The General Assembly made changes to Kentucky’s tax law during its 2019 session, albeit not the type of wholesale changes made in 2018. The most significant sales tax changes and several income tax changes are described below.

Sales Tax

In 2018, for the first time, legislators imposed sales tax on 11 services:

  • Landscaping

  • Janitorial

  • Small animal veterinarian

  • Pet care

  • Industrial laundry

  • Non-coin-operated laundry and dry cleaning

  • Linen supply

  • Indoor skin tanning

  • Non-medical diet and weight reducing

  • Limousine services (if a driver is provided)

  • Extended warranties

These new taxes created a number of problems. Click the “solution” tab to learn about changes addressing the problems.

Three additional changes include:

  • No sales tax on veterinarian services for “poultry”

  • Narrowing the definition of “admission” to exclude fishing tournaments, fees paid for boat slips, and unarmed combat shows

  • Requiring marketplace providers to collect and remit sales tax on behalf of vendors selling from their platforms

Income Tax

The General Assembly also made several income tax changes with varying levels of impact. The following four changes have broad applicability:

  1. Increasing from $25,000 to $100,000 Kentucky’s version of the Internal Revenue Code’s Section 179 expense;
  2. Allowing a deduction for investment interest expense;
  3. Allowing a deduction for wagering losses; and
  4. Conforming Kentucky’s estimated tax filing rules to those of the IRS.

All four of these changes are effective for tax years beginning on or after January 1, 2019. Additionally, for those sections of the Internal Revenue Code (IRC) to which Kentucky conforms, the state will now conform to the IRC in effect as of December 31, 2018. Other changes made relate to the filing methodology for tax returns of C corporations and taxation of financial institutions and savings and loan associations.

Questions?

Contact your Dean Dorton advisor or Erica Horn at ehorn@deandorton.com.