KRS 139.470 — Exempt transactions

There are excluded from the computation of the amount of taxes imposed by this chapter:
(1) Gross receipts from the sale of, and the storage, use, or other consumption in this
state of, tangible personal property or digital property which this state is pro hibited
from taxing under the Constitution or laws of the United States, or under the
Constitution of this state;
(2) Gross receipts from sales of, and the storage, use, or other consumption in this state
of:
(a) Nonreturnable and returnable containers whe n sold without the contents to
persons who place the contents in the container and sell the contents together
with the container; and
(b) Returnable containers when sold with the contents in connection with a retail
sale of the contents or when resold for refilling;
As used in this section the term "returnable containers" means containers of a kind
customarily returned by the buyer of the contents for reuse. All other containers are
"nonreturnable containers";
(3) Gross receipts from occasional sales of ta ngible personal property or digital
property and the storage, use, or other consumption in this state of tangible personal
property or digital property, the transfer of which to the purchaser is an occasional
sale;
(4) Gross receipts from sales of tangible personal property to a common carrier,
shipped by the retailer via the purchasing carrier under a bill of lading, whether the
freight is paid in advance or the shipment is made freight charges collect, to a point
outside this state and the property is act ually transported to the out -of-state
destination for use by the carrier in the conduct of its business as a common carrier;
(5) Gross receipts from sales of tangible personal property sold through coin -operated
bulk vending machines, if the sale amounts t o fifty cents ($0.50) or less, if the
retailer is primarily engaged in making the sales and maintains records satisfactory
to the department. As used in this subsection, "bulk vending machine" means a
vending machine containing unsorted merchandise which, upon insertion of a coin,
dispenses the same in approximately equal portions, at random and without
selection by the customer;
(6) Gross receipts from sales to any cabinet, department, bureau, commission, board, or
other statutory or constitutional agency of the state and gross receipts from sales to
counties, cities, or special districts as defined in KRS 65.005. This exemption shall
apply only to purchases of tangible personal property, digital property, or services
for use solely in the government function. A purchaser not qualifying as a
governmental agency or unit shall not be entitled to the exemption even though the
purchaser may be the recipient of public funds or grants;
(7) (a) Gross receipts from the sale of sewer services, water, and fuel to Kentucky
residents for use in heating, water heating, cooking, lighting, and other
residential uses if the sewer services, water, and f uel are purchased and
declared by the resident as used in his or her place of domicile.
(b) As used in this subsection:
1. "Fuel" shall include but not be limited to natural gas, electricity, fuel oil,
bottled gas, coal, coke, and wood; and
2. "Place of do micile" means 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.
(c) Determinations of eligibility for the exemption shall be made by the
department.
(d) The exemption shall apply to charges for sewer service, water, and fuel billed
to an owner or operator of a multi -unit residential rental facility or mobile
home and recreational vehicle park if the o wner or operator declares that the
sewer services, water, and fuel are purchased for Kentucky residents to be
used in the resident's place of domicile.
(e) The exemption shall apply also to residential property which may be held by
legal or equitable title , by the entireties, jointly, in common, as a
condominium, or indirectly by the stock ownership or membership
representing the owner's or member's proprietary interest in a corporation
owning a fee or a leasehold initially in excess of ninety -eight (98) years if the
sewer services, water, and fuel are purchased for and declared by the
Kentucky resident as used in his or her place of domicile;
(8) Gross receipts from sales to an out -of-state agency, organization, or institution
exempt from sales and use tax in its state of residence when that agency,
organization, or institution gives proof of its tax-exempt status to the retailer and the
retailer maintains a file of the proof;
(9) (a) Gross receipts derived from the sale of tangible personal property, as provided
in paragraph (b) of this subsection, to a manufacturer or industrial processor if
the property is to be directly used in the manufacturing or industrial
processing process of:
1. Tangible personal property at a plant facility;
2. Distilled spirits or wine at a plant facility or on the premises of a
distiller, rectifier, winery, or small farm winery licensed under KRS
243.030 that includes a retail establishment on the premises; or
3. Malt beverages at a plant facility or on the premises of a brewer or
microbrewery licensed under KRS 243.040 that includes a retail
establishment;
and which will be for sale.
