Free guide for contractors
Do contractors charge sales tax in Kentucky?
General information, not tax advice. Tax rules change and depend on the details of each job. Confirm how they apply to your business with your accountant or the state's revenue department before relying on them.
KY Kentucky
Usually no tax on the invoiceNo, for construction work. Kentucky contractors pay tax on materials when buying them and may not bill sales tax separately.
Kentucky's regulation makes a construction contractor pay tax on materials and fixtures when buying them, whatever the contract type: lump sum, cost plus, time and materials or other.
The contractor shall not bill sales tax as a separate charge to the customer on a construction contract. The regulation names trades such as carpentry, bricklaying, wall-to-wall carpeting, cement work, roofing, electrical work, plumbing, central heating and air conditioning, and painting.
A contractor engaged only in construction is not required to hold a retail sales tax permit.
Some services are taxable whoever provides them, including landscaping and lawn care, janitorial and cleaning services, and extended warranties. The statute also taxes interior decorating and design, although the contractor regulation lists interior decorating as a contractor trade.
It turns on: what trade the work is; whether the job is construction or a taxable service such as landscaping or cleaning; whether a free-standing item is sold.
Watch out for
- A contractor selling a free-standing appliance, such as a refrigerator, charges sales tax on it along with any delivery or installation charges, and needs a sales tax permit (103 KAR 26:070 § 8(4)).
- Labor to repair or maintain commercial refrigeration is taxable when no tangible personal property is sold in the transaction (KRS 139.200(2)(av)).
- Hardscape under a construction contract, such as retaining walls, driveways, patios, decks and fences, is construction; planting, sod and lawn work remain taxable landscaping (103 KAR 26:131 § 8(3)).
- Someone repairing tangible personal property is not a contractor for that work under the regulation (103 KAR 26:070 § 1(2)(b)).
“The contractor shall not bill sales tax as a separate charge to the customer”103 KAR 26:070 § 8(2)