No, contractors are making improvements or repairs to real property, and improvements or repairs to real property are not services that are subject to sales tax.
However, contractors will still pay sales and use tax on their purchases of tangible personal property (i.e., materials) to complete their construction contracts. These transactions are not treated as retail sales under the current law and that treatment does not change under the new law. Nothing in the new law changes the current tax treatment of construction contractor services or labor. Please see Kentucky Regulation 103 KAR 26.070 for more detail.
The rate for the new sales tax on services is 6%.
Beginning July 1, 2018, when a dealership charges the customer for parts and labor on a vehicle repair job, the associated labor will also be taxable if the parts are taxable to the customer. The sales tax rate will be 6% for both charges.
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