Kentucky Department of Revenue Kentucky Department of Revenue Kentucky Department of Revenue Kentucky Department of Revenue

Sales and Use Tax

Equine Breeders’ Incentive Funds

Beginning with tax periods due on or after June 1, 2005, sales and use tax generated on the fees paid for breeding a stallion to a mare in Kentucky will be deposited in a fund administered by the Kentucky Horse Racing Authority.

Breeders will continue to file and pay the sales and use tax due each period on their Sales and Use Tax Return.  Along with this return, they should also file Form 51A132, Kentucky Sales and Use Tax Equine Breeders Supplementary Schedule, on which they will report only the amount of fees collected for the breeding of a stallion to a mare in Kentucky and the amount of tax collected on these sales.  Form 51A132 will allow the Department of Revenue to set aside these amounts for transfer to the Kentucky Horse Racing Authority.  Mail this form directly to the Division of Sales and Use Tax, P.O. Box 181, Frankfort, KY 40602-0181, or fax to (502) 564-2041. Failure to report this information will affect the transfer of the appropriate amount of funds to the Kentucky Horse Racing Authority.

KRS 139.531 is amended effective June 1, 2005 so that the sales tax collected on the fees for the breeding of a stallion to a mare will be divided into three different funds to be administered by the Kentucky Horse Racing Authority.  A Kentucky thoroughbred breeders incentive fund will receive 80 percent, 13 percent will be allocated to a Kentucky standardbred breeders incentive fund, and 7 percent will be transferred to a Kentucky horse breeders incentive fund. The Kentucky Horse Racing Authority will set forth the conditions and criteria for distribution of the money from these funds.

In addition to the sales tax credited to these funds, there is also a provision to allow for additional state appropriations, gifts, grants and federal funds to be received.  All interest earned on the money deposited will also be credited to these funds and administered by the Kentucky Racing Authority.

Any horse breeder that is not currently registered to collect sales and use tax should complete a registration application.

Effective June 1, 2005, KRS 139.531 was also amended to expand the exemption on horses younger than two years old sold to nonresidents by eliminating the requirement that the horse be transported out of state.  For the purposes of this exemption, nonresident means a person defined in KRS 141.010(15) who is not a resident in this state as defined by KRS 141.010(17) or who is not commercially domiciled in this state as defined in KRS 141.120(1) (b).

Anyone who needs information regarding the filing of the supplemental form or needs copies of the form may access them at the Department of Revenue’s web site, or you may contact the Sales and Use Tax Division at (502) 564-5170. 

Additional questions regarding the funds and the distribution of the money collected should be addressed to the Kentucky Horse Racing Authority at (859) 246-2040.

The Department of Revenue and the Kentucky Horse Racing Authority pledge their cooperation to make this historic legislation an effective program for equine breeders.

Kentucky Sales & Use Tax Equine Breeders Supplementary Schedule  (39K)

Nexus Standards

KRS 139.340 is amended to broaden the nexus standard to encompass remote sellers who use a representative in Kentucky, either full time or part time, to facilitate remote sales.  For example, remote sellers who allow merchandise to be received and exchanged at an affiliated store or any location within Kentucky qualify as retailers engaged in business in this state that must register to collect Kentucky use tax. (Effective August 1, 2005)

Enterprise Initiatives

A new section of KRS 154 is created to provide a statewide tax incentive program that allows eligible companies the opportunity to receive refunds of sales and use tax paid on the purchase of building materials and research and development equipment.  Only businesses primarily engaged in manufacturing, service or technology, or developing a tourism attraction are eligible to apply for the tax incentives.  Companies seeking to participate in the incentive program must apply for eligibility through the Kentucky Economic Development Finance Authority.  Applications may be submitted on or after October 1, 2005; however, no approvals will be effective before January 1, 2006.  The plan gives preference to companies in existing enterprise zones, requiring them to invest a minimum of $100,000.  All other areas require a minimum investment of $500,000.  There is a yearly statewide cap of $20 million for building materials and $5 million for research and development equipment on all approved projects.  In addition, the existing enterprise zones and accompanying exemptions will continue until their normal expiration.  (Effective January 1, 2006) 

Telephones/Pay Phones

Effective January 1, 2006, KRS 139.195 is amended to exclude switch access and pay phone receipts from communications services subject to sales tax.  All other communications services as outlined in KRS 139.200 remain subject to sales tax unless specifically exempted. (Also See Telecommunications Services)

Study of Exemptions

The Legislative Research Commission is directed to study the effectiveness of sales and use tax exemptions for enhancing economic development and report the findings by no later than December 1, 2006.


Last Updated 9/15/2006