The amended denion for “extended warranty services” now includes extended
warranty contracts for real property and all contracts for tangible personal property
and digital property regardless of whether the property itself is taxable or exempt.
5
Effective January 1, 2023, “extended warranty services” in KRS 139.010(14) is amended to
mean “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, [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.”
The effect of this language change (deletions and additions) is to not only add extended warranty
contracts for real property, but to also include all contracts for tangible personal property and digital
property regardless of whether the property itself is taxable or exempt. For example, separately
charged extended warranties purchased on exempt property such as farm equipment, machinery for
new expanded industry and motor vehicles sold to certain out-of-state residents will no longer be
exempt from sales and use tax. However, all entity-based exemptions are still valid so the purchase
of an extended warranty contract by a tax-exempt purchaser, such as a 501(c)(3) charitable
organization or a governmental entity, may still be exempt from the tax.
An amendment to KRS 139.480 creates a new sales and use tax exemption for drugs and over-
the-counter drugs “that are purchased by a person regularly engaged in the business of
farming and used in the treatment of cattle, sheep, goats, swine, poultry, ratite birds, llamas,
alpacas, buffalo, aquatic organisms, or cervids.” The terms “drug” and “over-the-counter drug” have
the same meaning as defined in KRS 139.472(3).
The exemptions from sales tax for admissions to historical sites found in KRS 139.200(2)(c)(2)
and KRS 139.482 have been removed. However, these historical sites are typically non-profits
whose sales of admissions remain exempt from the tax under KRS 139.498.
The exemption from sales and use tax for residential electricity, natural gas, fuels, water, and sewer
services found in KRS 139.470(7) is amended to specify that these purchases are only exempt if
they are “purchased and declared by the resident as used in his or her place of domicile.”
“Place of domicile” is further defined as “the place where an individual has his or her legal, true,
fixed, and permanent home and principal establishment, and to which, whenever the individual is
absent, the individual has the intention of returning.” DOR is developing further guidance for both
consumers and utility providers on how to claim and document the residential utility exemption
beginning for periods on or after January 1, 2023.
KRS 139.730 is amended to require that “any event coordinator of a festival or similar event
shall provide the department with a list of vendors selling at the event any tangible property, digital
property, or services” subject to sales and use tax (effective July 14, 2022).
House Bill 8, continued