Testing Services

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As part of the provisions of House Bill (HB) 8, receipts from the sales of testing services become subject to sales and use tax on 01/01/2023, except testing for medical, educational, or veterinary reasons.

What is the scope of testing services that become taxable as of 01/01/2023?

Testing services are technical processes performed upon a product or property that require analysis to determine whether the object tested meets desired criteria.

Are home or commercial property inspections included under taxable testing services?

No, inspections of real property that rely solely upon observation are not in the scope of taxable testing services. However, testing of a technical nature that requires the application of chemicals, collection of samples for analysis, use of specialized equipment, etc. are included within the category of taxable testing services.

Can the Department provide a listing of activities that are and are not included in taxable testing services to better illustrate the scope of the services included?

Examples of services that are testing services include, but are not limited to:

Mold, radon and carbon monoxide testing
Water and soil testing analysis
Food products analyzed to detect toxins
Concrete samples taken to verify proper strength
Internet speed evaluation to determine system capacity
Motor vehicle diagnostic testing charges
Various technical tests performed by engineers
Quality control testing of manufactured products

Examples of services that are not testing services include, but are not limited to:

Drug testing of employees or potential employees-medical exclusion
Educational achievement test costs-educational exclusion
Termite and various pest control inspections-physical observation without testing performed
Testing to obtain various professional certifications (CPA, MD, DVM, DDS, Esq)-educational exclusion
Testing and recalibration of in-process manufacturing machinery-KRS 139.470(22)
Inspection of construction site to verify use of rebar-physical observation without testing performed

What additional types of charges billed with taxable testing services are subject to sales and use tax?

If other miscellaneous charges for equipment, transportation, lodging, etc. are billed as part of the cost incurred to perform testing services, then all receipts from these charges are part of gross receipts subject to sales and use tax. The definition of “gross receipts" in KRS 139.010 includes all charges incurred by the retailer and passed on to the customer in the performance of taxable services except those specifically enumerated in statute.

Are testing services performed by out -of-state providers for Kentucky customers subject to Kentucky sales and use tax?

Yes, the sales and use tax on services is based upon where the customer receives the service and not necessarily where the service is performed. Therefore, if an out-of-state service provider has a laboratory that performs a testing service on a sample for a Kentucky-based customer and bills the Kentucky customer for the testing services performed, the charges are subject to Kentucky sales and use tax. See KRS 139.105 and Kentucky Administrative Regulation 103 KAR 30:190 for additional sourcing guidance.

Are testing service providers eligible to claim a resale exemption for any of their purchases used in their business operations?

No, the purchases of equipment or any items consumed or used by a testing service provider while providing the taxable services are retail purchase transactions subject to taxation and are not eligible for exemption as purchases for resale.

​​​​​Testing Services​​

​As part of the provisions of House Bill (HB) 8, receipts from the sales of testing services become subject to sales and use tax on 01/01/2023, except testing for medical, educational, or veterinary reasons.