAL COPY 24 RS BR 178
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digital property is transferred, but the seller retains the title as security 1
for the payment of the price; and 2
3. A transfer for a consideration of the title or possession of tangible 3
personal property or digital property which has been produced, 4
fabricated, or printed to the special order of the purchaser. 5
(c) This definition shall apply regardless of the classification of a transaction 6
under generally accepted accounting principles, the Internal Revenue Code, or 7
other provisions of federal, state, or local law; 8
(46)[(44)] "Seller" includes every person engaged in the business of selling tangible 9
personal property, digital property, or services of a kind, the gross receipts from the 10
retail sale of which are required to be included in the measure of the sales tax, and 11
every person engaged in making sales for resale; 12
(47)[(45)] (a) "Storage" includes any keeping or retention in this state for any purpose 13
except sale in the regular course of business or subsequent use solely outside 14
this state of tangible personal property, digital property, or prewritten 15
computer software access services purchased from a retailer. 16
(b) "Storage" does not include the keeping, retaining, or exercising any right or 17
power over tangible personal property for the purpose of subsequently 18
transporting it outside the state for use thereafter solely outside the state, or 19
for the purpose of being processed, fabricated, or manufactured into, attached 20
to, or incorporated into, other tangible personal property to be transported 21
outside the state and thereafter used solely outside the state; 22
(48)[(46)] "Tangible personal property" means personal property which may be seen, 23
weighed, measured, felt, or touched, or which is in any other manner perceptible to 24
the senses and includes natural, artificial, and mixed gas, electricity, water, steam, 25
and prewritten computer software; 26
(49)[(47)] "Taxpayer" means any person liable for tax under this chapter; 27 UNOFFICIAL COPY 24 RS BR 178
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(50)[(48)] "Telemarketing services" means services provided via telephone, facsimile, 1
electronic mail, text messages, or other modes of communications to another 2
person, which are unsolicited by that person, for the purposes of: 3
(a) 1. Promoting products or services; 4
2. Taking orders; or 5
3. Providing information or assistance regarding the products or services; 6
or 7
(b) Soliciting contributions; 8
(51)[(49)] "Transferred electronically" means accessed or obtained by the purchaser by 9
means other than tangible storage media; and 10
(52)[(50)] (a) "Use" includes the exercise of: 11
1. Any right or power over tangible personal property or digital property 12
incident to the ownership of that property, or by any transaction in 13
which possession is given, or by any transaction involving digital 14
property or tangible personal property where the right of access is 15
granted; or 16
2. Any right or power to benefit from any services subject to tax under 17
KRS 139.200(2)(p) to (ax). 18
(b) "Use" does not include the keeping, retaining, or exercising any right or 19
power over: 20
1. Tangible personal property or digital property for the purpose of: 21
a. Selling tangible personal property or digital property in the regular 22
course of business; or 23
b. Subsequently transporting tangible personal property outside the 24
state for use thereafter solely outside the state, or for the purpose 25
of being processed, fabricated, or manufactured into, attached to, 26
or incorporated into, other tangible personal property to be 27 UNOFFICIAL COPY 24 RS BR 178
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transported outside the state and thereafter used solely outside the 1
state; or 2
2. Prewritten computer software access services purchased for use outside 3
the state and transferred electronically outside the state for use thereafter 4
solely outside the state. 5
Section 2. KRS 139.480 (Effective until January 1, 2025) is amended to read as 6
follows: 7
Any other provision of this chapter to the contrary notwithstanding, the terms "sale at 8
retail," "retail sale," "use," "storage," and "consumption," as used in this chapter, shall not 9
include the sale, use, storage, or other consumption of: 10
(1) Locomotives or rolling stock, including materials for the construction, repair, or 11
modification thereof, or fuel or supplies for the direct operation of locomotives and 12
trains, used or to be used in interstate commerce; 13
(2) Coal for the manufacture of electricity; 14
(3) (a) All energy or energy-producing fuels used in the course of manufacturing, 15
processing, mining, or refining and any related distribution, transmission, and 16
transportation services for this energy that are billed to the user, to the extent 17
that the cost of the energy or energy-producing fuels used, and related 18
distribution, transmission, and transportation services for this energy that are 19
billed to the user exceed three percent (3%) of the cost of production. 20
(b) Cost of production shall be computed on the basis of a plant facility, which 21
shall include all operations within the continuous, unbroken, integrated 22
manufacturing or industrial processing process that ends with a product 23
packaged and ready for sale. 24
(c) A person who performs a manufacturing or industrial processing activity for a 25
fee and does not take ownership of the tangible personal property that is 26
incorporated into, or becomes the product of, the manufacturing or industrial 27 UNOFFICIAL COPY 24 RS BR 178
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processing activity is a toller. For periods on or after July 1, 2018, the costs of 1