(b) The following tangible personal property shall qualify for exemption under
this subsection:
1. Materials which enter into and become an ingredie nt or component part
of the manufactured product;
2. Other tangible personal property which is directly used in the
manufacturing or industrial processing process, if the property has a
useful life of less than one (1) year. Specifically, these items are
categorized as follows:
a. Materials. This refers to the raw materials which become an
ingredient or component part of supplies or industrial tools exempt
under subdivisions b. and c. below;
b. Supplies. This category includes supplies such as lubricating a nd
compounding oils, grease, machine waste, abrasives, chemicals,
solvents, fluxes, anodes, filtering materials, fire brick, catalysts,
dyes, refrigerants, and explosives. The supplies indicated above
need not come in direct contact with a manufactured pro duct to be
exempt. "Supplies" does not include repair, replacement, or spare
parts of any kind; and
c. Industrial tools. This group is limited to hand tools such as jigs,
dies, drills, cutters, rolls, reamers, chucks, saws, and spray guns
and to tools atta ched to a machine such as molds, grinding balls,
grinding wheels, dies, bits, and cutting blades. Normally, for
industrial tools to be considered directly used in the manufacturing
or industrial processing process, they shall come into direct
contact with the product being manufactured or processed; and
3. Materials and supplies that are not reusable in the same manufacturing
or industrial processing process at the completion of a single
manufacturing or processing cycle. A single manufacturing cycle shall
be considered to be the period elapsing from the time the raw materials
enter into the manufacturing process until the finished product emerges
at the end of the manufacturing process.
(c) The property described in paragraph (b) of this subsection shall be regarded as
having been purchased for resale.
(d) For purposes of this subsection, a manufacturer or industrial processor
includes an individual or business entity that performs only part of the
manufacturing or industrial processing activity, and the per son or business
entity need not take title to tangible personal property that is incorporated
into, or becomes the product of, the activity.
(e) The exemption provided in this subsection does not include repair,
replacement, or spare parts;
(10) Any water use fee paid or passed through to the Kentucky River Authority by
facilities using water from the Kentucky River basin to the Kentucky River
Authority in accordance with KRS 151.700 to 151.730 and administrative
regulations promulgated by the authority;
(11) Gross receipts from the sale of newspaper inserts or catalogs purchased for storage,
use, or other consumption outside this state and delivered by the retailer's own
vehicle to a location outside this state, or delivered to the United States Postal
Service, a common carrier, or a contract carrier for delivery outside this state,
regardless of whether the carrier is selected by the purchaser or retailer or an agent
or representative of the purchaser or retailer, or whether the F.O.B. is retailer's
shipping point or purchaser's destination.
(a) As used in this subsection:
1. "Catalogs" means tangible personal property that is printed to the special
order of the purchaser and composed substantially of information
regarding goods and services offered for sale; and
2. "Newspaper inserts" means printed materials that are placed in or
distributed with a newspaper of general circulation.
(b) The retailer shall be responsible for establishing that delivery was made to a
non-Kentucky location through shipping docu ments or other credible
evidence as determined by the department;
(12) Gross receipts from the sale of water used in the raising of equine as a business;
(13) Gross receipts from the sale of metal retail fixtures manufactured in this state and
purchased for storage, use, or other consumption outside this state and delivered by
the retailer's own vehicle to a location outside this state, or delivered to the United
States Postal Service, a common carrier, or a contract carrier for delivery outside
this state, regardless of whether the carrier is selected by the purchaser or retailer or
an agent or representative of the purchaser or retailer, or whether the F.O.B. is the
retailer's shipping point or the purchaser's destination.
(a) As used in this subsection, " metal retail fixtures" means check stands and
belted and nonbelted checkout counters, whether made in bulk or pursuant to
specific purchaser specifications, that are to be used directly by the purchaser
or to be distributed by the purchaser.
