What Services Are Taxable in Kentucky?

Sales tax in Kentucky, traditionally applied to tangible goods, has expanded to include a broad range of services. This evolution aims to modernize the state’s tax structure and broaden its revenue base. Understanding which services are taxable is important for businesses operating within Kentucky to ensure compliance. Businesses providing these services are required to collect and remit the applicable sales tax.

Categories of Taxable Services

Kentucky imposes a 6% sales tax on various services. This rate applies uniformly across the state, as there are no additional local sales tax rates. Businesses providing these services must collect sales tax from their customers.

Several categories of services are subject to sales tax. These include non-medical out-of-state dialysis treatment and lobbying services.

Body modification services are subject to sales tax, including tattooing, piercing, scarification, branding, and tongue splitting, unless medically or dentally necessary. Cosmetic services, such as those provided by nail salons, tanning facilities, and hair removal businesses, are also taxable. This includes cosmetic surgery, unless for reconstruction due to birth disorders, trauma, burns, or disease.

Landscaping services are taxable, covering activities like lawn care, maintenance, tree trimming, removal, landscape design, installation, and snow plowing. Similarly, janitorial services, encompassing residential and commercial cleaning, carpet cleaning, upholstery cleaning, and window cleaning, are subject to sales tax.

Small animal veterinary services are taxable, with exceptions for agricultural production animals such as equine, cattle, swine, sheep, goats, llamas, alpacas, ratite birds, buffalo, and cervids. Pet care services like grooming, boarding, and obedience training are also taxable.

Parking services are taxable, including valet services and the use of parking lots and structures. However, parking at educational institutions is excluded. Charges for street parking at metered spaces are also taxable.

Prewritten computer software access services, including Software as a Service (SaaS) and cloud computing, are taxable. This applies to both business-to-business and business-to-consumer transactions.

Telecommunication services are taxable. Extended warranty services include contracts for real, tangible personal, and digital property. This applies regardless of whether the property itself is taxable or exempt, though entity-based exemptions remain valid.

Security services, such as residential and nonresidential security system monitoring, are taxable. Personal fitness training services are also subject to sales tax. This includes one-on-one training and instructor-led classes.

Admissions to events and facilities are taxable, including charges for entrance to displays, programs, sporting events, music concerts, performances, plays, shows, movies, exhibits, and fairs. Photography and photofinishing services, including sitting fees, developing, printing, and image editing, are also taxable. This includes wedding, family, and athletic pictures, but not videography.

Other taxable services include:
Bodyguard services
Condominium time-share exchange services
Executive employee recruitment services
Facsimile transmission services
Massage services (unless medically necessary)
Personal background check services
Private investigation services
Process server services
Repossession of tangible personal property services
Rental of space for meetings, conventions, and social events
Social event planning and coordination services

Specific Exemptions and Exclusions

Kentucky law provides certain exemptions and exclusions from sales tax, even if a service might otherwise be considered taxable. Understanding these provisions is important for businesses and consumers.

Sales for resale are exempt. Businesses purchasing services or tangible personal property for resale can issue a resale certificate to the supplier. This exemption applies when the service or property is transferred to the customer as part of a taxable transaction.

Sales to governmental entities or qualifying non-profit organizations are exempt. For instance, a 501(c)(3) charitable organization or a governmental entity purchasing an extended warranty contract may be exempt. Qualifying non-profits can apply for a purchase exemption with the Kentucky Department of Revenue (DOR) by submitting documentation, including articles of incorporation and their IRS determination letter.

Services purchased for direct use in manufacturing or industrial processing may also qualify for exemptions. However, general building contractors cannot claim a resale exemption for landscaping services used in their construction projects, as they are considered the end consumer of these services.

Agricultural exemptions exist for veterinary services. Small animal veterinary services are taxable, but services for agricultural animals like equine, cattle, and swine are excluded. This distinction supports agricultural production.

Educational or religious organizations may also be exempt. Sales by elementary or secondary schools or their affiliated non-profit organizations may be exempt if net proceeds benefit the school or its students. Services provided to tax-exempt organizations, such as school districts, are also exempt.

Sales Tax Administration for Service Providers

Businesses providing taxable services in Kentucky must administer their sales tax obligations, beginning with registration with the state tax authority.

Businesses must register with the Kentucky Department of Revenue (DOR) to obtain a sales tax permit. Registration can be completed online through the Kentucky Business One Stop Portal. Required information includes the legal business name, physical address, federal Employer Identification Number (EIN), ownership type, and types of sales and services offered. There is no fee to register, and processing typically takes a few days to a few weeks.

Once registered, businesses must collect the 6% sales tax from customers on all taxable services. Clearly state the sales tax as a separate line item on invoices or receipts. This transparency ensures customers are aware of the tax collected.

Maintaining accurate records of all sales, collected tax, and any exempt transactions is important. These records should detail gross sales, taxable sales, exempt sales, and total sales tax collected. Proper record-keeping aids compliance and prepares businesses for reporting and payment obligations.

Reporting and Payment Obligations

After collecting sales tax, businesses must fulfill their reporting and payment obligations to the Kentucky Department of Revenue. This involves submitting returns and remitting the collected funds according to an assigned schedule.

The Kentucky DOR assigns a filing frequency (monthly, quarterly, or annually) based on sales volume or expected tax liability. Businesses with higher sales volumes file more frequently. For instance, a monthly sales and use tax liability of $10,000 or more may require accelerated monthly filing.

Sales tax returns and payments are due on the 20th day of the month following the reporting period. If a due date falls on a weekend or holiday, the deadline extends to the next business day. Annual filers have a due date of January 20th of the following year.

Businesses can file sales tax returns and make payments online through the Kentucky Online Gateway. This portal provides a streamlined method for submitting information and remitting funds. When completing the sales tax return, businesses use their records of total taxable sales and collected tax. Even if no sales tax was collected, a “zero return” must be filed to avoid penalties.