the tangible personal property shall be excluded from the toller's cost of 2
production at a plant facility with tolling operations in place as of July 1, 3
2018. 4
(d) For plant facilities that begin tolling operations after July 1, 2018, the costs of 5
tangible personal property shall be excluded from the toller's cost of 6
production if the toller: 7
1. Maintains a binding contract for periods after July 1, 2018, that governs 8
the terms, conditions, and responsibilities with a separate legal entity, 9
which holds title to the tangible personal property that is incorporated 10
into, or becomes the product of, the manufacturing or industrial 11
processing activity; 12
2. Maintains accounting records that show the expenses it incurs to fulfill 13
the binding contract that include but are not limited to energy or energy-14
producing fuels, materials, labor, procurement, depreciation, 15
maintenance, taxes, administration, and office expenses; 16
3. Maintains separate payroll, bank accounts, tax returns, and other records 17
that demonstrate its independent operations in the performance of its 18
tolling responsibilities; 19
4. Demonstrates one (1) or more substantial business purposes for the 20
tolling operations germane to the overall manufacturing, industrial 21
processing activities, or corporate structure at the plant facility. A 22
business purpose is a purpose other than the reduction of sales tax 23
liability for the purchases of energy and energy-producing fuels; and 24
5. Provides information to the department upon request that documents 25
fulfillment of the requirements in subparagraphs 1. to 4. of this 26
paragraph and gives an overview of its tolling operations with an 27 UNOFFICIAL COPY 24 RS BR 178
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explanation of how the tolling operations relate and connect with all 1
other manufacturing or industrial processing activities occurring at the 2
plant facility; 3
(4) Livestock of a kind the products of which ordinarily constitute food for human 4
consumption, provided the sales are made for breeding or dairy purposes and by or 5
to a person regularly engaged in the business of farming; 6
(5) Poultry for use in breeding or egg production; 7
(6) Farm work stock for use in farming operations; 8
(7) Seeds, the products of which ordinarily constitute food for human consumption or 9
are to be sold in the regular course of business, and commercial fertilizer to be 10
applied on land, the products from which are to be used for food for human 11
consumption or are to be sold in the regular course of business; provided such sales 12
are made to farmers who are regularly engaged in the occupation of tilling and 13
cultivating the soil for the production of crops as a business, or who are regularly 14
engaged in the occupation of raising and feeding livestock or poultry or producing 15
milk for sale; and provided further that tangible personal property so sold is to be 16
used only by those persons designated above who are so purchasing; 17
(8) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals to be 18
used in the production of crops as a business, or in the raising and feeding of 19
livestock or poultry, the products of which ordinarily constitute food for human 20
consumption; 21
(9) Feed, including pre-mixes and feed additives, for livestock or poultry of a kind the 22
products of which ordinarily constitute food for human consumption; 23
(10) Machinery for new and expanded industry; 24
(11) Farm machinery. As used in this section, the term "farm machinery": 25
(a) Means machinery used exclusively and directly in the occupation of: 26
1. Tilling the soil for the production of crops as a business; 27 UNOFFICIAL COPY 24 RS BR 178
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2. Raising and feeding livestock or poultry for sale; or 1
3. Producing milk for sale; 2
(b) Includes machinery, attachments, and replacements therefor, repair parts, and 3
replacement parts which are used or manufactured for use on, or in the 4
operation of farm machinery and which are necessary to the operation of the 5
machinery, and are customarily so used, including but not limited to combine 6
header wagons, combine header trailers, or any other implements specifically 7
designed and used to move or transport a combine head; and 8
(c) Does not include: 9
1. Automobiles; 10
2. Trucks; 11
3. Trailers, except combine header trailers; or 12
4. Truck-trailer combinations; 13
(12) Tombstones and other memorial grave markers; 14
(13) On-farm facilities used exclusively for grain or soybean storing, drying, processing, 15
or handling. The exemption applies to the equipment, machinery, attachments, 16
repair and replacement parts, and any materials incorporated into the construction, 17
renovation, or repair of the facilities; 18
(14) On-farm facilities used exclusively for raising poultry or livestock. The exemption 19
shall apply to the equipment, machinery, attachments, repair and replacement parts, 20
and any materials incorporated into the construction, renovation, or repair of the 21
facilities. The exemption shall apply but not be limited to vent board equipment, 22
waterer and feeding systems, brooding systems, ventilation systems, alarm systems, 23
and curtain systems. In addition, the exemption shall apply whether or not the seller 24
is under contract to deliver, assemble, and incorporate into real estate the 25
equipment, machinery, attachments, repair and replacement parts, and any materials 26
incorporated into the construction, renovation, or repair of the facilities; 27 UNOFFICIAL COPY 24 RS BR 178
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(15) Gasoline, special fuels, liquefied petroleum gas, and natural gas used exclusively 1
and directly to: 2
(a) Operate farm machinery as defined in subsection (11) of this section; 3
