By Sydney Settle and Derek Gray, CPA, Director at Blue & Co.
Beginning January 1, 2023, utility services for property other than a primary residence will be subject to six percent sales tax.
This broader sales tax is a result of 2022 Kentucky House Bill 8 (HB8).
HB8 amended KRS 139.470(7) which established exemptions from sales tax for residential electricity, natural gas, fuels, water, and sewer services.
The amendment narrowed the sales tax exemption to only apply to utilities purchased and declared by the resident as used in their place of domicile. This establishes that individuals may be exempt from paying sales tax for the utilities of only one primary residence.
An individual cannot have more than one primary residence for the purposes of this amendment.
This amendment will affect individuals holding multiple residential accounts through any utility provider(s).
To apply for a residential utility sales tax exemption, complete and submit the applicable forms outlined below.
Owners and Renters of a Single-Unit Residence
Individuals owning their primary residence can apply for the resident exemption by submitting one Form 51A380: Declaration of Domicile for Purchase of Residential Utilities.
Form 51A380 should be submitted directly to each applicable utility provider and only one form per provider is needed.
Individuals renting a home as a primary residence may still be eligible for the residential exemption. For the rental home to qualify for the resident exemption, the renters who primarily reside in the home must complete Form 51A380.
This form should be submitted directly to the utility provider(s). In this scenario, the rental home exemption status will not be affected if the rental owner also qualified for a resident exemption on their separate primary residence.
Individuals are only required to submit Form 51A380 if they own multiple property utility accounts.
This form does not expire once submitted. Additionally, accounts classified as residential will not default to nonresidential status if Form 51A380 is not submitted.
Thus, this legislation is not intended to require every residential utility customer to complete the form to be eligible for the resident exemption.
A link to Form 51A380 can be found here.
Owners and Renters of a Multi-Unit Residence
Property owners holding one account that serves multiple residential units can apply for the residential exemption by submitting Form 51A381: Multi-Unit Declaration of Domicile for Landlords or Other Accountholders of Multi-Unit Dwellings Served by a Single Meter (Master Meter).
Landlords should submit Form 51A381 for each meter that serves multiple units.
The resident exemption is not applicable to meters used solely for common areas or nonresidential units. Therefore, no form needs to be submitted for those meters.
Form 51A381 must be submitted to the applicable utility provider with one Form 51A380 per dwelling unit. Landlords should collect and submit Form 51A380 from their renters.
Form 51A380 must be completed by one resident per dwelling unit and landlords may not complete the form on a resident’s behalf. Additionally, Multi-Unit Declarations that do not include Declarations of Domicile from all dwelling units served are not eligible for the resident exemption.
A link to Form 51A381 can be found here.
Submitting Exemption Forms
The forms mentioned above are standard and should be accepted by all utility providers.
The Kentucky Department of Revenue website states that there will be no refunds issued for the period beginning January 1, 2023, through the date of residential exemption form submission.
Therefore, any primary residence classified as nonresidential should be altered by submitting the applicable forms before January 1, 2023. Some utility providers may offer the ability to submit the exemption form directly through their website.
For more information, you can visit the Kentucky Department of Revenue’s FAQ page.
If you have any questions about submitting the exemption forms mentioned above, please reach out to a Blue & Co. Advisor.