Understanding which services trigger sales tax in Kentucky isn’t optional. Since 2018, Kentucky has quietly transformed from taxing mostly products to capturing over 30 service categories, catching thousands of service businesses off guard.
Kentucky’s 6% state sales tax hits tangible goods, digital products, and an expanding list of services. No local variations, no complex rate tables, just one straightforward rate that applies everywhere. Which sounds simple until you realize your massage therapy, website design, or landscaping service just became taxable.
Whether you’re launching a Kentucky service business or already operating one, knowing exactly what’s taxable prevents expensive surprises. Hands Off Sales Tax (HOST) specializes in cutting through this complexity, ensuring you collect correctly from day one.
Kentucky’s Sales Tax Framework
Kentucky keeps it simple with destination-based sourcing and a uniform 6% rate statewide. The lack of local taxes means fewer headaches than states juggling hundreds of jurisdictions.
But simple rates don’t mean simple rules. You need to register and collect once you cross Kentucky’s economic nexus threshold: $100,000 in gross receipts or 200 separate transactions in the previous or current calendar year. Hit either threshold, and collection obligations begin immediately.
The 2022 Earthquake: House Bill 8
House Bill 8 rewrote Kentucky’s tax landscape. Passed in 2022 and effective January 1, 2023, it added more than 30 service categories to the tax base overnight.
This wasn’t Kentucky’s first expansion. The state began taxing services in 2018 with HB 487, capturing landscaping, janitorial services, admissions to entertainment venues, pet care, small animal veterinary services, and indoor tanning. The 2023 expansion through HB 8 added the business-to-business services that caught most companies off guard.
The trade-off? Lower individual income taxes. Kentucky expanded what it taxes (consumption) while reducing what it taxes on income (production). For service businesses, this philosophical shift created immediate compliance obligations.
Here’s the safety net: services generating under $12,000 in annual gross receipts qualify for exemption (raised from $6,000 in 2024). But once you cross that threshold, everything over $12,000 becomes taxable that year. In subsequent years, all receipts face tax regardless of amount.
What Services Kentucky Actually Taxes
Business Services That Caught Everyone Off Guard
Marketing, advertising, and telemarketing now require tax collection. Digital marketing agencies, social media managers, and traditional ad firms all collect 6% from clients.
Photography and photo finishing turned taxable. Wedding photographers, commercial shooters, and photo labs now collect on both services and prints.
Website design, development, and hosting all require collection. Whether you’re building from scratch or maintaining existing sites, Kentucky wants its 6%.
Private investigation, process servers, and background checks? Taxable. Lobbying and executive recruitment? Also taxable.
Additional business services now taxable: courier services, private mailroom services including mail presorting and private mailbox rental, public opinion and research polling, and facsimile transmission services.
Personal Services Consumers Feel
Body modification services like tattooing, piercing, and scarification all collect tax now. Medically necessary procedures remain exempt.
Cosmetic surgery services are taxable, though reconstruction from birth defects, trauma, or disease stays exempt.
Leisure and athletic instruction like personal trainers, sports coaches, and yoga instructors collect on every session. Massage services require collection except when medically necessary.
Indoor skin tanning services, bodyguard services, and social event planning and coordination all became taxable in the recent expansions.
Property Services Homeowners Notice
Kentucky taxes comprehensive landscaping including lawn care, tree work, design, installation, and snow removal. Commercial janitorial services and parking (including valet) require collection, though parking at educational institutions remains exempt.
Security system monitoring for residential and nonresidential properties, condominium time-share exchange services, and household moving services all face the 6% rate.
Repair Services With Hidden Complexity
Labor installing or applying taxable tangible personal property sold at retail requires collection. Stand-alone labor without product sales generally escapes tax unless specifically listed.
Apparel, footwear, watch, and jewelry repair when no tangible property changes hands? Taxable. Commercial refrigeration repair and maintenance without parts? Also taxable.
Cutting, polishing, and engraving precious stones collect on every job.
Technology Services Capturing Modern Commerce
SaaS became taxable January 1, 2023 as “prewritten computer software access services.” Cloud-based subscriptions require collection, though custom software development may escape.
Video streaming services face sales tax, potentially with additional utility gross receipts tax passed to customers.
Entertainment and Events
Admissions to displays, sporting events, concerts, performances, movies, exhibits, and entertainment venues all collect. Fitness facilities and recreational sports centers charge tax on memberships.
Short-term event space rental for meetings, conventions, weddings, and parties requires collection on anything under 30 days.
