Blue-Grass State Rewards Green Manufacturing

Under the Sales Tax Exemption for Manufacturing Facilities program, Kentucky allows for a 100% sales tax refund for new or replacement machinery and equipment dedicated to an energy-efficiency project. The project must decrease the measurable amount of energy used by the facility by at least 15% percent while maintaining or increasing the production for the same period.

This sales tax exemption is made available to manufacturers to apply for a refund for the amount of sales or use tax paid on the purchase of new or replacement equipment for an energy efficiency project.

Under the Kentucky of Revenue Sales tax code section 139.518(1)

"Energy efficiency project" is defined as a project undertaken by a person engaged in manufacturing whereby the person purchases new or replacement machinery or equipment that reduces the consumption of energy or energy-producing fuels in the manufacturing process at a plant facility in this state by at least fifteen percent (15%) measured in megawatts, gallons, or other measurable units of energy, while maintaining or increasing the number of units of production for that same period.

Consequently, the types of equipment that are allowable under this policy are not specified however, the definition of "Machinery and equipment" does not include windows, lighting, other improvements to the building, or repair, replacement, and spare parts.

To be eligible for the refund, the manufacturer must file an application for preapproval with the Department of Revenue prior to purchasing new or replacement equipment, and should initiate the process with the Kentucky Cabinet for Economic Development.

To read more about the Energy Efficiency Project visit the Kentucky Department of Revenue Website.