Effective Jan. 1, 2023, new documentation is required for customers to qualify for the residential exemption from sales tax on utilities pursuant to KRS 139.470. The Kentucky Department of Revenue recently released guidance on how local utilities must apply the new amendments to the residential tax exemption contained in House Bill 8 passed in the 2023 Regular Session of the Kentucky General Assembly. A summary of the changes that impact city utilities are as follows:
- Customers treated as exempt under the previous language of KRS 139.470(7) will remain exempt unless they receive the exemption for two or more locations. All new customers must submit a completed declaration of domicile form to qualify for the residential exemption.
- Utilities should review customer databases to determine whether a customer receives a residential exemption for more than one address. If so, the utility must document the address that the customer declares as their domicile.
- Landlords holding utility accounts for single and multi-unit residential rental properties may have tenants fill out the Kentucky Department of Revenue declaration of domicile form to classify the rental property as a residential account. Landlords must submit a completed multi-unit declaration of domicile form along with the individual tenant domicile forms to qualify for the residential exemption.
- Customers can request a reclassification of accounts from non-residential to residential after Jan. 1, 2023. However, those customers will not receive a refund for sales tax accrued prior to the date the utility receives the completed request for a residential exemption.
- Each time a new tenant takes possession of rental property, a landlord holding the utility account for the property must have the new tenant sign a declaration of domicile form for the property to remain eligible for the residential exemption.
- There is no expiration date for the declaration of domicile certification unless the account changes ownership or there is a new tenant.
For questions about this or any other legal matters, please contact the KLC Municipal Law Department.