Kentucky Utility Sales Tax Exemption

Manufacturers and industrial processors with facilities located in Kentucky, may be eligible for a utility tax exemption. Kentucky offers an exemption from state sales tax and gross receipts tax on the purchase of electricity, natural gas, and water used in qualifying production activities. This tax exemption is authorized by Section 103 KAR 30:140.

Exemption Language of Section 103 KAR 30:140

"Taxpayer may claim exemption on the purchase of energy or energy-producing fuel if these costs "exceed 3 percent of the cost of production."

Utility Study Requirement for Exemption Qualification

A Kentucky utility tax study should list every piece of equipment and appliance (production and non-production) that uses the utility and the annual consumption of each. Additionally, cost of production calculations are needed to determine whether the cost of energy exceeds 3% of the total cost of production.

Kentucky Statute of Limitations on Tax Refund

4 years

State Sales Tax Rate: 6%

Average Local Sales Tax Rate: 0%

Helpful Resources

Kentucky Utility Exemption Certificate: Application for Direct Pay 51A109

Kentucky Utility Exemption Statute/Rule: Section 103 KAR 30:140

Kentucky Claim Form for Tax Refund: Energy Exemption Annual Return