A bloodstock agent, a trainer, and an auction company representative told Kentucky legislators during a Nov.12 subcommittee hearing at the state capital in Frankfort that the 6% sales tax charged to Kentucky residents on horse purchases should be repealed and that purses distributed at Kentucky racetracks needs to grow along with other states if Kentucky expects to remain the central point of the Thoroughbred industry.
Bloodstock agent Jack Smith, trainer Kenny McPeek, and Fasig-Tipton Sales Company president Walt Robertson spoke during the Interim Joint Committee on Agriculture and Natural Resources Subcommittee on Horse Farming.
The subcommittee was formed earlier this year in advance of the 2004 legislative session in an effort to educate lawmakers on the scope and importance of the horse breeding and racing industries in Kentucky. The November session was the last before the legislative session reconvenes in January.
The speakers during the November meeting hinted toward the need of expanded gaming in the state and said that the tax structure could cost the state stallions and quality horses if it does not become equal with other states.
"We may be competitive in a lot of areas, but I don't think we are competitive when it comes to the area of purses," said Smith, a Lexington-based bloodstock agent who specializes in syndications and partnerships. "Our purses are not competitive with states that I didn't even think would be racing. They are taking our horses away because of alternative gaming."
Smith told the committee that owners and trainers point their horses to races and tracks that offer the best purses. "If we want to keep the best horses in the state then we must come up with a way to increase purses," he said.
Sen. Damon Thayer, who co-chairs the panel with Rep. Susan Westrom, has repeatedly said the meetings aren't designed to be forums for alternative gaming bills, which have failed to pass the legislature the last two years. Alternative gaming is one of the many issues the legislature could address during its 2004 session.
Robertson told the committee that auction purchases have remained strong and are continuing to grow at exceptional rates. He said last year Fasig-Tipton sold $210-million worth of horses nationwide with $63-million coming from sales in Kentucky.
McPeek told the committee that one of his biggest concerns was the 6% sales tax that Kentucky residents pay when purchasing a yearling or 2-year-old in training. Buyers from out-of-state are exempt from the sales tax if their purchase is shipped out of state immediately after the sale or after training if held temporarily in the state for training. The state does not charge sales tax on breeding stock.
"We are offering incentives to move horses out of state," McPeek said. "I would much rather the young horses stay here to be broken then shipped out of state but we have to move the horses out of state because of our state tax structure."
McPeek said he was in a unique position as he not only serves as a trainer but he also acts as an agent at public auctions.
Smith echoed McPeek's concerns over sales tax. "I go out of my way to get these horses I buy at sales shipped out of state and to establish partnerships in other states to avoid the sales tax," Smith said.
Sen. Thayer said he had pre-filed bills that would eliminate the sales tax on stallion fees and the purchase of farm equipment. He went on to say that the next step toward eliminating the sales tax on young horses would be to seek out a financial impact study.