SALT Report 1455 – The Kentucky Board of Tax Appeals upheld a lower court’s denial of a use tax refund for a taxpayer who purchased construction equipment outside Kentucky and brought into Kentucky for use. The taxpayer purchased the equipment in Indiana, paid Indiana sales tax, plus an additional Kentucky use tax when he brought the equipment into the state. The taxpayer contended that he should be entitled to a use tax credit for the Indiana sales tax paid.
In 2004, Kentucky imposed a special use tax on construction equipment. KRS 139.320 states that, “the use tax of five percent (5%) is hereby levied upon the storage, use or other consumption in this state of any machines, machinery, tools or other equipment brought, imported or caused to be brought into this state for use in constructing, building or repairing any building.” This statute was repealed in 2007.
When making their decision the Kentucky Board of Tax Appeals determined that the statute governing use tax credits only addresses the regular use tax under KRS §139.310 and not the special use tax for construction equipment under KRS 139.320. The taxpayer argued that applying the special use tax for construction equipment without the use tax credit provision was unconstitutional.
However, the KBTA used the Kentucky Supreme Court decision in Genex London, Inc v Department of Revenue which addressed the constitutionality of the use tax credit statute. In this decision a taxpayer was also denied credit for sales tax paid to another state on construction equipment because “the taxpayer had already used the construction equipment in another state” before bringing it in to Kentucky.
Based on the Supreme Court’s ruling the Kentucky Board of Tax Appeals denied the taxpayer’s claim for refund. The taxpayer has 20 days to appeal this decision.
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