What Items Are Exempt From Sales Tax in Kentucky?

Kentucky charges a 6% sales tax on most tangible personal property, digital property, and certain services, but a handful of broad categories escape it.¹ The main items exempt from sales tax in Kentucky are unprepared groceries, residential utilities at your primary home, prescription medicines and prescribed medical equipment, farm machinery and agricultural inputs, manufacturing machinery and raw materials, and purchases made by qualifying nonprofits, schools, and government agencies. Most of these exemptions are not automatic. You generally have to present the right certificate at the register, and some require a form filed in advance.

Groceries and Food Ingredients

Food and food ingredients bought for human consumption are exempt.² That covers bread, milk, meat, fruits, vegetables, and similar staples whether they’re fresh, frozen, canned, or dried. Plain bottled water qualifies too.

Several things you might think of as food are specifically taxable:

Prepared food, meaning anything sold hot, made by combining two or more ingredients at the store, or sold with utensils like plates, forks, or napkins.
Soft drinks, defined as nonalcoholic beverages with natural or artificial sweeteners. Drinks made with milk or a milk substitute, and drinks that are more than 50% fruit or vegetable juice, aren’t “soft drinks” under this rule and stay exempt.
Candy, meaning sugar-based confections combined with chocolate, fruit, nuts, or flavorings. Candy that contains flour, or that needs refrigeration, doesn’t count as candy for this purpose and remains exempt.²
Dietary supplements with a “supplement facts” panel, like vitamins and herbal supplements.
Tobacco and alcoholic beverages.

Bakery items such as bread, cookies, cakes, and donuts are exempt when sold without seller-provided utensils, even if the seller mixed the ingredients. Any food sold through a vending machine is taxable regardless of what it is.²

Residential Utilities

Electricity, natural gas, water, and home-heating fuels used at your primary residence are exempt from the 6% tax.³ A vacation home, a commercial office, or any secondary location does not qualify. Only the address you declare as your place of domicile does.

Utility providers verify eligibility before dropping the tax. You submit a Declaration of Domicile (Form 51A380) to your utility company confirming the service address is your primary home.⁴ A property with both residential and commercial use qualifies only when the residential use is primary. Each customer may declare only one domicile.

Prescription Medicine and Medical Equipment

Prescription drugs are exempt when prescribed for treating a human being, whether dispensed by a pharmacist, administered by a physician, or distributed as a free sample.⁵ Over-the-counter medications also qualify, but only when a prescription has been issued for them. Buy an OTC pain reliever off the shelf without a prescription and the 6% tax applies.

Several categories of medical equipment are exempt as well:

Prosthetic devices, when bought by a health care provider for a specific patient, bought by an individual with a prescription, or individually designed for a person.
Mobility-enhancing equipment such as wheelchairs and walkers, when prescribed.
Durable medical equipment such as hospital beds, when prescribed.
Medical oxygen and oxygen delivery equipment, when bought for home use.⁵

The common thread is a prescription or practitioner’s order. Buy a brace or monitor without one and the tax applies. Keeping a copy of the prescription when buying expensive medical equipment helps if a retailer questions the exemption.

Farm Machinery and Agricultural Supplies

Machinery used exclusively and directly in farming is exempt.⁶ That covers equipment used to till soil and produce crops as a business, raise and feed livestock or poultry for sale, and produce milk for sale. Tractors, harvesters, and irrigation systems qualify when they meet the exclusively-and-directly standard.

Key farming inputs also qualify:

Seeds, when the resulting crops are ordinarily food for human consumption or will be sold in the regular course of business.
Commercial fertilizer applied to land producing crops that will be consumed or sold.
Animal feed, including pre-mixes and feed additives, for livestock or poultry whose products ordinarily constitute food for human consumption.
Livestock drugs, both over-the-counter and prescription, used to treat cattle, sheep, goats, swine, poultry, llamas, alpacas, buffalo, aquatic organisms, and cervids.⁶

To claim these, farmers first obtain an Agriculture Exemption Number from the Kentucky Department of Revenue by filing Form 51A800 with documentation of their farming activity, such as an IRS Schedule F or a farm service agency number.⁷ The number alone does not make a purchase tax-free. You also present a Farm Exemption Certificate (Form 51A158) or an On-Farm Facilities Certificate of Exemption (Form 51A159) to each vendor at the time of purchase.

