KRS 139.480 — Property exempt. (See LRC Note below)

(2) Coal for the manufacture of electricity;
(3) (a) All energy or energy -producing fuels used in the course of manufacturing,
processing, mining, or refining and any related distribution, transmission, and
transportation services for this energy that are billed to the user, to the extent
that the cost of the energy or energy -producing fuels used, and related
distribution, transmission, and transportation services for this energy that are
billed to the user exceed three percent (3%) of the cost of production.
(b) Cost of production shall be computed on the basis of a plant facility, which
shall include all operations within the continuous, unbroken, integrated
manufacturing or industrial processing process that ends with a product
packaged and ready for sale.
(c) A person who performs a manufacturing or industrial processing activity for a
fee and does not take ownership of the tangible personal property that is
incorporated into, or becomes the product of, the manufacturing or industrial
processing activity is a toller. For periods on or after July 1, 20 18, the costs of
the tangible personal property shall be excluded from the toller's cost of
production at a plant facility with tolling operations in place as of July 1,
2018.
(d) For plant facilities that begin tolling operations after July 1, 2018, the c osts of
tangible personal property shall be excluded from the toller's cost of
production if the toller:
1. Maintains a binding contract for periods after July 1, 2018, that governs
the terms, conditions, and responsibilities with a separate legal entity,
which holds title to the tangible personal property that is incorporated
into, or becomes the product of, the manufacturing or industrial
processing activity;
2. Maintains accounting records that show the expenses it incurs to fulfill
the binding contract that include but are not limited to energy or energy -
producing fuels, materials, labor, procurement, depreciation,
maintenance, taxes, administration, and office expenses;
3. Maintains separate payroll, bank accounts, tax returns, and other records
that demonstrate its independent operations in the performance of its
tolling responsibilities;
4. Demonstrates one (1) or more substantial business purposes for the
tolling operations germane to the overall manufacturing, industrial
processing activities, or corporate structure at the plant facility. A
business purpose is a purpose other than the reduction of sales tax
liability for the purchases of energy and energy-producing fuels; and
5. Provides information to the department upon request that documents
fulfillment of the requirements in subparagraphs 1. to 4. of this
paragraph and gives an overview of its tolling operations with an
explanation of how the tolling opera tions relate and connect with all
other manufacturing or industrial processing activities occurring at the
plant facility;
(4) Livestock of a kind the products of which ordinarily constitute food for human
consumption, provided the sales are made for breed ing or dairy purposes and by or
to a person regularly engaged in the business of farming;
(5) Poultry for use in breeding or egg production;
(6) Farm work stock for use in farming operations;
(7) Seeds, the products of which ordinarily constitute food for human consumption or
are to be sold in the regular course of business, and commercial fertilizer to be
applied on land, the products from which are to be used for food for human
consumption or are to be sold in the regular course of business; provided the sales
are made to farmers who are regularly engaged in the occupation of tilling and
cultivating the soil for the production of crops as a business, or who are regularly
engaged in the occupation of raising and feeding livestock or poultry or producing
milk for sale; and provided further that tangible personal property so sold is to be
used only by those persons designated above who are so purchasing;
(8) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals to be
used in the producti on of crops as a business, or in the raising and feeding of
livestock or poultry, the products of which ordinarily constitute food for human
consumption;
(9) Feed, including pre-mixes and feed additives, for livestock or poultry of a kind the
products of which ordinarily constitute food for human consumption;
(10) Machinery for new and expanded industry;
(11) Farm machinery. As used in this section, the term "farm machinery":
(a) Means machinery used exclusively and directly in the occupation of:
1. Tilling the soil for the production of crops as a business;
2. Raising and feeding livestock or poultry for sale; or
3. Producing milk for sale;
(b) Includes machinery, attachments, and replacements therefor, repair parts, and
replacement parts which are used or manufactured for use on, or in the
operation of farm machinery and which are necessary to the operation of the
machinery, and are customarily so used, including but not limited to combine
