2026 Kentucky Sales Tax Changes Affecting Businesses
Published on by Cheryl Ganim in State Local Tax
- Economic nexus threshold changes: Beginning August 1, 2026, Kentucky eliminates the 200-transaction threshold, while the $100,000 gross receipts threshold remains in effect.
- Data brokering services become taxable: Companies providing data brokering services to Kentucky customers must register and begin collecting the 6% sales tax.
- Digital and remote sales rules continue to evolve: Updates affecting streaming content, drop shipments, and other digital transactions may impact your sales tax compliance obligations.
- New exemptions, incentives, and rebates take effect: Legislative changes include updates for religious institutions, qualifying professional golf events, film productions, and commercial airports.
- Review your compliance obligations: Businesses selling into Kentucky should evaluate how these changes affect their nexus, registration, and sales tax responsibilities.
Kentucky’s sales tax rules continue to evolve, especially for digital, data-driven, and remote sales activity. If your business sells into Kentucky or provides data-related services, now is a good time to review your taxability, nexus, registration, and compliance obligations.
Sales by religious institutions now exempt
Effective August 1, 2026, KRS 139.495 is amended for religious institutions. Sales and use tax no longer applies to sales or purchases of tangible personal property, digital property, or services when used solely within a religious function in Kentucky.
After filing their July reporting period sales tax return, qualifying religious institutions are no longer required to remain registered solely to report and remit tax on these sales.
Economic nexus threshold
Effective August 1, 2026, remote retailers and marketplace providers are no longer required to register for a Kentucky sales and use tax permit based solely on meeting the 200-transaction threshold. The economic nexus threshold of $100,000 or more in gross receipts during the current or previous calendar year remains unchanged, as does physical nexus.
Penny shortage doesn’t reduce taxes due
Effective July 15, 2026, legislation requires cash transactions to be rounded to the nearest five-cent increment when pennies are unavailable (KRS 45.345). Regardless of the purchaser’s method of payment, retailers remain responsible for collecting and remitting the correct amount of sales tax due.
Drop shipment
Drop shipment transactions involve a retailer accepting an order, purchasing the product from a third party, and having that third party ship the product directly to the customer.
For Kentucky transactions, retailers should provide the appropriate resale exemption certificate to ensure sales and use tax is reported and paid by the correct party. Out-of-state retailers that aren’t required to register in Kentucky may issue Kentucky Form 51A105 with a notation that they aren’t required to register. The Streamlined Sales Tax Certificate of Exemption (Form 51A260) may also be used.
If a Kentucky customer purchases tangible personal property from an out-of-state retailer that doesn’t collect Kentucky sales tax, the customer is responsible for reporting and remitting the applicable 6% use tax.
Data brokering services now taxable
Beginning August 1, 2026, companies providing data brokering services to Kentucky customers must register and begin collecting the 6% sales tax.
Data brokering services generally include collecting, aggregating, and analyzing personal data for sale to a third party while maintaining possession of that data, regardless of how the service is billed.
Professional golf sporting event now incentive
Effective July 1, 2026, Kentucky established a 100% sales and use tax incentive for qualifying professional golf sporting events held in Lexington and Louisville.
The incentive includes Kentucky sales tax generated from admissions, concessions, parking, sponsorships, hospitality services, and other qualifying sales. Applications must generally be submitted at least 60 days before the event.
Additional streaming content taxable
Charges for additional live, scheduled, or on-demand streaming content are subject to Kentucky sales tax, whether purchased as part of a subscription or separately. A one-time charge to stream a single movie or similar content is considered a taxable multichannel video programming service.
Film and motion picture incentive credit reinstated
Effective July 15, 2026, Kentucky reinstated the refundable sales and use tax credit for qualifying film and motion picture productions. Applications will be accepted through June 30, 2030.
Commercial airport alternative fuel sales tax rebate
Effective August 1, 2026, qualifying commercial airports may receive a sales tax rebate of up to 75% of Kentucky sales tax generated from the sale of alternative jet fuel. Rebates must be reinvested in airport facilities and operations.
Commercial airports may apply for the rebate through the Kentucky Department of Revenue’s Sales and Use Tax website.
Fluidized bed energy production facility exemption repealed
Effective July 15, 2026, Kentucky repealed the sales and use tax exemption for property certified as a fluidized bed energy production facility because the technology is no longer in use.
Talk to us
Kentucky’s sales tax rules continue to evolve, particularly for businesses selling across state lines or providing digital products and services. Understanding how these changes affect your business can help you remain compliant and avoid unexpected tax liabilities.
If you have questions about these legislative changes or your Kentucky sales tax obligations, contact us today to schedule a free consultation. As always, we’re here to help.
Related resources
You might also be interested in our Sales Tax Audit Survival Guide for practical strategies to navigate an audit, reduce potential assessments, and prepare for future audits. You can also download our Sales Tax Audit Preparation Checklist to help take the first steps toward a smoother audit process.
