Local lawmakers look to get rid of nonprofit service sales tax

PADUCAH — Less money going to help the people in need — that’s what several local nonprofits say a new tax law is doing.

Back in July, a law went into effect that adds 6 percent sales tax on nonprofit services.

That means event tickets for a fundraiser or silent auction items that you buy for a charity are taxed. Some donors are having to pay that extra bit while other nonprofits say they’ve just been eating those costs.

Kentucky lawmakers are in legislative session now, and they’re looking to fix that problem.

Six cents of every dollar adds up, and $1  goes far at Family Service Society. “On average, it costs us $1 to provide one meal to a person,” Executive Director Candace Melloy says. She says they paid $4,000 in taxes on the money they raised at BBQ on the River.

“So in theory, $4,000 is 4,000 meals that we could provide to our community,” Melloy says. “When we give away clothing from our clothing room, the average cost per item there is $1 as well.”

Rep. Randy Bridges

Kentucky Rep. Randy Bridges says a bill has been introduced in the house to make nonprofits exempt again. “The intent is to correct the unintended consequences of the tax changes that were made in the last session,” he says.

Rep. Richard Heath

Kentucky Rep. Richard Heath was re-elected this year. He says the General Assembly didn’t vote for this. “The bill was actually passed in 1970 and was laying dormant all these years, and the Kentucky Supreme Court ruled on it in April 2018.”

Bridges says the bill will now go to the state Senate to be reviewed.

Melloy hopes the bill is passed before the current law takes a toll on Family Service Society’s next big fundraiser. It isn’t the only nonprofit that took a major hit in the past six months.

The United Way of Paducah and McCracken County says it has had to tax donors, which organizers worry will force people to donate smaller amounts.

West Kentucky Community and Technical College has paid $3,297.94 in taxes for things such as performances at their fine arts center and scholarship auctions since July.

Some organizations are preparing to warn people before their next big events that they may have to pay more to help those in need, but Heath says he thinks the bill could be passed by the beginning of February.

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