header wagons, combine header trailers, or any other implements spec ifically
designed and used to move or transport a combine head; and
(c) Does not include:
1. Automobiles;
2. Trucks;
3. Trailers, except combine header trailers; or
4. Truck-trailer combinations;
(12) Tombstones and other memorial grave markers;
(13) On-farm facilities used exclusively for grain or soybean storing, drying, processing,
or handling. The exemption applies to the equipment, machinery, attachments,
repair and replacement parts, and any materials incorporated into the construction,
renovation, or repair of the facilities;
(14) On-farm facilities used exclusively for raising poultry or livestock. The exemption
shall apply to the equipment, machinery, attachments, repair and replacement parts,
and any materials incorporated into the construction, re novation, or repair of the
facilities. The exemption shall apply but not be limited to vent board equipment,
waterer and feeding systems, brooding systems, ventilation systems, alarm systems,
and curtain systems. In addition, the exemption shall apply whet her or not the seller
is under contract to deliver, assemble, and incorporate into real estate the
equipment, machinery, attachments, repair and replacement parts, and any materials
incorporated into the construction, renovation, or repair of the facilities;
(15) Gasoline, special fuels, liquefied petroleum gas, and natural gas used exclusively
and directly to:
(a) Operate farm machinery as defined in subsection (11) of this section;
(b) Operate on -farm grain or soybean drying facilities as defined in subsection
(13) of this section;
(c) Operate on -farm poultry or livestock facilities defined in subsection (14) of
this section;
(d) Operate on-farm ratite facilities defined in subsection (23) of this section;
(e) Operate on-farm llama or alpaca facilities as defined in subsection (25) of this
section; or
(f) Operate on-farm dairy facilities;
(16) Textbooks, including related workbooks and other course materials, purchased for
use in a course of study conducted by an institution which qualifies as a nonprofit
educational institution under KRS 139.495. The term "course materials" means only
those items specifically required of all students for a particular course but shall not
include notebooks , paper, pencils, calculators, tape recorders, or similar student
aids;
(17) Any property which has been certified as an alcohol production facility as defined
in KRS 247.910;
(18) Aircraft, repair and replacement parts therefor, and supplies, except fuel, for the
direct operation of aircraft in interstate commerce and used exclusively for the
conveyance of property or passengers for hire. Nominal intrastate use shall not
subject the property to the taxes imposed by this chapter;
(19) Any property which has been certified as a fluidized bed energy production facility
as defined in KRS 211.390;
(20) (a) 1. Any property to be incorporated into the construction, rebuilding,
modification, or expansion of a blast furnace or any of its components or
appurtenant equipment or structures as part of an approved supplemental
project, as defined by KRS 154.26-010; and
2. Materials, supplies, and repair or replacement parts purchased for use in
the operation and maintenance of a blast furnace and related carbon
steel-making operations as part of an approved supplemental project, as
defined by KRS 154.26-010.
(b) The exemptions provided in this subsection shall be effective for sales made:
1. On and after July 1, 2018; and
2. During the term of a supplemental project agreem ent entered into
pursuant to KRS 154.26-090;
(21) Beginning on October 1, 1986, food or food products purchased for human
consumption with food coupons issued by the United States Department of
Agriculture pursuant to the Food Stamp Act of 1977, as amended , and required to
be exempted by the Food Security Act of 1985 in order for the Commonwealth to
continue participation in the federal food stamp program;
(22) Machinery or equipment purchased or leased by a business, industry, or
organization in order to collect, source separate, compress, bale, shred, or otherwise
handle waste materials if the machinery or equipment is primarily used for
recycling purposes;
(23) Ratite birds and eggs to be used in an agricultural pursuit for the breeding and
production of ratite birds, feathers, hides, breeding stock, eggs, meat, and ratite by -
products, and the following items used in this agricultural pursuit:
(a) Feed and feed additives;
(b) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals;
and
(c) On-farm facilities, including equipment, machinery, attachments, repair and
replacement parts, and any materials incorporated into the construction,
renovation, or repair of the facilities. The exemption shall apply to incubation
systems, egg processi ng equipment, waterer and feeding systems, brooding
systems, ventilation systems, alarm systems, and curtain systems. In addition,
the exemption shall apply whether or not the seller is under contract to
deliver, assemble, and incorporate into real estate the equipment, machinery,
