Pub. 1550 Business Taxes for Agricultural Industries
This publication provides information as to how Kansas taxes apply to your agricultural business. Using common industry examples, it explains which items are taxable, which are exempt and how to properly claim the exemptions. Kansas law provides several sales tax exemptions for those engaged in the agricultural industry, but these tax exemptions are specific in nature and do not apply to all aspects of your business. Also included is information about how to report and pay the taxes. By law, businesses are required to submit their Sales, Compensating Use and Withholding Tax returns electronically. Kansas offers several electronic file and pay solutions – see page 17.
Use this publication as a supplement to Kansas Department of Revenue’s basic sales tax publication, KS-1510, Kansas Sales and Compensating Use Tax.
Table of Contents
- INTRODUCTION TO KANSAS SALES TAX
- SALES TAX EXEMPTIONS FOR AGRIBUSINESS
- INDUSTRY APPLICATIONS AND EXAMPLES
- CLAIMING THE EXEMPTIONS
- OTHER KANSAS TAXES
- REGISTRATION AND FILING KANSAS BUSINESS TAXES
- KANSAS CUSTOMER SERVICE CENTER
- ADDITIONAL INFORMATION
- KANSAS EXEMPTION CERTIFICATES
- TAXPAYER ASSISTANCE
INTRODUCTION TO KANSAS SALES TAX
This publication is designed to provide farmers, ranchers and others in agribusiness with information you will need to determine which of your purchases are subject to sales or use tax, which are exempt and how to properly claim the exemptions. Throughout this publication we will cite or refer to the statute (K.S.A.) or regulation (K.A.R.) applicable to that section. The laws and regulations on which the information is based are listed on page 19.
Before we can begin any discussion of what is exempt from Kansas sales tax, we must first identify the transactions that are taxable in Kansas. Kansas sales tax applies to three general types of transactions.
- The retail sale, rental or lease of tangible personal property;
- The fees for labor services to install, apply, repair, service, alter or maintain tangible personal property;
- The sale of admissions to places providing amusement, entertainment or recreation.
A retail sale is a sale to the final consumer or user. Tangible personal property is any item to which you can attach a monetary value, has a physical presence and can be moved. Tangible personal property is different from intangible property (stocks and bonds) or real property (land and buildings). Examples of tangible personal property used by the agricultural industry include ATVs, combines, fencing, grain, hand tools, livestock, pipe, seed, tractors and trucks. Some of these items qualify for exemption from sales tax when purchased by a farmer or rancher, others do not.
The labor services taxable in Kansas are only those services enumerated in the law and listed above. Examples of taxable services used by the agricultural industry are irrigation system installation, machine and truck repair, welding, and well drilling. As with the purchase of tangible personal property, some of these services are exempt when purchased by agribusiness, others are not.
Examples of admissions subject to tax include movie tickets and admissions to a fair or trade show.
Farmers and ranchers who make retail sales of products or taxable services also must register to collect sales tax from their customers. For detailed information about sales and use tax, obtain a copy of Pub. KS-1510, Kansas Sales Tax and Compensating Use Tax, from our website.
SALES TAX STRUCTURE
The Kansas sales tax rate is a combination of the state rate of 6.5%, plus any local sales tax imposed by a city and/ or county. Local sales (and use) tax rates vary by locality (jurisdiction), and may change quarterly. The law requires these local taxes be administered by the Department of Revenue. Local sales tax generally applies whenever the state sales tax applies. Exception: Utilities (except water) used for agricultural or residential purposes are subject to local tax only (see page 12).
The combined tax rate collected on a retail sale of goods or taxable services is the rate in effect where the customer takes delivery of the merchandise or first makes use of the taxable service. This is called destination based sourcing. On over-the-counter sales, it will generally be the rate of tax at the location of the retailer; on delivered sales, it will be the rate of tax at the customer’s (or customer’s designee) location (shipto address). For taxable labor services, it will be the rate in effect at the job site where the labor services are performed.