Manufacturing Machinery, Raw Materials, and Energy

Machinery used directly in a manufacturing or industrial processing operation is exempt when it is first incorporated into a plant facility or replaces existing machinery with a lesser productive capacity.⁸ The exemption begins where raw material enters a process and is changed in size, shape, or composition, and ends when the finished product is packaged for sale.

Raw materials that become an ingredient or component of the finished product are exempt at the time of purchase.³ Labor and service charges for installing, repairing, or maintaining qualifying manufacturing equipment are exempt too, as long as they’re separately stated on the invoice.⁸

Manufacturers also get an energy exemption. Energy and energy-producing fuels used in manufacturing, processing, mining, or refining are exempt to the extent their cost exceeds 3% of the plant’s total cost of production.⁶ The cost of production is calculated across the entire integrated manufacturing process at a plant, from raw material input through packaging.

Nonprofits, Schools, and Government Purchases

Resident nonprofit educational, charitable, or religious organizations with 501(c)(3) status can buy tangible personal property, digital property, and services free of sales tax, provided the purchase is used solely within the organization’s educational, charitable, or religious function in Kentucky.⁹ The organization must present exemption certificate Form 51A126 to the vendor at the time of purchase.

The exemption is limited to items the organization uses directly in its mission. A purchase made for an employee’s personal use does not qualify. If the certificate isn’t provided at the time of sale, the vendor must collect the tax.

Separately, sales made by schools, school-sponsored clubs and organizations, and certain nonprofit educational youth programs are exempt under their own provision.¹⁰ That covers common fundraisers like bake sales and school-group merchandise sales.

What People Assume Is Exempt but Isn’t

A few categories catch Kentucky shoppers off guard.

Digital property is taxable. The 6% sales tax applies to digital audio works (songs, audiobooks, ringtones), digital books, digital photographs, finished artwork, periodicals, newspapers, magazines, video games, electronic games, and video or audio greeting cards when transferred electronically.¹¹ It applies whether you get permanent access or a subscription.¹

Clothing is taxable. Kentucky has no general exemption for clothing, shoes, or accessories. Every clothing purchase at a Kentucky retailer carries the 6% tax.

Motor vehicles sit outside the sales tax entirely. They’re subject to a separate 6% motor vehicle usage tax collected at registration, with a possible credit for a similar tax paid to another state on a previously registered vehicle.¹²

How to Claim an Exemption

With a few exceptions like groceries and prescription drugs rung up at the register, Kentucky exemptions require paperwork. The certificate depends on the exemption:

Farmers: Agriculture Exemption Number from Form 51A800, plus a Farm Exemption Certificate (Form 51A158) or On-Farm Facilities Certificate (Form 51A159).⁷
Nonprofits: Form 51A126 presented to each vendor.
Residential utility customers: Declaration of Domicile (Form 51A380) filed with the utility provider.⁴
Manufacturers: exemption certificates provided to suppliers, with records of how equipment is used directly in the manufacturing process.

Without the right certificate, the seller must collect the tax. Filing one fraudulently carries serious consequences. Kentucky imposes a 50% fraud penalty on the unpaid tax with no cap, and even a negligent misuse carries a 10% penalty on the tax owed.¹³ Businesses that rely on exemption certificates should review them regularly to make sure the information still holds.

1
Kentucky Legislative Research Commission. Kentucky Code 139.200 – Imposition of Sales Tax
2
Kentucky Legislative Research Commission. Kentucky Code 139.485 – Exemption of Food Items
3
Justia Law. Kentucky Revised Statutes 139.470 – Exempt Transactions
4
Kentucky Department of Revenue. Residential Utility Exemption Changes
5
Kentucky Legislative Research Commission. Kentucky Code 139.472 – Exemption for Certain Medical Items
6
Kentucky Legislative Research Commission. Kentucky Code 139.480 – Property Exempt
7
Kentucky Department of Revenue. Application for Agriculture Exemption Number
8
Cornell Law School. Kentucky Administrative Regulations 103 KAR 30:120 – Machinery for New and Expanded Industry
9
Kentucky Legislative Research Commission. Kentucky Code 139.495 – Application of Taxes to Resident Nonprofit Institutions
10
Kentucky Legislative Research Commission. Kentucky Code 139.497 – Exemption for Sales by Schools and School-Sponsored Organizations
11
Kentucky Legislative Research Commission. Kentucky Code 139.010 – Definitions for Chapter
12
Kentucky Department of Revenue. Motor Vehicle Usage Tax
13
Kentucky Department of Revenue. Penalties, Interest and Fees