(b) Operate on-farm grain or soybean drying facilities as defined in subsection 4
(13) of this section; 5
(c) Operate on-farm poultry or livestock facilities defined in subsection (14) of 6
this section; 7
(d) Operate on-farm ratite facilities defined in subsection (23) of this section; 8
(e) Operate on-farm llama or alpaca facilities as defined in subsection (25) of this 9
section; or 10
(f) Operate on-farm dairy facilities; 11
(16) Textbooks, including related workbooks and other course materials, purchased for 12
use in a course of study conducted by an institution which qualifies as a nonprofit 13
educational institution under KRS 139.495. The term "course materials" means only 14
those items specifically required of all students for a particular course but shall not 15
include notebooks, paper, pencils, calculators, tape recorders, or similar student 16
aids; 17
(17) Any property which has been certified as an alcohol production facility as defined 18
in KRS 247.910; 19
(18) Aircraft, repair and replacement parts therefor, and supplies, except fuel, for the 20
direct operation of aircraft in interstate commerce and used exclusively for the 21
conveyance of property or passengers for hire. Nominal intrastate use shall not 22
subject the property to the taxes imposed by this chapter; 23
(19) Any property which has been certified as a fluidized bed energy production facility 24
as defined in KRS 211.390; 25
(20) (a) 1. Any property to be incorporated into the construction, rebuilding, 26
modification, or expansion of a blast furnace or any of its components or 27 UNOFFICIAL COPY 24 RS BR 178
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appurtenant equipment or structures as part of an approved supplemental 1
project, as defined by KRS 154.26-010; and 2
2. Materials, supplies, and repair or replacement parts purchased for use in 3
the operation and maintenance of a blast furnace and related carbon 4
steel-making operations as part of an approved supplemental project, as 5
defined by KRS 154.26-010. 6
(b) The exemptions provided in this subsection shall be effective for sales made: 7
1. On and after July 1, 2018; and 8
2. During the term of a supplemental project agreement entered into 9
pursuant to KRS 154.26-090; 10
(21) Beginning on October 1, 1986, food or food products purchased for human 11
consumption with food coupons issued by the United States Department of 12
Agriculture pursuant to the Food Stamp Act of 1977, as amended, and required to 13
be exempted by the Food Security Act of 1985 in order for the Commonwealth to 14
continue participation in the federal food stamp program; 15
(22) Machinery or equipment purchased or leased by a business, industry, or 16
organization in order to collect, source separate, compress, bale, shred, or otherwise 17
handle waste materials if the machinery or equipment is primarily used for 18
recycling purposes; 19
(23) Ratite birds and eggs to be used in an agricultural pursuit for the breeding and 20
production of ratite birds, feathers, hides, breeding stock, eggs, meat, and ratite by-21
products, and the following items used in this agricultural pursuit: 22
(a) Feed and feed additives; 23
(b) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals; 24
and 25
(c) On-farm facilities, including equipment, machinery, attachments, repair and 26
replacement parts, and any materials incorporated into the construction, 27 UNOFFICIAL COPY 24 RS BR 178
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renovation, or repair of the facilities. The exemption shall apply to incubation 1
systems, egg processing equipment, waterer and feeding systems, brooding 2
systems, ventilation systems, alarm systems, and curtain systems. In addition, 3
the exemption shall apply whether or not the seller is under contract to 4
deliver, assemble, and incorporate into real estate the equipment, machinery, 5
attachments, repair and replacement parts, and any materials incorporated into 6
the construction, renovation, or repair of the facilities; 7
(24) Embryos and semen that are used in the reproduction of livestock, if the products of 8
these embryos and semen ordinarily constitute food for human consumption, and if 9
the sale is made to a person engaged in the business of farming; 10
(25) Llamas and alpacas to be used as beasts of burden or in an agricultural pursuit for 11
the breeding and production of hides, breeding stock, fiber and wool products, 12
meat, and llama and alpaca by-products, and the following items used in this 13
pursuit: 14
(a) Feed and feed additives; 15
(b) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals; 16
and 17
(c) On-farm facilities, including equipment, machinery, attachments, repair and 18
replacement parts, and any materials incorporated into the construction, 19
renovation, or repair of the facilities. The exemption shall apply to waterer 20
and feeding systems, ventilation systems, and alarm systems. In addition, the 21
exemption shall apply whether or not the seller is under contract to deliver, 22
assemble, and incorporate into real estate the equipment, machinery, 23
attachments, repair and replacement parts, and any materials incorporated into 24
the construction, renovation, or repair of the facilities; 25
(26) Baling twine and baling wire for the baling of hay and straw; 26
(27) Water sold to a person regularly engaged in the business of farming and used in the: 27 UNOFFICIAL COPY 24 RS BR 178
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(a) Production of crops; 1
(b) Production of milk for sale; or 2
(c) Raising and feeding of: 3
1. Livestock or poultry, the products of which ordinarily constitute food 4
for human consumption; or 5
2. Ratites, llamas, alpacas, buffalo, cervids or aquatic organisms; 6
(28) Buffalos to be used as beasts of burden or in an agricultural pursuit for the 7
production of hides, breeding stock, meat, and buffalo by-products, and the 8
