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Labor Charges for Installation or Repair of Tangible Personal Property, Digital Property or Services Sold.

  • Please note that labor associated with the repair of fixtures to real property such as HVAC units, water heaters or plumbing fixtures will not become subject to tax. 
  • Labor is taxable if it is part of a taxable retail sale.  An example would be the labor bill of a mechanic to sell and install repair parts in a car.

Does a plumbing or HVAC contractor need to charge sales tax for services?

‚ÄčNo, 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.

What is the tax rate for the new sales tax on services?

The rate for the new sales tax on services is 6%.

How do the new sales tax laws affect motor vehicle dealerships when they perform repairs and installation labor on vehicles not covered by an original or extended warranty?

‚ÄčBeginning 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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