To assist retailers in collecting the correct sales tax rate for the destination or source of the sale, the Department of Revenue publishes a complete list of state and local tax jurisdictions and rates. Pub. KS-1700, Sales and Use Tax Jurisdiction Code Booklet, and its quarterly updates are available on our website.
RETAILER AND CONSUMER RESPONSIBILITIES
Kansas retailers are required by law to collect the full amount of sales tax due on each sale to the final user or consumer, and remit it on a regular basis to the Department of Revenue. When added to the purchase price of taxable goods or services, the sales tax is a debt from the consumer to the retailer. As such, the sales tax is recoverable by the retailer from the customer in the same manner as any other debt.
Kansas consumers are likewise obligated to pay the full amount of sales or use tax due on all taxable purchases. If the purchase is from a Kansas retailer, the Kansas retailers’ sales tax must be paid to the retailer. When tangible personal property is purchased from a retailer in another state, a Kansas compensating use tax may be due (see page 15).
For every sale of merchandise or taxable services, a Kansas retailer must either collect the total amount of sales tax due or obtain documentation as to why a particular sale is exempt. A consumer who is entitled to an exemption from sales or use tax is obligated to provide this documentation and should not demand that a retailer exempt a sale without it. Discussion on how to properly claim the sales and use tax exemptions begin on page 14.
HOW TO REGISTER
To apply for a tax number or to register for Kansas Retailers’ Sales Tax, visit ksrevenue.org and sign in to the KDOR Customer Service Center. After you complete the application you will receive a confirmation number for your registration and account number(s). See Pub. KS-1216, Business Tax Application and Instructions, for more information.
The Department of Revenue assigns a sales tax account number to you after you complete a Business Tax Application (CR-16). The account number is printed on your Retailers’ Sales Tax Registration Certificate and is used to report and pay the sales tax you collect from your customers. Additionally, your sales tax number must also appear on the resale and ingredient or component part exemption certificates you give your supplier. For more information about Kansas sales tax account numbers, including how they are formatted, see Pub. KS-1510, Kansas Sales Tax and Compensating Use Tax.
SALES TAX EXEMPTIONS FOR AGRIBUSINESS
AGRIBUSINESS DEFINED FOR SALES TAX
For the purpose of applying sales tax, Kansas tax law defines farming or ranching as any activity which is ordinary and necessary for the growing or raising of agricultural products; the operation of a feedlot; or, farm and ranch work for hire. Therefore, anyone engaged in the production of agricultural commodities for resale may claim an agricultural exemption. Included are farmers, ranchers, feedlots, Christmas tree farms, plant nurseries, and the aquaculture industry – those who are engaged in the controlled cultivation and harvest of aquatic plants and animals.
Farming or ranching includes, but is not limited to, such enterprises producing:
- bees and apiary products
- dairy products
- fruits of all kinds, including grapes, nuts and berries
- fur animals
- grains and feed crops
- livestock, including beef and dairy cattle, sheep, swine, goats or rabbits, including the breeding, grazing and feeding of any or all such animals
- plant nursery operations, including bushes, flowers, grass, sod and trees
- maple syrup
- poultry and poultry products
To be considered as farm and ranch work for hire, the activity must be ordinary and necessary for the growing or raising of agricultural products or livestock. Persons engaged in farm and ranch work for hire include custom cutters, crop dusters, and fertilizer applicators.
NOTE: Throughout this guide we will use the terms farming, ranching or agribusiness to mean anyone engaged in any of the above enterprises and therefore eligible to claim an agribusiness exemption.
CAUTION: Farming or ranching does NOT include the growing or raising of agricultural products for personal use, or commercial operations such as processing food or dairy products, off-farm grain storage and marketing, the processing of lumber, the operation of a stockyard or slaughter house, or the retail sale of farm and ranch supplies or products.
