Kentucky: Sales Tax Handbook
What purchases are taxable in Kentucky?
The taxability of various transactions (like services and shipping) can vary from state to state, as do policies on subjects such as whether excise taxes or installation fees included in the purchase price are also subject sales tax. This reference is here to help answer your questions about what is and is not subject to the Kentucky sales tax.
Contents1.) Taxability of Goods and Services
- General Kentucky taxability guidelines
- Are services subject to sales tax?
- Is shipping & handling subject to sales tax?
- Are drop shipped items taxable?
Section 1: Taxability of Goods and Services
What transactions are generally subject to sales tax in Kentucky?
In the state of Kentucky, legally sales tax is required to be collected from tangible, physical products being sold to a consumer. Several exceptions to this tax are most types of farming equipment, prescription medication, and equipment used for construction.
This means that someone selling furniture would be required to charge sales tax, but an individual who sells equipment used for farming would not be required to charge sales tax.
Are services subject to sales tax in Kentucky?
The state of Kentucky does not usually collect sales taxes on the vast majority of services performed. An example of taxed services would be one which modifies or repairs a product.
This means that a freelance accountant would not be required to collect sales tax, while a someone working in jewelry repair may be required to collect sales tax.
You can find a table describing the taxability of common types of services later on this page.Top
Are shipping & handling subject to sales tax in Kentucky?
In the state of Kentucky, the laws regarding tax on shipping and handling are very simple. If the item being shipped is taxable in itself, then the shipping charge is considered taxable.
If the item being shipped is not considered taxable, then the shipping charge is not taxable. If you are shipping multiples items, both taxable and nontaxable items, then you should have two shipping charges fairly divided between the taxable and nontaxable pieces of merchandise.
Are drop shipments subject to sales tax in Kentucky?
"Drop shipping" refers to the common business practice in which a vendor, often in a different state, makes a sale of a product which is shipped to the end-user by a third party supplier hired by the initial vendor. In Kentucky, drop shipments may or may not be subject to taxation depending on the circumstances.
Section 2: Taxability of Various Items in Kentucky
This table shows the taxability of various goods and services in Kentucky. If you are interested in the sales tax on vehicle sales, see the car sales tax page instead. Scroll to view the full table, and click any category for more details.
|Products on Amazon.com||TAXABLE *|
|Food and Meals|
|Grocery Food||EXEMPT *|
|Leases and Rentals|
|Motor Vehicles||EXEMPT *|
|Tangible Media Property||TAXABLE|
|Manufacturing and Machinery|
|Utilities & Fuel||EXEMPT *|
|Medical Goods and Services|
|Medical Devices||EXEMPT *|
|Newspapers and Magazines|
|General Occasional Sales||EXEMPT|
|Motor Vehicles||EXEMPT *|
|Optional Maintenance Contracts|
|General Optional Maintenance Contracts||EXEMPT *|
|Parts Purchased for Use in Performing Service Under Optional Maintenance Contracts||TAXABLE *|
|Pollution Control Equipment|
|General Pollution Control Equipment||TAXABLE *|
|Software and Digital Products|
|Canned Software - Delivered on Tangible Media||TAXABLE|
|Canned Software - Downloaded||TAXABLE|
|Custom Software - Delivered on Tangible Media||EXEMPT|
|Custom Software - Downloaded||EXEMPT|
|Customization of Canned Software||EXEMPT *|
|Vending Machine Sales|
* See notes in category taxability page for details
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