Kevin Schwalb, TRSA’s vice president of government relations, testified on behalf of the linen, uniform and facility services industry in front of the Interim Joint Committee on Economic Development and Sustainability of the Kentucky State Legislature.
Schwalb was invited by the Committee Chairman, State Sen. Gary Boswell (R), to discuss the negative impacts of tax legislation passed in 2018 and the Kentucky Department of Revenue’s (KDOR) interpretation of how textile rental should be taxed.
“In Kentucky, the industry is responsible for $82,179,000 in annual payroll, 1,945 employees and an average statewide wage rate of $23 an hour,” Schwalb told the committee.
Prior to 2018, industrial laundries paid Kentucky sales or use tax on items purchased for rental to customers, with no additional tax collected from customers. After July 1, 2018, industrial laundries are required to charge Kentucky sales tax on charges for supplying those items to customers. KDOR also requires the industrial laundry and linen supply industry to continue to pay Kentucky use tax on purchases of textiles.
“KDOR claims the industry must pay tax on purchases of items purchased for rental to customers AND charge tax on charges to customers,” Schwalb said. “This leads to DOUBLE TAXATION – KDOR’s interpretation imposes Kentucky sales tax twice on textiles. Another impact of this is TAX PYRAMIDING, which imposes a sales tax on the sales tax of items. This practice contradicts the resale exemption, creates an adverse economic development climate and harms growth. This places Kentucky at a competitive disadvantage to other states.”
After Schwalb’s remarks, Chairman Boswell committed to work with Gov. Andrew Beshear (D) to rectify the situation. “My hope is the governor will work with the Department of Revenue to resolve this unfair tax,” Chairman Boswell said. “If not, I will introduce legislation to resolve it.”
TRSA will continue to work to remove the double taxation and tax pyramiding schemes on the linen, uniform and facility services industry.
Click here for a video of the proceedings.
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