AMTA-KY Government Relations Report
11/4/2022
ATTENTION:
AMTA-KY Members and Fellow KY Massage Therapists
HB/Sales Tax bill Update
We have had many requests for clarity regarding how House Bill 8 (HB8) came about and what will be required of Kentucky Licensed Massage Therapists and their clients, among a long list of many other services, with regards to this sales tax bill.
See the bill here: https://legiscan.com/KY/text/HB8/id/2589476. This bill was presented and passed by the 2022 Kentucky legislature and vetoed by Governor Beshear. The Kentucky General Assembly overturned the Governor’s veto. Due to this, the bill will go into effect on 1/1/2023. The Kentucky Department of Revenue (DOR) will collect this tax through the Sales and Use Tax division. The reason this tax is being levied now is to offset the plan to reduce/eliminate the state income tax over a 5 to10 year period.
DOR Commissioner Thomas Miller and two of his Revenue Cabinet members, Mr. Richard Dobson and Mr. Tim Bennett, were very gracious and informative in both of the meetings we’ve had with them. In our most recent meeting, we gained more clarity. Good questions were brought up and we were able to gain concise information in order to disseminate the most accurate, up-to-date information. They have been very open to our input. In attendance at the most recent meeting were Brandy Madding, LMT (KBLMT board chair), Denise Logsdon, LMT (AMTA Government Relations team member), Jacob Jansen, (Babbage Cofounder group), and Ann Boone, LMT (AMTA Government Relation chair).
Please refer to the Kentucky DOR’s letter below delineating aspects of what will be required of us as LMTs around this bill as well as how to set up your Sales and Use tax account. Some of you may have received this already. I have added additional information not spelled out in this letter.
UPDATE: From the Kentucky Department of Revenue:
August 30, 2022
RE: New Services Subject to Sales Tax in Kentucky
To Businesses Impacted by House Bill (HB 8), effective January 1, 2023
Information available to the Department of Revenue indicates that your business may provide one or more of the services listed in this letter. Please review this correspondence carefully and take the appropriate action to comply with these new sales tax obligations. For more information on the types of services now subject to sales and use tax, please consult our website at https://TaxAnswers.ky.gov. The Department continues to supply further guidance on the law changes as it becomes available.
Effective for transactions on or after January 1, 2023, Kentucky tax law (HB 8) applies the 6% sales and use tax to charges for the services listed on the following page.
Businesses that provide these services must begin charging and collecting tax on the total sales price for the provision of these services on or after January 1, 2023. In order to remit the tax to the Department of Revenue, businesses without a sales & use tax account must register for an account number. Please complete online registration for a sales & use tax account through the KY OneStop Business Portal at https://onestop.portal.ky.gov/OneStopPortal/. In addition to the steps below, you may also access an online user guide at https://onestop.portal.ky.gov/OneStopPortal/Content/Documents/eFileQuickStartUserGuide.pdf.
• Create a user account
• Next, link your business using the CBI referenced below by clicking the “link your
business” icon on the OneStop home page. *
CBI Number: xxxxxxxxx
Business Name: xxxxxxxx
Security Token: xxxxxxxxx
• After the business is linked, return to the OneStop dashboard and click on that
business from “mybusinesses”.
• Under the Tax Administration Tab, click “Apply for Additional Accounts.”
• Answer “yes” to the question, “Does your business make sales?”
• Provide a description of the services provided.
Once you have the six-digit sales tax account number, you may file sales tax returns from the dashboard screen through the following steps:
• Click on the business name or CBI Number
• Click on the Tax Administration tab
• Click on File Taxes
• Click on the sales tax account number
• Click on the filing period for which you want to submit the return.
If you need assistance with this process or have further questions regarding this matter, please contact the Division of Sales & Use Tax at 502 564-5170 or by email at KRC.WebResponseSalesTax@Ky.gov
*The CBI and Security token will be issued once a therapist signs up on the site. If you have any questions, please contact the DOR by one of the methods mentioned in this letter.
Sincerely,
Kentucky Department of Revenue
Division of Sales & Use Tax
• Massage services, except when medically necessary
In addition to the above information, please note:
Medical necessity is determined by the client’s prescribing practitioner(s). Eligible prescribing practitioners are those whose licenses currently legally allow them to write prescriptions in the state of Kentucky (e.g., Primary Care Practitioners (PCPs), Chiropractors, Psychiatrists, etc.).
Prescriptions can be written for a year or more based on what is agreed upon between the prescribing practitioner and the client. In speaking recently to Massage Therapists from Alberta, Canada, who are not part of the Canadian National Health System, they mentioned they often have prescriptions written by PCPs and others for a year or longer. The prescription has to cover the exact time frame that the client is receiving tax exempt, medically necessary treatment (e.g., 1/1/2023-12/31/2023).
These prescriptions will need to be kept on file for at least 5 years after the final date of issuance. The Kentucky Revenue Cabinet will randomly audit therapists every 2-3 years. They will require:
A valid prescription for each client (as described above),
Sales records/receipts for dates the clients were seen within the treatment time frame. The prescription does not have to have a diagnosis, nor will SOAP notes be required for the audit. SOAP notes are required in Kentucky Laws and Regulations, separate from this bill. Please review your state’s current laws regularly for updates at bmt.ky.gov. There will be updated laws and regulations once all parts of our HB79 bill, which passed on 3/18/2021, are cleared, hopefully later this year.
Any gift certificates sold, including those sold before but redeemed on or after 1/1/2023, will be subject to sales tax at the time of redemption unless the client has a prescription for medical exemption that covers the dates of service. Sales tax should be charged, and subsequently reported, when the service is rendered, and the gift certificate or package is redeemed. This does make for awkward conversations with those who have been given gift certificates.
Therapists will be collecting sales tax from their non-exempt clients and filing/paying it back to the Revenue Cabinet as described in the letter above. This is typically done monthly or quarterly.
Prepare your clients now so that they, and you, aren’t caught without prescriptions for those who qualify for medical exemptions.
Please be aware that any payments through e-transfer sites (e.g., Venmo, Zelle, Square, Stripe, PayPal, etc.). are also subject to this tax.
All of this seems like a lot, and it is. We’ve survived a pandemic. We will get through this as well. The Revenue Cabinet members are willing to answer your questions and understand that many of you have never had a Sales and Use tax account. If you sell items, you should already have an account. Please be patient and represent our profession with dignity and grace. Directing your frustration with all of this at their office won’t change anything in the short term. It will only serve to shed an unprofessional light on our industry. They are a small office and will be receiving questions from the dozens of other businesses these taxes are being levied on, not just Massage Therapy. They did not enact this. They are only the tax collection administrators.
If you still have questions the DOR can’t answer, please contact me at: GRchair@amtaky.org.
In health,
Ann E. Boone, LMT, BCTMB
AMTA-KY Government Relations chair