Did you know that many Kentucky Baptist churches are required by law, on certain transactions, to collect sales tax for the state?
If your church receives $6,000 or more in a calendar year for church dinners, sports leagues, tickets for wild game suppers and the like, you are expected to collect sales taxes. You are also expected to file a tax form even if you did not have any eligible revenue.
Did you know that failure to collect the sales tax could result in penalties, including foreclosure on church property?
For example, according to a former Revenue Cabinet employee, if a church charges for recreational leagues and church dinners and takes in $31,250, it must collect the 6 percent sales tax on that amount — a total of $1,850.
If the church takes in that same amount of revenue for, say, three years, but fails to report it — the penalties and interest continue to add up. Instead of owing $5,624 in sales tax, the church would owe $7,725.
At the 2025 Kentucky Baptist Convention Annual Meeting, messengers overwhelmingly approved a resolution opposing requiring churches to collect sales tax and urging lawmakers to rescind it. The legislature failed to act during the 2025 session, and a bill that would fix the problem seems to have stalled in the House again this year. But an opportunity remains for the Kentucky Senate to step up during the budget process and make the necessary changes by amending the budget bill that has already passed the House.
Why should pastors, elders, and church members oppose this tax? Here are six reasons:
1. The tax unfairly targets some churches: Are all church meals subject to the sales tax in Kentucky? No, they are not. In fact, if you call your meal a “fundraiser,” you are not forced to collect taxes on it. According to a representative from the Department of Revenue, “Catholic fish fry dinner receipts are exempt if the fish fry is held by a nonprofit entity as part of a fundraising event with the caveat that fundraising events do not include retail operations.”
2. The tax sets up churches for failure: Some elected leaders have said that while the sales tax requirement does exist, no one in the Revenue Department is currently going after churches for tax collection. But that reality could change at any time, which provides little comfort to a Kentucky church that has not been collecting taxes on t-shirts, small group workbooks, men’s breakfasts and more. Just because the current administration is not auditing churches on the sales tax does not mean that future administrations will follow suit.
3. The tax especially burdens smaller churches: While some churches can afford to hire a financial secretary, or a CPA, to handle the burdensome paperwork required to meet the state’s expectations, most cannot. The vast majority of Kentucky Baptist churches have fewer than 100 people on Sunday morning and rely on a volunteer treasurer to keep the books. The state is unnecessarily burdening churches with extra paperwork.
4. The tax encourages dishonest labeling: Some in elected leadership have suggested that if a church will refer to the fee charged for such things as meals, sports leagues, or t-shirts as a “donation” then there is no tax to be collected. For example, instead of charging a fee for a $5 meal, just call it a “suggested donation.” That is like my “donation” to Kentucky Educational Television (KET) for its streaming service. I recently received the following notice: “Starting February 1, 2026, the minimum qualifying donation to receive KET Passport begins at $8/month or $96 annually.” Although the fee is required, it is still a donation — at least according to tax law. Kentucky Baptists know the difference.
5. The tax fails to understand local church ministry: Churches are not competing with local restaurants when they charge $5 for a $6 meal. They are providing a convenience to help working families more easily attend a Wednesday night Bible study or a children’s program without having to prepare a meal for the family. Churches are not trying to turn a profit but simply recover their cost. Churches are not trying to compete with the local travel basketball league when they charge a fee for Upward Sports programs. They are simply carrying out a ministry to residents of their community who need it.
6. The tax makes churches an agent of the state: The old adage applies, “What you can tax you can control.” Kentucky Baptists didn’t like it when Gov. Andy Beshear sent Kentucky State Police to church parking lots to take down license plate numbers on Easter Sunday during COVID-19, and we do not like it when Frankfort lawmakers impose a burdensome tax on local churches. That is why more than 50 members of the House co- sponsored a bill to alleviate this tax burden. However, leadership would not allow it to even come to a vote on the House floor. Surely a legislature that has brought us expanded sports betting for the stated purpose of increased revenue does not need to go after local churches that provide a simple meal and sports ministry to families across the Commonwealth.
Your voice can make a difference right now. If you would like to join me and others in opposing this onerous tax, call the Legislative Message Line at 1-800-372-7181. You will talk to a kind lady who will ask you a few questions to help identify your senator, and then you can leave a simple message asking your senator to amend the proposed Kentucky budget bill to remove the requirement that churches collect the sales tax.
Dr. Todd Gray 