There have been several notable tax developments since the 2022 Kentucky regular session, including Bill 260 (“HB 260”) which did not pass and Bill 8 (“HB 8”) which was enacted despite the Governor’s veto.
Many were closely watching HB 260, which proposed drastic changes to the methods used to value property for property tax assessment purposes. The taxpayer and property tax community believed that HB 260 would, among other things, have exceeded by law the constitutional standard of fair monetary value of real estate developed by case law over decades. This property tax bill was amended and passed by the House but rejected by the Senate, becoming the final iteration rejected by the General Assembly. It is curious to know why such an anti-taxpayer bill keeps resurfacing. Maybe he is now dead for good?
HB 8 includes a phased reduction in the personal income tax rate and funded by broadening the sales tax base by imposing sales tax on over thirty new services. Notably, HB 8 establishes an annual assessment of the rate reduction, with any potential tax rate reduction of 0.5% commencing January 1, 2023.
The new bill also includes a tax amnesty program, available to all taxpayers from October 1 through November 29, 2022. The amnesty applies to all amounts due and owing on state taxes for the periods taxes or transactions made on or after October 1, 2011, but before December 1, 2021. The program allows taxpayers to resolve unpaid debts due to under-reporting or non-reporting and benefit from a waiver of prosecution criminal and civil penalties and costs. Amnesty is not available for locally assessed taxes on real estate, motor vehicles and motorboats, personal property, and certain penalties. Taxpayers seeking to take advantage of this limited opportunity should ensure program requirements are met.
A non-exhaustive list of services newly subject to the tax, effective January 1, 2023, includes photography and photo finishing services, cosmetic surgery services, marketing services, telemarketing services, survey services opinion and research, lobbying services, executive search services. , website design and development services, website hosting services, private mail room services, pre-written software access services, certain security services, parking services, certain repair services and some rental services. Only a few of these new services are specifically defined, which leaves the scope a little less well defined in some cases. Any provider of any of these newly taxable services with more than $6,000 in gross revenue in 2021 or 2022 must be registered to collect sales and use tax by January 1, 2023.
In addition to the expansion of services, the new legislation also allows all newly taxable services to be purchased for resale. As provided in the Department’s June 2022 “Sales Tax Facts”, an example of a service sold for resale would include a purchaser of a website design service, who then resells the service to an end customer; in other words, a web designer who contracts with another web design entity. In such sale for resale, Reseller may issue a Resale Certificate at the time of purchasing the Web Design Services.
Taking into account the practical and technological changes in vehicles and ridesharing, HB 659 establishes an excise tax on electric vehicle energy which will come into effect on January 1, 2024. The tax will be imposed on the vehicle energy concessionaire electric, with the $0.03 per kilowatt hourly rate subject to adjustment based on the annual percentage change in the National Road Construction Cost Index 2.0. HB 659 also establishes initial and annual registration fees for electric vehicle owners. In addition, a new section establishes a new 6% excise tax on vehicle rentals, peer-to-peer rentals, ride-sharing services, taxi services, and limousine services.