following items used in this pursuit: 9
(a) Feed and feed additives; 10
(b) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals; 11
and 12
(c) On-farm facilities, including equipment, machinery, attachments, repair and 13
replacement parts, and any materials incorporated into the construction, 14
renovation, or repair of the facilities. The exemption shall apply to waterer 15
and feeding systems, ventilation systems, and alarm systems. In addition, the 16
exemption shall apply whether or not the seller is under contract to deliver, 17
assemble, and incorporate into real estate the equipment, machinery, 18
attachments, repair and replacement parts, and any materials incorporated into 19
the construction, renovation, or repair of the facilities; 20
(29) Aquatic organisms sold directly to or raised by a person regularly engaged in the 21
business of producing products of aquaculture, as defined in KRS 260.960, for sale, 22
and the following items used in this pursuit: 23
(a) Feed and feed additives; 24
(b) Water; 25
(c) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals; 26
and 27 UNOFFICIAL COPY 24 RS BR 178
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(d) On-farm facilities, including equipment, machinery, attachments, repair and 1
replacement parts, and any materials incorporated into the construction, 2
renovation, or repair of the facilities and, any gasoline, special fuels, liquefied 3
petroleum gas, or natural gas used to operate the facilities. The exemption 4
shall apply, but not be limited to: waterer and feeding systems; ventilation, 5
aeration, and heating systems; processing and storage systems; production 6
systems such as ponds, tanks, and raceways; harvest and transport equipment 7
and systems; and alarm systems. In addition, the exemption shall apply 8
whether or not the seller is under contract to deliver, assemble, and 9
incorporate into real estate the equipment, machinery, attachments, repair and 10
replacement parts, and any materials incorporated into the construction, 11
renovation, or repair of the facilities; 12
(30) Members of the genus cervidae permitted by KRS Chapter 150 that are used for the 13
production of hides, breeding stock, meat, and cervid by-products, and the 14
following items used in this pursuit: 15
(a) Feed and feed additives; 16
(b) Insecticides, fungicides, herbicides, rodenticides, and other chemicals; and 17
(c) On-site facilities, including equipment, machinery, attachments, repair and 18
replacement parts, and any materials incorporated into the construction, 19
renovation, or repair of the facilities. In addition, the exemption shall apply 20
whether or not the seller is under contract to deliver, assemble, and 21
incorporate into real estate the equipment, machinery, attachments, repair and 22
replacement parts, and any materials incorporated into the construction, 23
renovation, or repair of the facilities; 24
(31) (a) Repair or replacement parts for the direct operation or maintenance of a motor 25
vehicle, including any towed unit, used exclusively in interstate commerce for 26
the conveyance of property or passengers for hire, provided the motor vehicle 27 UNOFFICIAL COPY 24 RS BR 178
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is licensed for use on the highway and its declared gross vehicle weight with 1
any towed unit is forty-four thousand and one (44,001) pounds or greater. 2
Nominal intrastate use shall not subject the property to the taxes imposed by 3
this chapter; and 4
(b) Repair or replacement parts for the direct operation and maintenance of a 5
motor vehicle operating under a charter bus certificate issued by the 6
Transportation Cabinet under KRS Chapter 281, or under similar authority 7
granted by the United States Department of Transportation. 8
(c) For the purposes of this subsection, "repair or replacement parts" means tires, 9
brakes, engines, transmissions, drive trains, chassis, body parts, and their 10
components. "Repair or replacement parts" shall not include fuel, machine 11
oils, hydraulic fluid, brake fluid, grease, supplies, or accessories not essential 12
to the operation of the motor vehicle itself, except when sold as part of the 13
assembled unit, such as cigarette lighters, radios, lighting fixtures not 14
otherwise required by the manufacturer for operation of the vehicle, or tool or 15
utility boxes; 16
(32) Food donated by a retail food establishment or any other entity regulated under 17
KRS 217.127 to a nonprofit organization for distribution to the needy; 18
(33) Drugs and over-the counter drugs, as defined in KRS 139.472, that are purchased 19
by a person regularly engaged in the business of farming and used in the treatment 20
of cattle, sheep, goats, swine, poultry, ratite birds, llamas, alpacas, buffalo, aquatic 21
organisms, or cervids; 22
(34) (a) Building materials, fixtures, or supplies purchased by a construction 23
contractor if: 24
1. Fulfilled by a construction contract for a sewer or water project with: 25
a. A municipally owned water utility organized under KRS Chapter 26
96; 27 UNOFFICIAL COPY 24 RS BR 178
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b. A water district or water commission formed or organized under 1
KRS Chapter 74; 2
c. A sanitation district established under KRS Chapter 220 or formed 3
pursuant to KRS Chapter 65; 4
d. A nonprofit corporation created under KRS 58.180 to act on behalf 5
of a governmental agency in the acquisition and financing of 6
public projects; 7
e. Regional wastewater commissions formed under KRS Chapter 8
278; 9
f. A municipally owned joint sewer agency formed under KRS 10
Chapter 76; or 11
g. Any other governmental agency; and 12
2. The building materials, fixtures, or supplies: 13
a. Will be permanently incorporated into a structure or improvement 14
to real property, or will be completely consumed, in fulfilling a 15