attachments, repair and replacement parts, and any materials incorporated into
the construction, renovation, or repair of the facilities;
(24) Embryos and semen that are used in the reproduction of livestock, if the products of
these embryos and semen ordinarily constitute food for human consumption, and if
the sale is made to a person engaged in the business of farming;
(25) Llamas and alpacas to be used as beasts of burden or in an agricultural pursuit for
the breeding and produc tion of hides, breeding stock, fiber and wool products,
meat, and llama and alpaca by -products, and the following items used in this
pursuit:
(a) Feed and feed additives;
(b) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals;
and
(c) On-farm facilities, including equipment, machinery, attachments, repair and
replacement parts, and any materials incorporated into the construction,
renovation, or repair of the facilities. The exemption shall apply to waterer
and feeding systems, ven tilation systems, and alarm systems. In addition, the
exemption shall apply whether or not the seller is under contract to deliver,
assemble, and incorporate into real estate the equipment, machinery,
attachments, repair and replacement parts, and any materials incorporated into
the construction, renovation, or repair of the facilities;
(26) Baling twine and baling wire for the baling of hay and straw;
(27) Water sold to a person regularly engaged in the business of farming and used in the:
(a) Production of crops;
(b) Production of milk for sale; or
(c) Raising and feeding of:
1. Livestock or poultry, the products of which ordinarily constitute food
for human consumption; or
2. Ratites, llamas, alpacas, buffalo, cervids or aquatic organisms;
(28) Buffalos to be used as beasts of burden or in an agricultural pursuit for the
production of hides, breeding stock, meat, and buffalo by -products, and the
following items used in this pursuit:
(a) Feed and feed additives;
(b) Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals;
and
(c) On-farm facilities, including equipment, machinery, attachments, repair and
replacement parts, and any materia ls incorporated into the construction,
renovation, or repair of the facilities. The exemption shall apply to waterer
and feeding systems, ventilation systems, and alarm systems. In addition, the
exemption shall apply whether or not the seller is under cont ract to deliver,
assemble, and incorporate into real estate the equipment, machinery,
attachments, repair and replacement parts, and any materials incorporated into
the construction, renovation, or repair of the facilities;
(29) Aquatic organisms sold dire ctly to or raised by a person regularly engaged in the
business of producing products of aquaculture, as defined in KRS 260.960, for sale,
and the following items used in this pursuit:
(a) Feed and feed additives;
(b) Water;
(c) Insecticides, fungicides, h erbicides, rodenticides, and other farm chemicals;
and
(d) On-farm facilities, including equipment, machinery, attachments, repair and
replacement parts, and any materials incorporated into the construction,
renovation, or repair of the facilities and, any gasoline, special fuels, liquefied
petroleum gas, or natural gas used to operate the facilities. The exemption
shall apply, but not be limited to: waterer and feeding systems; ventilation,
aeration, and heating systems; processing and storage systems; pro duction
systems such as ponds, tanks, and raceways; harvest and transport equipment
and systems; and alarm systems. In addition, the exemption shall apply
whether or not the seller is under contract to deliver, assemble, and
incorporate into real estate th e equipment, machinery, attachments, repair and
replacement parts, and any materials incorporated into the construction,
renovation, or repair of the facilities;
(30) Members of the genus cervidae permitted by KRS Chapter 150 that are used for the
production of hides, breeding stock, meat, and cervid by -products, and the
following items used in this pursuit:
(a) Feed and feed additives;
(b) Insecticides, fungicides, herbicides, rodenticides, and other chemicals; and
(c) On-site facilities, including equipme nt, machinery, attachments, repair and
replacement parts, and any materials incorporated into the construction,
renovation, or repair of the facilities. In addition, the exemption shall apply
whether or not the seller is under contract to deliver, assemble , and
incorporate into real estate the equipment, machinery, attachments, repair and
replacement parts, and any materials incorporated into the construction,
renovation, or repair of the facilities;
(31) (a) Repair or replacement parts for the direct operation or maintenance of a motor
vehicle, including any towed unit, used exclusively in interstate commerce for
the conveyance of property or passengers for hire, provided the motor vehicle
is licensed for use on the highway and its declared gross vehicle we ight with
any towed unit is forty -four thousand and one (44,001) pounds or greater.
