A state sales tax of six (6) percent is imposed on retailers for the privilege of making retail sales. A retail sale includes the sale, rental, or lease of tangible personal property and the sale of certain services. Taxable services include sewer services, communication services, overnight transient room accommodations, and admissions. Local sales taxes are not levied in Kentucky.

Major exemptions from the state sales tax:

• Trucks weighing over 44,000 pounds are exempt from the motor vehicle usage tax and sales tax on repair and replacement parts. The sales tax exemption is limited to parts for trucks, including any towed unit, used exclusively in interstate commerce for the conveyance of property or passengers for hire.
• Items purchased for resale.
• Machinery for new and expanded industry.
• Raw materials, industrial supplies, and industrial tools.
• Energy and energy producing fuels, to the extent that they exceed three (3) percent of the cost of production.
• Certified pollution control equipment.
• Industrial machinery sold and delivered out-of-state to manufacturers or processors for use out-of-state.
• Containers, packaging, and wrapping materials.
• Motor fuels for highway use.
• Industrial supplies and tools used to perform a manufacturing process on another entity's property.

To qualify for the exemption for new and expanded industry, machinery must meet four (4) specific requirements:

1. it must be machinery;
2. it must be used directly in the manufacturing process;
3. it must be incorporated for the first time into plant facilities in this state; and
4. it must not replace other machinery unless it: increases consumption of recycled materials not less than 10%, performs a different function, manufactures a different product, or has a greater productive capacity.