(b) The retailer shall be responsible for establishing that delivery was made to a
non-Kentucky location through shipping documents or other credible
evidence as determined by the department;
(14) Gross receipts from the sale of unenriched or enriched uranium purchased for
ultimate storage, use, or other consumption outside this state and delivered to a
common carrier in this state for delivery outside this state, regardless of whether the
carrier is selected by the purchaser or retailer, or is an agent or representative of the
purchaser or retailer, or whether the F.O.B. is the retailer's shipping point or
purchaser's destination;
(15) Amounts received from a tobacco buydown. As used in this subsection, "buydown"
means an agreement whereby an amount, whether paid in mone y, credit, or
otherwise, is received by a retailer from a manufacturer or wholesaler based upon
the quantity and unit price of tobacco products sold at retail that requires the retailer
to reduce the selling price of the product to the purchaser without th e use of a
manufacturer's or wholesaler's coupon or redemption certificate;
(16) Gross receipts from the sale of tangible personal property or digital property
returned by a purchaser when the full sales price is refunded either in cash or credit.
This exc lusion shall not apply if the purchaser, in order to obtain the refund, is
required to purchase other tangible personal property or digital property at a price
greater than the amount charged for the property that is returned;
(17) Gross receipts from the sales of gasoline and special fuels subject to tax under KRS
Chapter 138;
(18) The amount of any tax imposed by the United States upon or with respect to retail
sales, whether imposed on the retailer or the consumer, not including any
manufacturer's excise or import duty;
(19) Gross receipts from the sale of any motor vehicle as defined in KRS 138.450 which
is:
(a) Sold to a Kentucky resident, registered for use on the public highways, and
upon which any applicable tax levied by KRS 138.460 has been paid; or
(b) Sold to a nonresident of Kentucky if the nonresident registers the motor
vehicle in a state that:
1. Allows residents of Kentucky to purchase motor vehicles without
payment of that state's sales tax at the time of sale; or
2. Allows residents of Kent ucky to remove the vehicle from that state
within a specific period for subsequent registration and use in Kentucky
without payment of that state's sales tax;
(20) Gross receipts from the sale of a semi -trailer as defined in KRS 189.010(12) and
trailer as defined in KRS 189.010(17);
(21) Gross receipts from the collection of:
(a) Any fee or charge levied by a local government pursuant to KRS 65.760;
(b) The charge imposed by KRS 65.7629(3);
(c) The fee imposed by KRS 65.7634; and
(d) The service charge imposed by KRS 65.7636;
(22) Gross receipts derived from charges for labor or services to apply, install, repair, or
maintain tangible personal property directly used in manufacturing or industrial
processing process of:
(a) Tangible personal property at a plant facility;
(b) Distilled spirits or wine at a plant facility or on the premises of a distiller,
rectifier, winery, or small farm winery licensed under KRS 243.030; or
(c) Malt beverages at a plant facility or on the premises of a brewer or
microbrewery licensed under KRS 243.040;
that is not otherwise exempt under subsection (9) of this section or KRS
139.480(10), if the charges for labor or services are separately stated on the invoice,
bill of sale, or similar document given to purchaser;
(23) (a) For persons selling services i ncluded in KRS 139.200(2)(g) to (ax) prior to
January 1, 2025, gross receipts derived from the sale of those services if the
gross receipts were less than twelve thousand dollars ($12,000) during
calendar year 2024. When gross receipts from these services exceed twelve
thousand dollars ($12,000) in a calendar year:
1. All gross receipts over twelve thousand dollars ($12,000) are taxable in
that calendar year; and
2. All gross receipts are subject to tax in subsequent calendar years.
(b) The exemption provid ed in this subsection shall not apply to a person also
engaged in the business of selling tangible personal property, digital property,
or services included in KRS 139.200(2)(a) to (f); and
(24) (a) For persons that first begin making sales of services inc luded in KRS
139.200(2)(g) to (ax) on or after January 1, 2025, gross receipts derived from
the sale of those services if the gross receipts are less than twelve thousand
dollars ($12,000) within the first calendar year of operation. When gross
receipts fr om these services exceed twelve thousand dollars ($12,000) in a
calendar year:
1. All gross receipts over twelve thousand dollars ($12,000) are taxable in
that calendar year; and
2. All gross receipts are subject to tax in subsequent calendar years.
(b) The exemption provided in this subsection shall not apply to a person that is
also engaged in the business of selling tangible personal property, digital
property, or services included in KRS 139.200(2)(a) to (f).