Kentucky – Taxability of Labor Charges for Fabrication

SALT Report 1729 – The latest issue of the Kentucky Sales Tax Facts newsletter discusses the taxability of labor charges for fabricating tangible personal property. Under 103 KAR 28:030, sales tax applies to the price of tangible personal property that is cut, threaded, shaped, bent, polished, welded, sheared, engraved, punched, drilled, machined, monogrammed, decoratively stitched, or has work  performed  on  it that  changes it from its original state into something with different characteristics.

Kentucky state sales tax applies to the total selling price of the fabricated property regardless of whether the seller or buyer provides it for fabrication.  Additionally, all labor and service costs are considered part of the charge for the production of the item and should be included in the gross receipts from the sale.

Labor that does not result in the creation or production of tangible personal property or that is not a step in a process that will result in the creation or production of tangible personal property, but is simply the repair of tangible personal property, is not considered fabrication and is not taxable. However, the repair labor charges must be separately stated from any taxable repair parts being sold to be considered exempt.

For Further Information:

Kentucky Department of Revenue – Kentucky Sales Tax Facts