Utility Sales Tax Exemption
Beginning January 1, 2023, a utility customer is only eligible for the residential exemption from sales tax for services used at his or her place of domicile. In recent legislation, the state defined a place of domicile to be, “where an individual has his or her legal, true, fixed, and permanent home and principal establishment, and to which, whenever the individual is absent, the individual has the intention of returning.”
Although the sales tax exemption has always been in place for residential customers, utility companies must now declare which meter or meters are associated with their primary residence. The Kentucky Department of Revenue has provided the domicile form to be used to make this declaration. If you are an existing BMU customer with a single residential utility account we are not requiring this form at this time; however, if it is convenient to submit the form we will attach this to your account. You will not lose your tax exemption by not providing this form if you do not have multiple residential utility accounts.
BMU customers with multiple utility accounts are required to submit this declaration to continue receiving tax exemption. BMU has mailed letters to these customers with multiple utility accounts with further instructions. Additionally, BMU will be asking all new residential customers to provide the domicile declaration form.
Landlords holding utility accounts for single and multi-unit residential rental properties may have tenants fill out the Kentucky Department of Revenue declaration of domicile form to classify the rental property as a residential account. Landlords must submit a completed multi-unit declaration of domicile form along with the individual tenant domicile forms to qualify for the residential exemption.
These forms can be found by here:
Declaration of Domicile for Purchase of Residential Utilities – Form 51A380
Multi-Unit Declaration of Domicile for Landlords or Other Account Holders of Multi-Unit Dwellings Served by a Single Meter – Form 51A381
Frequently Asked Questions
Is this a new tax?
No. In most cases, customers treated as exempt under the previous language in KRS 139.470(7) are expected to continue to receive the residential exemption.
Will I be charged sales tax on my residential utility services if I do not return the domicile form?
If you have a single residential utility account with BMU for the utilities at your home, you will continue to receive your utilities exemption from sales tax even if you have not returned the domicile declaration form. While we do encourage you to provide that form, it is not required unless you make changes to your utility account.
If you have multiple residential utility accounts, you are required to return the domicile declaration form to continue receiving your residential tax exemption for your primary residence.
I have multiple utility accounts, but I have not received a letter from BMU. What should I do?
If one of your accounts is listed as a commercial account, the tax exemption is not applicable to you. Only those customers with multiple residential accounts have been contacted. However, we encourage you to contact a BMU representative at 859-986-4391 if there is any question as to the number and type of utility accounts you have.
I am a landlord but don’t pay utilities for my tenants. Do I still need to return the forms?
If you own rental property but the utilities are in the names of your individual tenants, you would not be required to submit domicile declaration forms on their behalf. You are only responsible for the declaration for properties in which the utilities are in your name.
Why is my landlord asking me to provide a domicile declaration form?
If your landlord is currently paying the utilities for your residence, they are required to provide a domicile declaration form for each tenant for that account to be reclassified as residential. We encourage you to provide that form to your landlord. Landlords are not permitted to complete the form on your behalf.
I have a separate account for my garage, will I have to pay sales tax on it?
The residential utility exemption may apply under the following circumstances: a) the utility meters must serve a single location that is the declared place of domicile, b) the utility services through both meters must be exclusively for residential usage, and c) the resident must submit a fully completed Declaration of Domicile, Form 51A380, for each metered account.
What other taxes do I pay on my utilities?
All utility customers pay a 3% sales tax on electric and water service, as well as a 3% franchise replacement fee.
Does this change affect other utilities?
Yes. The change in tax law affects all water, sewer, electric and gas utilities. If you have accounts with other utility providers, they may be requesting you declare your domicile as well as Berea Municipal Utilities. We recommend you follow the instructions provided for each separate utility as procedures may differ between utility providers.
Where can I find more information?
The Kentucky Department of Revenue has provided additional information on their website at Residential Exemption Changes – TAXANSWERS (ky.gov)