Luxury Horse Trailers Sales Tax Exempt in Kentucky
- Oct 15, 2015 | Gail Cole
Traveling with a horse is more complicated than traveling with, say, a Chihuahua. Perhaps that’s why many horse trailers come with living quarters.
According to the Kentucky Department of Revenue (KDOR), the trailers should be subject to sales tax because they include living quarters. However, a horse trailer retailer, the Kentucky Board of Tax Appeals, the Franklin Circuit Court, and the Kentucky Court of Appeals all disagree. In their eyes, certain horse trailers with living quarters are eligible for a sales tax exemption in Kentucky.
Some years ago, the KDOR audited Shinin’ B Trailer Sales, LLC, and found it liable for sales tax on 21 horse trailers with living quarters (bathroom, kitchen, seating area, sleeping facilities, and storage area). The trailers were designed to be drawn by a truck and had a load capacity of 1,000 pounds (including the horse stalls/storage). Of the trailers under dispute, 20 could carry 3 or 4 horses and 1 could carry 6 horses.
Shinin’ B did not collect tax on these trailers at the point of sale. When audited, it argued that the sales were exempt under KRS § 139.470(21), which provides an exemption for semi-trailers and trailers defined as follows:
- A semi-trailer is “a vehicle designed to be attached to, and having its front end supported by, a motor truck or truck tractor, intended for the carrying of freight or merchandise and having a load capacity of over one thousand (1,000) pounds.” KRS 189.010(12)
- A trailer is “any vehicle designed to be drawn by a motor truck or truck-tractor, but supported wholly upon its own wheels, intended for the carriage of freight or merchandise and having a load capacity of over one thousand (1,000) pounds.” KRS 189.010(17)
KDOR contended that the living quarters in the trailers are “similar to those in recreational vehicles” and therefore should be subject to sales tax, as are recreational vehicles. It argued that the living quarters prevent the horse trailers from being eligible for the exemption provided in KRS 139.470(21): “[T]he presence of living quarters makes it impossible for the trailers to be used only or primarily for carrying freight or merchandise” (emphasis mine).
The Kentucky Court of Appeals took issue with KDOR’s use of the word “primarily.” While recreational vehicles are defined in KRS 132.010(17) as “a vehicular type unit primarily designed as temporary living quarters for recreational, camping, or travel use…,” the definitions for semi-trailer and trailer do not include the word “primarily.”
The opinion further states, “There is no question that the trailers were intended for the transport of horses. The living quarters and storage space are included to further that purpose.” For an exemption to be valid, trailers must be “intended for the carriage of freight.” The court concluded that “transportation of horses is within the meaning of the ‘term carriage of freight.’”
The Kentucky Court of Appeals therefore affirmed the decisions by the Board of Appeals and the circuit court, that Shinin’ B is not required to prove that the trailers are exclusively or primarily intended for carriage of freight or merchandise for the sales tax exemption to apply. Read the opinion.
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