On April 13, 2022, the Kentucky General Assembly overrode Governor Andy Beshear's veto of House Bill 8 (HB 8). HB 8 makes several changes to Kentucky tax rules, including:

• Updating Kentucky's conformity to the Internal Revenue Code
• Implementing conditional reductions in the individual income tax rate
• Expanding Kentucky's sales/use tax base to include over 30 services
• Establishing a tax amnesty program
• Adopting a new tax incentive for remediating certain contaminated properties

These changes were previously discussed in Tax Alert 2022-0564.

Implications

The expansion of the sales and use tax base to a wide variety of services appears similar to those enacted for a short time in Kansas and considered in other states, such as Ohio. Taxpayers will need to carefully review the list of services that will be subject to sales and use tax starting January 1, 2023, to (1) understand how the commonwealth defines those services and (2) modify their own internal compliance systems and processes to make certain that the taxability determinations in their systems account for the expanded scope of services.

Taxpayers should also monitor the developments around the amnesty program, as the initiation of a program during calendar year 2022 depends on the success of the Kentucky Department of Revenue in procuring a third-party service provider to administer the program.

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