Current through Register Vol. 50, No. 6, December 1, 2023
RELATES TO:
KRS
139.010,
139.470
NECESSITY, FUNCTION, AND CONFORMITY:
KRS
131.130(1) authorizes the
Department of Revenue to promulgate administrative regulations for the
assessment, collection, refunding, administration, and enforcement of Kentucky
tax laws. This administrative regulation defines and clarifies the sales and
use tax law as it applies to containers, wrapping and packing materials,
labels, and related products.
Section
1. Definitions.
(1) "Containers"
means articles used for shipment or delivery of tangible personal property.
Examples of such articles are wrapping materials, bags, cans, twine, gummed
tape, boxes, bottles, drums, carboys, cartons, baling wire, and
sacks.
(2) "Nonreturnable
containers" means all containers other than those defined in subsection (3) of
this section. Examples are wrapping and packing materials, paper bags, twine,
medicine packaging, and distilled spirits bottles.
(3) "Returnable containers" means containers
of a kind customarily returned by the buyer of the contents for reuse. Examples
of returnable containers are milk bottles, steel drums, beer and soft drink
bottles, wine barrels, chemical carboys, totes, and gas cylinders.
Section 2. Sales of Returnable
Containers.
(1) Sales of returnable
containers when sold without the contents to manufacturers, com-pounders,
bottlers, etc., who place the contents in the container and sell the contents
together with the container are not subject to the sales or use tax. The
container is not subject to the tax when it is sold at retail in connection
with a retail sale of its contents. The fact that the retailer may require a
deposit against the return of the container or allows a credit upon its return
does not alter the rule. Returnable containers are not subject to the tax when
they are resold by the final buyer for refilling.
(2) Sales of returnable containers, for
example totes, to manufacturing suppliers who place the contents in the totes
and sell the contents but not the tote to their manufacturing customer are
subject to the sales and use tax. As the tote is not sold to the manufacturer,
the sales and use tax exemption found in
KRS
139.470(2) is not
applicable.
Section 3.
Sales of Nonreturnable Containers.
(1) Sales
of nonreturnable containers to manufacturers, compounders, bottlers, etc., for
use in packaging their product for resale which are not intended to be returned
for reuse are not subject to the sales or use tax. Bottle caps and crowns shall
be treated at all times as nonre-turnable containers for use in packaging a
product for resale.
(2) Sales of
wrapping paper, clothes hangers, twine, tape, and similar articles to persons
who use them to package merchandise for sale at retail are usually sales made
for resale and are therefore not subject to the tax. Sales of such articles to
persons who use them in the conduct of an activity other than sale of tangible
personal property at retail are subject to the sales or use tax.
(3) Sales of nonreturnable paper napkins,
straws, and like articles to restaurants, lunch counters, etc., who use them in
connection with the sale and serving of food are sales made for resale and are
therefore not subject to the tax.
Section 4. Labels and Name Plates.
(1) Sales of labels and name plates are not
subject to the sales or use tax if:
(a) They
are affixed to a nonreturnable container of property sold; or
(b) They are affixed to returnable containers
if a new label is affixed to the container each time it is refilled.
(2) Labels, name plates, and price
tags which are permanently affixed to the product for sale become a component
part of that product and thus not subject to tax when sold to the manufacturer
to be affixed by him.
(3) Price
tags, shipping tags, and advertising materials used in connection with the sale
of property or enclosed with the property sold are subject to the
tax.
SU-17-1; 1 Ky.R.
706; eff. 5-14-1975; Am. 3 Ky.R. 324; eff. 11-3-1976; TAm eff. 6-22-2016; 46
Ky.R. 581, 1091; eff. 11-1-2019; 46 Ky.R. 2602; eff.
6-30-2020.
STATUTORY AUTHORITY:
KRS
131.130