construction contract for the purpose of furnishing water or sewer 16
services to the general public; and 17
b. Would be exempt if purchased directly by the entities listed in 18
subparagraph 1. of this paragraph. 19
(b) As used in this subsection, "construction contract" means a: 20
1. Lump sum contract; 21
2. Cost plus contract; 22
3. Materials only contract; 23
4. Labor and materials contract; or 24
5. Any other type of contract. 25
(c) The exemption provided in this subsection shall apply without regard to the 26
payment arrangement between the construction contractor, the retailer, and 27 UNOFFICIAL COPY 24 RS BR 178
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the entities listed in paragraph (a)1. of this subsection or to the place of 1
delivery for the building materials, fixtures, or supplies; 2
(35) (a) On or after February 25, 2022, the rental of space for meetings, conventions, 3
short-term business uses, entertainment events, weddings, banquets, parties, 4
and other short-term social events, as referenced in KRS 139.200, if the tax 5
established in KRS 139.200 is paid by the primary lessee to the lessor. 6
(b) For the purpose of this subsection, "primary lessee" means the person who 7
leases the space and who has a contract with the lessor of the space only if: 8
1. The contract between the lessor and the lessee specifies that the lessee 9
may sublease, subrent, or otherwise sell the space; and 10
2. The space is then sublet, subrented, or otherwise sold to exhibitors, 11
vendors, sponsors, or other entities and persons who will use the space 12
associated with the event to be conducted under the primary lease;[ and] 13
(36) Prewritten computer software access services sold to or purchased by a retailer that 14
develops prewritten computer software for print technology and uses and sells 15
prewritten computer software access services for print technology; and 16
(37) Diapers, including disposable diapers, on or after August 1, 2024. 17
Section 3. KRS 139.480 (Effective January 1, 2025) is amended to read as 18
follows: 19
Any other provision of this chapter to the contrary notwithstanding, the terms "sale at 20
retail," "retail sale," "use," "storage," and "consumption," as used in this chapter, shall not 21
include the sale, use, storage, or other consumption of: 22
(1) Locomotives or rolling stock, including materials for the construction, repair, or 23
modification thereof, or fuel or supplies for the direct operation of locomotives and 24
trains, used or to be used in interstate commerce; 25
(2) Coal for the manufacture of electricity; 26
(3) (a) All energy or energy-producing fuels used in the course of manufacturing, 27 UNOFFICIAL COPY 24 RS BR 178
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processing, mining, or refining and any related distribution, transmission, and 1
transportation services for this energy that are billed to the user, to the extent 2
that the cost of the energy or energy-producing fuels used, and related 3
distribution, transmission, and transportation services for this energy that are 4
billed to the user exceed three percent (3%) of the cost of production. 5
(b) Cost of production shall be computed on the basis of a plant facility, which 6
shall include all operations within the continuous, unbroken, integrated 7
manufacturing or industrial processing process that ends with a product 8
packaged and ready for sale. 9
(c) A person who performs a manufacturing or industrial processing activity for a 10
fee and does not take ownership of the tangible personal property that is 11
incorporated into, or becomes the product of, the manufacturing or industrial 12
processing activity is a toller. For periods on or after July 1, 2018, the costs of 13
the tangible personal property shall be excluded from the toller's cost of 14
production at a plant facility with tolling operations in place as of July 1, 15
2018. 16
(d) For plant facilities that begin tolling operations after July 1, 2018, the costs of 17
tangible personal property shall be excluded from the toller's cost of 18
production if the toller: 19
1. Maintains a binding contract for periods after July 1, 2018, that governs 20
the terms, conditions, and responsibilities with a separate legal entity, 21
which holds title to the tangible personal property that is incorporated 22
into, or becomes the product of, the manufacturing or industrial 23
processing activity; 24
2. Maintains accounting records that show the expenses it incurs to fulfill 25
the binding contract that include but are not limited to energy or energy-26
producing fuels, materials, labor, procurement, depreciation, 27 UNOFFICIAL COPY 24 RS BR 178
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maintenance, taxes, administration, and office expenses; 1
3. Maintains separate payroll, bank accounts, tax returns, and other records 2
that demonstrate its independent operations in the performance of its 3
tolling responsibilities; 4
4. Demonstrates one (1) or more substantial business purposes for the 5
tolling operations germane to the overall manufacturing, industrial 6
processing activities, or corporate structure at the plant facility. A 7
business purpose is a purpose other than the reduction of sales tax 8
liability for the purchases of energy and energy-producing fuels; and 9
5. Provides information to the department upon request that documents 10
fulfillment of the requirements in subparagraphs 1. to 4. of this 11
paragraph and gives an overview of its tolling operations with an 12
explanation of how the tolling operations relate and connect with all 13
other manufacturing or industrial processing activities occurring at the 14
plant facility; 15
(4) Livestock of a kind the products of which ordinarily constitute food for human 16
consumption, provided the sales are made for breeding or dairy purposes and by or 17
