KRS 139.534 — Tax refund for purchases and operation of certain communications and computer systems costing $100 million or more

(1) As used in this section:
(a) "Approved company" means an eligible company that has received
preliminary approval from the department for a sales and use tax refund under
this section;
(b) "Communications system" means a system composed of equipment used to
provide communications services as defined in KRS 139.195.
"Communications system" does not include repair, replacement, or spare parts
as defined in KRS 139.010, installation materials, operating supplies, office
supplies, or supplies to maintain the system;
(c) "Computer software" means a set of coded instructions designed to cause a
computer or automatic processing equipment to perform a task;
(d) "Computer system" means a system composed of personal computers, laptops,
computer software, computer servers, processors, coprocessors, memory
devices, storage devices, input and output devices, and other similar devices
deployed as part of the system configuration. "Computer system" does not
include repair, replacement, or spare parts as defined in KRS 139.010,
installation materials, operating supplies, office supplies, or supplies to
maintain the system;
(e) "Eligible company" means a corporation, limited liability company,
partnership, registered limited liability partnership, sole proprietorship,
business trust, or any other entity that is classified under the following 2007
North American Industry Classification System (NAICS) indust ry codes,
including any subsequent updates or revisions thereto:
1. NAICS 511210, Software publishers;
2. NAICS 518210, Data processing, hosting, and related services;
3. NAICS 519130, Internet publishing, broadcasting, and web search portal
business; or
4. NAICS 541511, Custom computer programming services; and
(f) "Qualifying system" means:
1. A communications system;
2. A computer system; or
3. A combination thereof;
that is subject to depreciation under Section 167 or 168 of the In ternal
Revenue Code, including assets expensed under Section 179 of the Internal
Revenue Code.
(2) Notwithstanding KRS 134.580(3) and 139.770, an approved company may qualify
for a refund of up to one hundred percent (100%) of the Kentucky sales and use ta x
paid, reduced by the amount of vendor compensation allowed under KRS 139.570,
on the purchase of a qualifying system.
(3) To qualify for the refund provided in subsection (2) of this section, all of the
following requirements shall be met:
(a) The eligible company shall file an application for preliminary approval with
the department prior to making the purchase;
(b) Upon receiving preliminary approval, the approved company shall purchase
the qualifying system on or after July 1, 2010, and shall spend one hundred
million dollars ($100,000,000) or more on the purchase or purchases,
excluding tax;
(c) The qualifying system shall be installed at a single location in the
Commonwealth within eighteen (18) months from the date the department
preliminarily approves the eligible company for a sales and use tax refund as
provided in subsection (5) of this section; and
(d) The approved company shall use the qualifying system:
1. At the specified location until the property is fully depreciated or, if the
approved company elects to expense the property under Section 179 of
the Internal Revenue Code, the property shall be operated at the
Kentucky location for the same time as if the property were depreciated
under Section 167 or 168 of the Internal Revenue Code; and
2. In the business activities that are included within the NAICS industry
codes listed in subsection (1)(e) of this section.
(4) The eligible company shall file an application for preliminary approval with the
department prior to purchasing the qualifying system. The application shall be in the
form prescribed by the department and shall include:
(a) The name and address of the eligible company;
(b) A description of the eligible company's business activities and applicable
NAICS code;
(c) A description of the qualifying system and an explanation of how the
components thereof will be used by the eligible company in its business
activities;
(d) The estimated cost of the system;
(e) The business location where the system will be located;
(f) The date of anticipated purchase;
(g) The anticipated installation completion date; and
(h) Any other information the department may require.
(5) The department shall notify the eligible company that the application for
preliminary approval has been approved or denied.
(6) (a) To be eligible to receive a full refund, the approved company shall file a
request for a sales and use tax refund within sixty (60) days following the
completed installation of qualifying system.
(b) Failure to file a refund request within sixty (60) days shall result in an
adjustment to the refund amount paid as follows:
1. For late refund requests filed on or after the sixty -first day and prior to
the one hundred eighty-first day after the completed installation, for each
thirty (30) days, or portion ther eof, that the refund request is late, the
refund amount shall be reduced by one -twelfth (1/12) of the total
amount determined by the department; and
2. Any refund request filed more than one hundred eighty (180) days after
the completed installation shall be rejected, and no refunds shall be paid
for the time period covered by the request.
(7) Interest shall not be allowed or paid on any sales and use tax refund made under this
section.
(8) (a) If the approved company does not operate the qualifying system at the
business location where the system was initially installed for the time period
required under subsection (3)(d)1. of this section, or in the manner required
under subsection (3)(d)2. of this section, the approved company shall notify
the department that the requirements of subsection (3) of this section have not
been met. The approved company shall repay the previously received sales
and use tax refunds plus interest at the rate establish ed in KRS 131.183
computed from the date the refund was issued.
(b) If the approved company fails to pay the tax and interest within thirty (30)
days of the notification, the department shall apply all applicable penalties
provided in KRS 131.180.