GOVERNMENT UPDATE: MARKETING SERVICE TAX

Feb 8, 2023

WHAT YOU NEED TO KNOW ABOUT THE NEW MARKETING TAX

Many of our members may have recently received letters from the Kentucky Department of Revenue regarding a new 6% sales tax that may apply to services marketing and advertising agencies perform.

This is the result of legislation, (ref: KRS22 HB08), passed last session by the Kentucky General Assembly. House Bill 8 is widely considered one of the most extensive tax reform regulations passed in the Commonwealth in recent history.

This bill extended Kentucky’s 6% gross receipts sales and use tax base to include 39 new services, including the following relevant to our industry:

Marketing Services (defined as: developing marketing objectives and policies, sales forecasting, new product developing and pricing, licensing, and franchise planning)
Photography and Photo Finishing Services (defined as: sitting fees, developing and printing original photographs, developing negatives, and tinting or coloring pictures)
Website Design and Development Services
Website Hosting Services
Public Opinion and Research Polling

It is also worth noting that our national AAF counterpart was successful in removing “Advertising Services” from the legislation before it passed. Therefore, advertising services are not subject to this tax.

This regulation took effect on January 1, 2023. You can read more about the legislation and its impact at Revenue.KY.GOV.

It is our position that the tax on these services will have a detrimental impact on Kentucky’s marketing and advertising industry. We can also expect to see a negative impact on the Commonwealth’s economic growth, hampering Kentucky’s ability to compete for high-paying jobs and putting our otherwise growing industry at a disadvantage.

With the understanding that this issue is a major concern for many of our members, AAF-Louisville has enlisted the expertise of a lobbying firm in an attempt to strike marketing services, and the other services our members provide, from this regulation.

In the early days of the session, House Bill 44 (ref: KRS23 HB44), was quickly filed to help address this issue. We are optimistic that will the help of on-the-ground experts in Frankfort, and an effective grassroots campaign, we can reverse course on this harmful regulation.

We will be calling on our membership and industry supporters very soon to engage in specific calls-to-action that may include legislative outreach and other efforts.

But for now – here is how you can help.

Support our efforts in Frankfort with a sponsorship. We are actively crowd-sourcing funds to support our lobbying expenses. You can contribute at any sponsorship level that is comfortable for your business. Learn more about that here.
Help us grow our grassroots network. We must expand our network of support to include agencies, firms, businesses, and industry organizations outside of Louisville. Know someone out in the state that may want to support our effort? Put them in touch with us. Contact us at questions@aaflouisville.org.

As an organization, we cannot offer you any financial advice regarding how to apply this tax to your business. What we do suggest is that you contact your accounting or tax professional to determine next steps. We hope that you will support us as we continue to fight for the growth of our industry!

For more information on the legislation, questions about sponsorships, or for more ways to support our legislative efforts, contact Allison Deely at allison@aaflouisville.org.

If you would like to learn more about the tax legislation changes, we’ve provided links to news articles from across the state below.