to a person regularly engaged in the business of farming; 18
(5) Poultry for use in breeding or egg production; 19
(6) Farm work stock for use in farming operations; 20
(7) Seeds, the products of which ordinarily constitute food for human consumption or 21
are to be sold in the regular course of business, and commercial fertilizer to be 22
applied on land, the products from which are to be used for food for human 23
consumption or are to be sold in the regular course of business; provided such sales 24
are made to farmers who are regularly engaged in the occupation of tilling and 25
cultivating the soil for the production of crops as a business, or who are regularly 26
engaged in the occupation of raising and feeding livestock or poultry or producing 27 UNOFFICIAL COPY 24 RS BR 178
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milk for sale; and provided further that tangible personal property so sold is to be 1
used only by those persons designated above who are so purchasing; 2
(8) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals to be 3
used in the production of crops as a business, or in the raising and feeding of 4
livestock or poultry, the products of which ordinarily constitute food for human 5
consumption; 6
(9) Feed, including pre-mixes and feed additives, for livestock or poultry of a kind the 7
products of which ordinarily constitute food for human consumption; 8
(10) Machinery for new and expanded industry; 9
(11) Farm machinery. As used in this section, the term "farm machinery": 10
(a) Means machinery used exclusively and directly in the occupation of: 11
1. Tilling the soil for the production of crops as a business; 12
2. Raising and feeding livestock or poultry for sale; or 13
3. Producing milk for sale; 14
(b) Includes machinery, attachments, and replacements therefor, repair parts, and 15
replacement parts which are used or manufactured for use on, or in the 16
operation of farm machinery and which are necessary to the operation of the 17
machinery, and are customarily so used, including but not limited to combine 18
header wagons, combine header trailers, or any other implements specifically 19
designed and used to move or transport a combine head; and 20
(c) Does not include: 21
1. Automobiles; 22
2. Trucks; 23
3. Trailers, except combine header trailers; or 24
4. Truck-trailer combinations; 25
(12) Tombstones and other memorial grave markers; 26
(13) On-farm facilities used exclusively for grain or soybean storing, drying, processing, 27 UNOFFICIAL COPY 24 RS BR 178
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or handling. The exemption applies to the equipment, machinery, attachments, 1
repair and replacement parts, and any materials incorporated into the construction, 2
renovation, or repair of the facilities; 3
(14) On-farm facilities used exclusively for raising poultry or livestock. The exemption 4
shall apply to the equipment, machinery, attachments, repair and replacement parts, 5
and any materials incorporated into the construction, renovation, or repair of the 6
facilities. The exemption shall apply but not be limited to vent board equipment, 7
waterer and feeding systems, brooding systems, ventilation systems, alarm systems, 8
and curtain systems. In addition, the exemption shall apply whether or not the seller 9
is under contract to deliver, assemble, and incorporate into real estate the 10
equipment, machinery, attachments, repair and replacement parts, and any materials 11
incorporated into the construction, renovation, or repair of the facilities; 12
(15) Gasoline, special fuels, liquefied petroleum gas, and natural gas used exclusively 13
and directly to: 14
(a) Operate farm machinery as defined in subsection (11) of this section; 15
(b) Operate on-farm grain or soybean drying facilities as defined in subsection 16
(13) of this section; 17
(c) Operate on-farm poultry or livestock facilities defined in subsection (14) of 18
this section; 19
(d) Operate on-farm ratite facilities defined in subsection (23) of this section; 20
(e) Operate on-farm llama or alpaca facilities as defined in subsection (25) of this 21
section; or 22
(f) Operate on-farm dairy facilities; 23
(16) Textbooks, including related workbooks and other course materials, purchased for 24
use in a course of study conducted by an institution which qualifies as a nonprofit 25
educational institution under KRS 139.495. The term "course materials" means only 26
those items specifically required of all students for a particular course but shall not 27 UNOFFICIAL COPY 24 RS BR 178
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include notebooks, paper, pencils, calculators, tape recorders, or similar student 1
aids; 2
(17) Any property which has been certified as an alcohol production facility as defined 3
in KRS 247.910; 4
(18) Aircraft, repair and replacement parts therefor, and supplies, except fuel, for the 5
direct operation of aircraft in interstate commerce and used exclusively for the 6
conveyance of property or passengers for hire. Nominal intrastate use shall not 7
subject the property to the taxes imposed by this chapter; 8
(19) Any property which has been certified as a fluidized bed energy production facility 9
as defined in KRS 211.390; 10
(20) (a) 1. Any property to be incorporated into the construction, rebuilding, 11
modification, or expansion of a blast furnace or any of its components or 12
appurtenant equipment or structures as part of an approved supplemental 13
project, as defined by KRS 154.26-010; and 14
2. Materials, supplies, and repair or replacement parts purchased for use in 15
the operation and maintenance of a blast furnace and related carbon 16
steel-making operations as part of an approved supplemental project, as 17
defined by KRS 154.26-010. 18
(b) The exemptions provided in this subsection shall be effective for sales made: 19
