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Sales Tax on horses bought in KY

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  • Sales Tax on horses bought in KY

    I was looking at a sport horse in KY to buy and the seller said I would owe sales tax on the purchase price. I live in another state and we don't have to pay sales tax on horses? How common is this?

  • #2
    We buy horses at a Kentucky auction frequently. They charge KY sales tax except for breeding stock (i.e. horse is listed as broodmare or breeding stallion). I imagine if the person is registered as a business in the state of KY, they are required to charge sales tax on non-breeding stock.
    ::Sometimes you have to burn a few bridges to keep the crazies from following you::

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    • #3
      Originally posted by SmartAlex View Post
      We buy horses at a Kentucky auction frequently. They charge KY sales tax except for breeding stock (i.e. horse is listed as broodmare or breeding stallion). I imagine if the person is registered as a business in the state of KY, they are required to charge sales tax on non-breeding stock.
      If you are not a resident of KY and you are buying horses at the sales frequently and paying sales tax, then you are getting screwed. There is an exemption for breeding stock, but also for horses less than 2 years of age by persons who are not residents of KY and transport horses immediately out of the state after sale or a temporary stay for training/breeding. They've left big enough loop holes to drive a Sallee van through.

      OP - There is also an exemption for older horses, but I think the horse needs to leave the state by registered common carrier (suh as Sallee or Brookledge). If you can get your hands on a Keeneland catalog, they print the sales tax regs in the front. Usually it's before the Conditions of Sale.

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      • #4
        The Tattersalls catalog states (slightly paraphrased):

        Each horse offered for sale in this catalog is subject to the 6% Kentucky Retail Sales Tax unless the sale of such horse qualifies for exemption under the rules and regulations of the Dept of Revenue of Kentucky, and the purchaser provides documentary proof of exemption in the form approved by the Dept of Revenue. ... instructions available in the office...

        I guess we'll need to look into that next time. My understanding was that it was just breeding stock, and I believe you're right about stock under the age of 2 yrs, but we've never bought one that age.
        ::Sometimes you have to burn a few bridges to keep the crazies from following you::

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        • #5
          Hey SmartAlex - I looked it up in the Keeneland catalog and it's on page 18. I couldn't find a link to it on their website, tho. Keeneland has sales exemption check off boxes on their Acknowledgement of Purchase form. I've always checked a box and have never been charged. If you're not a KY resident, then I don't think there's anything they can do to you if you stretch it a bit and how would they know if you were going to ship the horse out of state 'after training'. It's not like the State of Kentucky can audit a resident of another state.

          Definitely look into it next time you go to Tatts, or if you can get your hands on a Keeneland sale book.

          ETA: Dogdays - I assume the sporthorse is a gelding? If it's a mare then you're in good shape. If it's a gelding and you can't get out of it, then require proof that they are actually going to turn that money into the Dept. of Revenue and they aren't pocketing the money. I've bought and sold quite a few horses when I lived in KY and never had an issue with sales tax.

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          • #6
            Sales and use taxes are for the state in which the horse will reside, not where it's sold.

            So if the animal will be moved out of Kentucky after purchase, the sellers cannot legally charge you Kentucky sales tax.

            You will be required however to claim and pay your own state's use tax amount. If you don't and your state catches you, you're subject to some very hefty fines.

            This is the law for everyone, from professional farms to someone just buying one horse for their own use.

            Whether or not you follow the law is up to you, because your own state won't actually know you've purchased an out of state animal without paying use tax, unless you're a business and subject to a state audit.

            If you're a registered business, it's better for you to claim and pay the use tax.
            Homeopathy claims water can cure you since it once held medicine. That's like saying you can get sustenance from an empty plate because it once held food.

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            • #7
              Well I can tell you that I send my mares to KY to do the deed and then they come home safely in foal shortly after. Ten months later when the foal pops out I do in fact owe sales tax to the state of KYwhen I pay the stud fee that created the foal who has never resided in KY for one moment in its lifetime outside of its dam.
              McDowell Racing Stables

              Home Away From Home

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              • #8
                Originally posted by Las Olas View Post
                If you are not a resident of KY and you are buying horses at the sales frequently and paying sales tax, then you are getting screwed. There is an exemption for breeding stock, but also for horses less than 2 years of age by persons who are not residents of KY and transport horses immediately out of the state after sale or a temporary stay for training/breeding. They've left big enough loop holes to drive a Sallee van through.

                OP - There is also an exemption for older horses, but I think the horse needs to leave the state by registered common carrier (suh as Sallee or Brookledge). If you can get your hands on a Keeneland catalog, they print the sales tax regs in the front. Usually it's before the Conditions of Sale.
                Thank you for this information. If I ever get enough $ to buy another ottb mare (or win the lotto and buy all of them) no sales tax.

                So when the sheik bought that 2.2M yearling the other day, did he have to pay sales tax? I would hope not. Even for a sheik.
                In my state, GA., the 7% sales tax applies to vehicles purchased from dealers, not from private parties. And since my state has no "dealer status" for horse sellers (breeders, etc) then no sales tax applies here to horse sales.

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                • Original Poster

                  #9
                  Thanks for all the info, makes my head spin....yes it was a gelding over 2 yrs of age, and when I got there and rode the horse and liked it, was told then I would owe sales tax....all a moot point now, cause the horse didn't vet....but I was shocked to learn about the sales tax..Bought a horse trailer in another state and in fact did pay sales tax in my state when I got the tag, just never heard of it for horses. How would I get proof the seller did pay the sales tax to the state and did not pocket the money?

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                  • #10
                    Originally posted by Laurierace View Post
                    Well I can tell you that I send my mares to KY to do the deed and then they come home safely in foal shortly after. Ten months later when the foal pops out I do in fact owe sales tax to the state of KYwhen I pay the stud fee that created the foal who has never resided in KY for one moment in its lifetime outside of its dam.
                    Here ya go, Laurie. This is the actual application of taxes statute. Explains what is taxable and what is exempt. There was a movement at one point to exempt the stud fees, but they are using that money for breeders awards instead.

                    http://www.lrc.ky.gov/KRS/139-00/531.PDF

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