Nominal intrastate use shall not subject the property to the taxes imposed by
this chapter; and
(b) Repair or replacement parts for the direct operation and maintenance of a
motor vehicle operating under a charter bus certificate issued by the
Transportation Cabinet under KRS Chapter 281, or under similar authority
granted by the United States Department of Transportation.
(c) For the purposes of this subsection, "repair or replacement parts" means tires,
brakes, engines, transmissions, drive trains, chassis, body parts, and their
components. "Repair or replacement parts" shall not include fuel, machine
oils, hydraulic fluid, brake fluid, grease, supplies, or accessories not essential
to the operation of the motor vehicle itself, except when sold as part of the
assembled unit, such as cigarette lighters, radios, lighting fixtures not
otherwise required by the manufacturer for operation of the vehicle, or tool or
utility boxes;
(32) Food donated by a retail food establishment or any other entity regulated under
KRS 217.127 to a nonprofit organization for distribution to the needy;
(33) Drugs and over -the-counter drugs, as defined in KRS 139.472, that are purchased
by a person re gularly 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;
(34) (a) Building materials, fixtures, or supplies purchased by a construction
contractor if:
1. Fulfilled by a construction contract for a sewer or water project with:
a. A municipally owned water utility organized under KRS Chapter
96;
b. A water district or wate r commission formed or organized under
KRS Chapter 74;
c. A sanitation district established under KRS Chapter 220 or formed
pursuant to KRS Chapter 65;
d. A nonprofit corporation created under KRS 58.180 to act on behalf
of a governmental agency in the ac quisition and financing of
public projects;
e. Regional wastewater commissions formed under KRS Chapter
278;
f. A municipally owned joint sewer agency formed under KRS
Chapter 76; or
g. Any other governmental agency; and
2. The building materials, fixtures, or supplies:
a. Will be permanently incorporated into a structure or improvement
to real property, or will be completely consumed, in fulfilling a
construction contract for the purpose of furnishing water or sewer
services to the general public; and
b. Would be exempt if purchased directly by the entities listed in
subparagraph 1. of this paragraph.
(b) As used in this subsection, "construction contract" means a:
1. Lump sum contract;
2. Cost plus contract;
3. Materials only contract;
4. Labor and materials contract; or
5. Any other type of contract.
(c) The exemption provided in this subsection shall apply without regard to the
payment arrangement between the construction contractor, the retailer, and
the entities listed in paragraph (a)1. of this subsec tion or to the place of
delivery for the building materials, fixtures, or supplies;
(35) (a) On or after February 25, 2022, the rental of space for meetings, conventions,
short-term business uses, entertainment events, weddings, banquets, parties,
and other short-term social events, as referenced in KRS 139.200, if the tax
established in KRS 139.200 is paid by the primary lessee to the lessor.
(b) For the purpose of this subsection, "primary lessee" means the person who
leases the space and who has a contract with the lessor of the space only if:
1. The contract between the lessor and the lessee specifies that the lessee
may sublease, subrent, or otherwise sell the space; and
2. The space is then sublet, subrented, or otherwise sold to exhibitors,
vendors, sponsors, or other entities and persons who will use the space
associated with the event to be conducted under the primary lease;
(36) Prewritten computer software access services sold to or purchased by a retailer that
develops prewritten computer software for print technology and uses and sells
prewritten computer software access services for print technology;
(37) (a) Currency or bullion.
(b) As used in this subsection:
1. "Bullion":
a. Means bars, ingots, or coins, which are:
i. Made of gold, silver, platinum, palladium, or a combination
of these metals;
ii. Valued based on the content of the metal and not its form;
and
iii. Used, or have been used, as a medium of exchange, security,
or commodity by any state, the United States government, or
a foreign nation; and
b. Does not include medallions or coins that are incorporated into a
pendant or other jewelry; and
2. "Currency":
a. Means a coin or currency made of gold, silver, platinum,
palladium, or other metal or paper money that is or has been used
as legal tender and is sold based on its value as a collectible item
rather than the value as a medium of exchange; and
b. Does not include a coin or currency that has been incorporated into
jewelry; and
(38) Medicinal cannabis as defined in KRS 218B.010 when sold, used, stored, or
consumed in accordance with KRS Chapter 218B.