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Kentucky Rolling Stock Exemption Limited to Items Involving Trains – Tax & Accounting Blog

The Kentucky sales tax exemption for trains and rolling stock did not apply to a rail transportation company’s purchases of:

  • track items;
  • signal items; and
  • herbicide.

Kentucky Rolling Stock Exemption

The exemption applies to locomotives or rolling stock for use in interstate commerce, as well as:

  • construction material; and
  • repair material.

In addition, fuel or supplies for the direct operation of trains are exempt.

The company claimed that the items it purchased were “supplies for the direct operation of locomotives and trains” under the exemption.

Exempt Items Must Involve the Train

However, the appellate court found that the items were not used for the “direct operation of locomotives and trains.” Instead, it found they were used for the railway system or tracks. The court held the items listed in the statute before “supplies for the direct operation of locomotives and trains” involve the train itself.

CSX Transportation, Inc. v. Finance and Administration Cabinet, Kentucky Court of Appeals, No. 2015-CA-001415-MR, March 9, 2018, ¶203-187

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Author: CCHTaxGroup

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