Explaining the utility sales tax that starts Jan. 1

Some of the burden of determining domicile will rest with the utility company

FRANKFORT, Ky. (Story Courtesy of our Friends at Kentuck Today) – The Kentucky General Assembly passed legislation this year ending the 6% sales tax exemption in 34 areas, but the one garnering the most questions deal with potentially having to pay sales tax on residential utilities, starting Jan. 1, 2023.

The Kentucky Department of Revenue (DOR) says the confusion is because under the new state law, “The basis of the residential exemption for utilities shifts from reliance on tariff language filed with the Public Service Commission to a customer declaration that the services are used at the location as the place of domicile.”

The DOR says, in most cases, customers treated as exempt under the previous statutory language are expected to continue to receive the residential exemption.

However, there is one exception to this general expectation, which is for customers who are currently receiving a residential exemption for two or more locations. Beginning 01/01/2023, a utility customer is only eligible for the residential exemption for services used at his or her place of domicile, which is defined under state law as “where an individual has his or her legal, true, fixed, and permanent home and principal establishment, and to which, whenever the individual is absent, the individual has the intention of returning.”

Some of the burden of determining domicile will rest with the utility company, according to the DOR.

“Since most accounts currently classified as residential are expected to retain residential treatment going forward, accounts should not default to non-residential status on 01/01/2023.  However, utility companies should examine their databases to determine if they have customers with a residential coding for more than one address.  In such cases, utility companies must document the single address that the customer declares as his or her place of domicile.

“In addition, utilities must obtain the declaration of domicile information for any accounts they currently designate as residential when there is a change in account holders or if a new account is established.  If there is uncertainty regarding the exempt status of a particular account, it will be the responsibility of the utility company to justify the residential treatment by obtaining a completed certificate of domicile from the customer.​​”

There is another consideration, which involves multi-family residential apartment buildings and mobile home parks, where the owner rather than the tenant pays utilities.  

“A property owner may collect and submit the Declaration of Domicile, Form 51A380 on behalf of the residential renters to the applicable utility companies providing services to the multi-unit residential rental facility for reclassification as a residential account.

“The property owner or landlord must also complete a Multi-Unit Declaration of Domicile for Landlords, which is available at 51A381 (1-23)​. The Multi-Unit declaration must specify how many dwelling units are served by the master meter, and a separate and complete Declaration of Domicile must be included for each of the dwelling units. Multi-Unit declarations that do not include Declarations of Domicile from all dwelling units served by the master meter are not eligible for residential tax treatment. In addition, customer accounts with a master meter that serves only common areas or that serves common areas and multiple dwelling units are also not eligible for residential treatment.”

Contact your utility provider with questions.