Often-Overlooked Services
Several categories catch businesses by surprise: repossession of tangible personal property services, testing services except for medical, educational, veterinary, or government-required purposes, non-medical diet and weight reduction services, and road and travel services provided by automobile clubs.
What Remains Exempt (For Now)
Professional services like legal, accounting, and consulting remain tax-free. Lawyers, CPAs, and management consultants don’t collect.
Medical, dental, and healthcare services provided by licensed practitioners stay exempt. Educational instruction and tutoring remain untaxed.
Banking, investment management, and financial advisory services haven’t been captured yet.
Compliance Requirements That Matter
Registration and the $12,000 Rule
Providing taxable services and meeting nexus thresholds? Register through the Kentucky Online Gateway. You’ll need your EIN or SSN and basic business details.
The $12,000 exemption applies only to services taxable since July 1, 2018. Once you cross $12,000, everything over that amount becomes taxable. Next year? Everything’s taxable from dollar one.
This exemption doesn’t apply to businesses selling tangible property or services taxable before 2018.
Filing Deadlines and Rewards
Kentucky requires filing by the 20th day following the tax period. Most businesses file monthly. Lower-volume operations may qualify for quarterly filing. High-volume businesses with $10,000+ monthly liability file by the 25th of the current month.
File on time and Kentucky rewards you with vendor compensation: 1.75% on the first $1,000 and 1.5% on amounts exceeding $1,000, capped at $50 monthly. It’s not much, but it’s real money for timely compliance.
How Hands Off Sales Tax Eliminates Kentucky Complexity
Managing Kentucky’s service taxation alongside multi-state obligations demands specialized expertise. That’s where HOST delivers.
Nexus Analysis – We determine exactly where you’ve triggered obligations, including Kentucky’s $100,000/200-transaction threshold.
Kentucky Registration – We handle the entire registration process through the Kentucky Online Gateway, managing all paperwork.
Filing Management – HOST prepares and files Kentucky returns on schedule, ensuring you meet the 20th-day deadline and claim vendor compensation.
Service Taxability Review – Our team identifies which services are taxable versus exempt, preventing over-collection and under-collection.
Software Configuration – We optimize TaxJar, Avalara, and other tools to ensure Kentucky service taxation works correctly.
Notice and Audit Support – Kentucky sends notices or initiates audits? We handle communications and defend your position.
Multi-State Expertise – We manage compliance across all 45+ sales tax states, so Kentucky becomes one piece of a seamless system.
Founded in 1999 by Mike Espenshade, HOST brings over 25 years of sales tax specialization. Our parent company TaxMatrix has served North America’s largest enterprises. We bring that expertise to businesses of all sizes.
Taking Action on Kentucky Service Taxation
Kentucky’s service tax expansion created obligations for thousands of businesses that never collected sales tax before. Understanding taxability, managing thresholds, and filing correctly protects you from penalties while maintaining customer trust.
The complexity of service taxation when determining what’s taxable, sourcing transactions, managing the $12,000 threshold, filing on time, makes professional assistance valuable. Every hour researching Kentucky tax law or preparing returns is time not spent growing your business.
Contact HOST today to discuss your Kentucky sales tax needs. Let us manage Kentucky compliance while you focus on delivering excellent services.
Get our “10 Sales Tax Mistakes E-Commerce Sellers Make” e-book to avoid costly errors across all states.
Frequently Asked Questions
What services are subject to sales tax in Kentucky?
Kentucky taxes over 30 service categories including marketing, photography, website design, landscaping, body modification, leisure instruction, SaaS, parking, admissions, and various repair services added primarily through House Bill 8 effective January 2023.
Are professional services like legal or accounting taxable in Kentucky?
No. Professional services including legal, accounting, and consulting remain exempt. Medical, educational, and financial services are also generally exempt.
What is the $12,000 threshold for service taxation in Kentucky?
Services taxable after July 1, 2018 get a $12,000 exemption. Once you exceed $12,000, amounts over that threshold become taxable. Next year, all receipts are taxable. This doesn’t apply to tangible property or previously taxable services.
Do out-of-state service providers need to register in Kentucky?
Yes, if you exceed $100,000 in gross receipts or 200 transactions in the previous or current calendar year. Physical presence doesn’t matter. Economic activity alone triggers obligations.
Is SaaS taxable in Kentucky?
Yes. SaaS became taxable January 1, 2023 as “prewritten computer software access services.” Custom software development may be exempt, but cloud subscriptions require collection.
What is Kentucky’s sales tax rate?
Kentucky’s rate is 6% statewide with no local taxes. The same 6% applies uniformly across all jurisdictions, making it simpler than states with varying local rates.