1. On and after July 1, 2018; and 20
2. During the term of a supplemental project agreement entered into 21
pursuant to KRS 154.26-090; 22
(21) Beginning on October 1, 1986, food or food products purchased for human 23
consumption with food coupons issued by the United States Department of 24
Agriculture pursuant to the Food Stamp Act of 1977, as amended, and required to 25
be exempted by the Food Security Act of 1985 in order for the Commonwealth to 26
continue participation in the federal food stamp program; 27 UNOFFICIAL COPY 24 RS BR 178
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(22) Machinery or equipment purchased or leased by a business, industry, or 1
organization in order to collect, source separate, compress, bale, shred, or otherwise 2
handle waste materials if the machinery or equipment is primarily used for 3
recycling purposes; 4
(23) Ratite birds and eggs to be used in an agricultural pursuit for the breeding and 5
production of ratite birds, feathers, hides, breeding stock, eggs, meat, and ratite by-6
products, and the following items used in this agricultural 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 parts, and any materials incorporated into the construction, 12
renovation, or repair of the facilities. The exemption shall apply to incubation 13
systems, egg processing equipment, waterer and feeding systems, brooding 14
systems, ventilation systems, alarm systems, and curtain systems. In addition, 15
the exemption shall apply whether or not the seller is under contract to 16
deliver, assemble, and incorporate into real estate the equipment, machinery, 17
attachments, repair and replacement parts, and any materials incorporated into 18
the construction, renovation, or repair of the facilities; 19
(24) Embryos and semen that are used in the reproduction of livestock, if the products of 20
these embryos and semen ordinarily constitute food for human consumption, and if 21
the sale is made to a person engaged in the business of farming; 22
(25) Llamas and alpacas to be used as beasts of burden or in an agricultural pursuit for 23
the breeding and production of hides, breeding stock, fiber and wool products, 24
meat, and llama and alpaca by-products, and the following items used in this 25
pursuit: 26
(a) Feed and feed additives; 27 UNOFFICIAL COPY 24 RS BR 178
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(b) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals; 1
and 2
(c) On-farm facilities, including equipment, machinery, attachments, repair and 3
replacement parts, and any materials incorporated into the construction, 4
renovation, or repair of the facilities. The exemption shall apply to waterer 5
and feeding systems, ventilation systems, and alarm systems. In addition, the 6
exemption shall apply whether or not the seller is under contract to deliver, 7
assemble, and incorporate into real estate the equipment, machinery, 8
attachments, repair and replacement parts, and any materials incorporated into 9
the construction, renovation, or repair of the facilities; 10
(26) Baling twine and baling wire for the baling of hay and straw; 11
(27) Water sold to a person regularly engaged in the business of farming and used in the: 12
(a) Production of crops; 13
(b) Production of milk for sale; or 14
(c) Raising and feeding of: 15
1. Livestock or poultry, the products of which ordinarily constitute food 16
for human consumption; or 17
2. Ratites, llamas, alpacas, buffalo, cervids or aquatic organisms; 18
(28) Buffalos to be used as beasts of burden or in an agricultural pursuit for the 19
production of hides, breeding stock, meat, and buffalo by-products, and the 20
following items used in this pursuit: 21
(a) Feed and feed additives; 22
(b) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals; 23
and 24
(c) On-farm facilities, including equipment, machinery, attachments, repair and 25
replacement parts, and any materials incorporated into the construction, 26
renovation, or repair of the facilities. The exemption shall apply to waterer 27 UNOFFICIAL COPY 24 RS BR 178
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and feeding systems, ventilation systems, and alarm systems. In addition, the 1
exemption shall apply whether or not the seller is under contract to deliver, 2
assemble, and incorporate into real estate the equipment, machinery, 3
attachments, repair and replacement parts, and any materials incorporated into 4
the construction, renovation, or repair of the facilities; 5
(29) Aquatic organisms sold directly to or raised by a person regularly engaged in the 6
business of producing products of aquaculture, as defined in KRS 260.960, for sale, 7
and the following items used in this pursuit: 8
(a) Feed and feed additives; 9
(b) Water; 10
(c) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals; 11
and 12
(d) On-farm facilities, including equipment, machinery, attachments, repair and 13
replacement parts, and any materials incorporated into the construction, 14
renovation, or repair of the facilities and, any gasoline, special fuels, liquefied 15
petroleum gas, or natural gas used to operate the facilities. The exemption 16
shall apply, but not be limited to: waterer and feeding systems; ventilation, 17
aeration, and heating systems; processing and storage systems; production 18
systems such as ponds, tanks, and raceways; harvest and transport equipment 19
and systems; and alarm systems. In addition, the exemption shall apply 20
whether or not the seller is under contract to deliver, assemble, and 21
incorporate into real estate the equipment, machinery, attachments, repair and 22
replacement parts, and any materials incorporated into the construction, 23
renovation, or repair of the facilities; 24
(30) Members of the genus cervidae permitted by KRS Chapter 150 that are used for the 25
