South Dakota, Kentucky and Other States Broaden the Scope of Sales and Use Tax
On June 21, 2018, the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc., et al. ruled that the new South Dakota law regarding sales and use tax is lawful and could be implemented. This new law requires online retailers with over $100,000 in sales or 200 individual transactions in a given year to collect South Dakota sales tax on their sales. Previously, a retailer had to have a physical presence in a state to collect sales tax in order to create a disincentive for online retailers to invest in physical locations in other states. It was also thought this might give them a competitive edge over tax-collecting brick-and-mortar stores.
Due to the Supreme Court’s recent decision, online retailers must start collecting sales tax on sales to South Dakota residences if they meet the gross sales or transactions criteria. Other states, including Kentucky, have adopted the same requirements, and others are bound to follow.
As of July 1, 2018, the House passed Bill 366, which broadens the scope of industries and services which may be required to pay sales tax. These services and industries include, but are not limited to:
• Admissions to events and facilities, such as initiation, membership and monthly fees.
Historical sites and racetracks are exempt. Affected facilities include:
o Bowling centers
o Fitness and recreational sports centers
o Golf courses
o Skating rinks
o Spas
o Swimming pools
o Tennis courts
o Weight training facilities
• Extended warranty services for maintenance, repairs or support of tangible digital or personal property
• Indoor skin tanning services, such as tanning booths, beds and spray tanning services
• Industrial laundry services, such as industrial mat and rug supply and industrial uniform supply services
• Janitorial services, such as cleaning services for residences, commercial buildings, carpet, upholstery, and windows
• Labor regarding installing or applying any tangible personal or digital property or services sold. Services regarding the repair of real property are exempt.
• Landscaping services, including:
o Landscape care and maintenance
o Landscape design and installation
o Lawn care and maintenance
o Snow plowing and removal
o Tree trimming, pruning, or removal
• Limousine services, if a driver is provided
• Linen supply services, including:
o Nonindustrial uniform supply services
o Table and bed linen supply services
• Non-coin operated laundry and dry cleaning services
• Non-medical diet and weight reducing services
• Pet care services, including:
o Grooming and boarding services
o Pet obedience training
o Pet sitting
• Small animal veterinary services. Veterinary services for alpacas, buffalo, cattle, cervids, equine, goats, llamas, ratite birds, sheep, and swine are exempt.
If you own a business involving any of the above affected industries or services, we recommend you begin collecting 6% Kentucky sales tax.
Please contact our office at 859-261-6800 if we can assist you in understanding or applying this new bill to your business.
