Kentucky ~ Sales and Use Tax: Disaster Relief Tax Refund Enacted

Kentucky Gov. Steve Beshear has signed legislation that provides legal owners of buildings damaged or destroyed by recent inclement weather in designated counties a refund of sales and use tax paid on purchases of building materials used to repair or replace these buildings. The legislation pertains to storms that occurred in Kentucky from February 29, 2012, through March 3, 2012, and only to buildings damaged or destroyed in counties declared federal disaster areas due to the storms. For a current list of these qualifying counties, see the Kentucky Department of Revenue’s website at http://revenue.ky.gov/taxrelief.htm. In this context, “building materials” means tangible personal property that becomes a permanent part of a building.

The refund is limited to the lesser of (1) $6,000 for each building without regard to the number of legal owners, or (2) 100% of the Kentucky sales and use tax actually paid reduced by the vendor compensation permitted to sellers under the law. The vendor compensation that a seller is permitted to deduct from each return is 1.75% of the first $1,000 of taxes due and 1% of the taxes due in excess of $1,000, with an overall cap of $1,500 for any reporting period. Purchases of building materials must be made by the legal owner of a building or by a contractor under contract with the legal owner. Purchases must be made following a declaration that a county is a federal disaster area.

Forms used to claim the disaster relief sales and use tax refund are available on the department’s website at http://revenue.ky.gov/forms/cursalefrm.htm. Application for the tax refund must be made with the department by the legal owner of a building within three years from the date that the county is declared a disaster area. A separate refund application must be filed for each building. Building owners are not obligated to return refunded sales and use tax to vendors, contractors, or subcontractors. Legal owners of buildings must provide documentation showing eligibility for assistance from the Federal Emergency Management Agency (FEMA), or must provide a copy of an insurance claim. Taxpayers with questions concerning the tax refund can telephone the department at (502) 564-5170 and select “option 1.”

H.B. 255, Laws 2012, effective April 16, 2012, and applicable retroactively to February 29, 2012; Notice, Kentucky Department of Revenue, April 18, 2012

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