Legislation in Kentucky that made substantial changes to how various services are taxed within the state (HB 8) went into effect on Jan. 1. Under the new law, 34 additional service categories are subject to sales tax, including “executive employee recruitment services.”
According to the Kentucky Department of Revenue, “existing IRS guidelines for highly compensated employees under IRC Section 414(q)(2), along with the common definition of the term ‘executive’ as an administrator or manager in an organization, are the criteria used to determine the types of recruitment services covered. For tax year 2023, the minimum compensation threshold level is $150,000. Therefore, recruitment services for placement of a highly compensated employee who is an administrator or manager for a Kentucky employer are subject to the sales and use tax.” The department’s FAQs can be found at ky.gov.
Businesses that provide the services are now required to collect the 6% sales tax from their customers.
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