production of hides, breeding stock, meat, and cervid by-products, and the 26
following items used in this pursuit: 27 UNOFFICIAL COPY 24 RS BR 178
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(a) Feed and feed additives; 1
(b) Insecticides, fungicides, herbicides, rodenticides, and other chemicals; and 2
(c) On-site facilities, including equipment, machinery, attachments, repair and 3
replacement parts, and any materials incorporated into the construction, 4
renovation, or repair of the facilities. In addition, the exemption shall apply 5
whether or not the seller is under contract to deliver, assemble, and 6
incorporate into real estate the equipment, machinery, attachments, repair and 7
replacement parts, and any materials incorporated into the construction, 8
renovation, or repair of the facilities; 9
(31) (a) Repair or replacement parts for the direct operation or maintenance of a motor 10
vehicle, including any towed unit, used exclusively in interstate commerce for 11
the conveyance of property or passengers for hire, provided the motor vehicle 12
is licensed for use on the highway and its declared gross vehicle weight with 13
any towed unit is forty-four thousand and one (44,001) pounds or greater. 14
Nominal intrastate use shall not subject the property to the taxes imposed by 15
this chapter; and 16
(b) Repair or replacement parts for the direct operation and maintenance of a 17
motor vehicle operating under a charter bus certificate issued by the 18
Transportation Cabinet under KRS Chapter 281, or under similar authority 19
granted by the United States Department of Transportation. 20
(c) For the purposes of this subsection, "repair or replacement parts" means tires, 21
brakes, engines, transmissions, drive trains, chassis, body parts, and their 22
components. "Repair or replacement parts" shall not include fuel, machine 23
oils, hydraulic fluid, brake fluid, grease, supplies, or accessories not essential 24
to the operation of the motor vehicle itself, except when sold as part of the 25
assembled unit, such as cigarette lighters, radios, lighting fixtures not 26
otherwise required by the manufacturer for operation of the vehicle, or tool or 27 UNOFFICIAL COPY 24 RS BR 178
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utility boxes; 1
(32) Food donated by a retail food establishment or any other entity regulated under 2
KRS 217.127 to a nonprofit organization for distribution to the needy; 3
(33) Drugs and over-the counter drugs, as defined in KRS 139.472, that are purchased 4
by a person regularly engaged in the business of farming and used in the treatment 5
of cattle, sheep, goats, swine, poultry, ratite birds, llamas, alpacas, buffalo, aquatic 6
organisms, or cervids; 7
(34) (a) Building materials, fixtures, or supplies purchased by a construction 8
contractor if: 9
1. Fulfilled by a construction contract for a sewer or water project with: 10
a. A municipally owned water utility organized under KRS Chapter 11
96; 12
b. A water district or water commission formed or organized under 13
KRS Chapter 74; 14
c. A sanitation district established under KRS Chapter 220 or formed 15
pursuant to KRS Chapter 65; 16
d. A nonprofit corporation created under KRS 58.180 to act on behalf 17
of a governmental agency in the acquisition and financing of 18
public projects; 19
e. Regional wastewater commissions formed under KRS Chapter 20
278; 21
f. A municipally owned joint sewer agency formed under KRS 22
Chapter 76; or 23
g. Any other governmental agency; and 24
2. The building materials, fixtures, or supplies: 25
a. Will be permanently incorporated into a structure or improvement 26
to real property, or will be completely consumed, in fulfilling a 27 UNOFFICIAL COPY 24 RS BR 178
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construction contract for the purpose of furnishing water or sewer 1
services to the general public; and 2
b. Would be exempt if purchased directly by the entities listed in 3
subparagraph 1. of this paragraph. 4
(b) As used in this subsection, "construction contract" means a: 5
1. Lump sum contract; 6
2. Cost plus contract; 7
3. Materials only contract; 8
4. Labor and materials contract; or 9
5. Any other type of contract. 10
(c) The exemption provided in this subsection shall apply without regard to the 11
payment arrangement between the construction contractor, the retailer, and 12
the entities listed in paragraph (a)1. of this subsection or to the place of 13
delivery for the building materials, fixtures, or supplies; 14
(35) (a) On or after February 25, 2022, the rental of space for meetings, conventions, 15
short-term business uses, entertainment events, weddings, banquets, parties, 16
and other short-term social events, as referenced in KRS 139.200, if the tax 17
established in KRS 139.200 is paid by the primary lessee to the lessor. 18
(b) For the purpose of this subsection, "primary lessee" means the person who 19
leases the space and who has a contract with the lessor of the space only if: 20
1. The contract between the lessor and the lessee specifies that the lessee 21
may sublease, subrent, or otherwise sell the space; and 22
2. The space is then sublet, subrented, or otherwise sold to exhibitors, 23
vendors, sponsors, or other entities and persons who will use the space 24
associated with the event to be conducted under the primary lease; 25
(36) Prewritten computer software access services sold to or purchased by a retailer that 26
develops prewritten computer software for print technology and uses and sells 27 UNOFFICIAL COPY 24 RS BR 178
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prewritten computer software access services for print technology;[ and] 1
(37) Medicinal cannabis as defined in KRS 218B.010 when sold, used, stored, or 2
consumed in accordance with KRS Chapter 218B; and 3
(38) Diapers, including disposable diapers, on or after August 1, 2024. 4