A common misconception is that sales tax is not due on any item or service purchased for farm or ranch use. This is not the case; farmers, per se, are not exempt from Kansas sales or use tax. However, there are four sales and use tax exemptions specifically for agribusiness: agricultural animals, farm machinery and equipment, propane for agricultural use, and soil erosion prevention.
Like all Kansas businesses, persons engaged in agribusiness may also purchase without tax items that make up all or part of the taxable goods or services produced or sold. These are tax exemptions for resale, ingredient or component parts, and consumed in production.
What follows is a general discussion of these seven sales and use tax exemptions with examples of items that qualify and those that do not. Other examples are in the industry application section beginning on page 7.
Animals purchased for pleasure or pets are taxable. The sales of agricultural animals and fowl (cattle, chickens, hogs, ostriches, sheep, turkeys, etc.) and aquatic animals and plants are exempt when used in agriculture or aquaculture; the production of food for human consumption; the production of animal, dairy, poultry or aquatic plant and animal products, fiber or fur; or, the production of offspring for any of the above purposes. [K.S.A. 79-3606(o)]
EXAMPLE: The purchase of a horse for breeding purposes or to herd cattle is not taxed. A horse purchased for pleasure or show is subject to sales tax.
EXAMPLE: The purchase of fish to raise and sell for human consumption is exempt. Purchase of fish for an aquarium is taxable.
FARM MACHINERY AND EQUIPMENT
The sales tax exemption for farm or aquaculture machinery and equipment found in K.S.A. 79-3606(t) has three categories of exempt transactions:
- the purchase, lease or rental of the equipment;
- repair or replacement parts for the equipment; and,
- labor services to repair and maintain the equipment.
Two conditions must be met to claim this exemption. The buyer must be engaged in farming or ranching as defined on this page, and the property purchased, repaired or serviced must be used only in farming and ranching.
Farm Machinery and Equipment Defined
As with many terms, the definition of farm machinery and equipment present in sales tax law and our common everyday use of the phrase differs. Many types of equipment are used in a farming or ranching operation, but not all qualify for the exemption. For the purpose of the sales tax exemption, farm machinery and equipment is defined as all machinery and equipment which is ordinary and necessary for the growing or raising of agricultural products.
The first category of items that come to mind as farm machinery and equipment are implements of husbandry. As defined by K.S.A. 8-126(cc), these are vehicles designed or adapted and used exclusively for agricultural operations, including feedlots, and only incidentally moved or operated on public highways. Implements include farm tractors, combines, and other self-propelled farm implements. Also included are aquaculture machinery and equipment. This is personal property actually and regularly used in any aquaculture operation. An aquaculture operation includes the feeding out; breeding, growing or rearing; and, selling or transporting aquatic plants and animals.
The definition of farm machinery and equipment includes precision farming equipment that is portable or is installed or purchased to be installed on farm machinery and equipment. Precision farming equipment includes the following items used only in computer-assisted farming, ranching or aquaculture production operations: soil testing sensors, yield monitors, computers, monitors, software, global positioning and mapping systems, guiding systems, modems, data communications equipment and any necessary mounting hardware, wiring and antennas.
IMPORTANT: The terms farm machinery and equipment and aquaculture machinery and equipment do not include buildings, building materials, silos, fence, land, passenger vehicles, all terrain vehicles, motorcycles, trucks, truck tractors, trailers, semitrailers, or pole trailers, other than a farm trailer (see page 12).
Exclusive Use Test
An item is considered to be farm machinery and equipment when used only in farming, ranching or agricultural production as defined. If it is used for another purpose, an exemption cannot be claimed for farm machinery and equipment.
EXAMPLE: A forklift used only for farming or ranching (which includes the operation of a feedlot, farm and ranch work for hire, and the operation of a Christmas tree farm or nursery) may be purchased as exempt farm machinery and equipment. However, when the forklift is used in another business, such as seed or chemical sales, the purchase of the forklift is subject to sales tax.
EXAMPLE: A skid loader purchased by a farmer and used exclusively in farming operations, such as removing manure from a feedlot, removing snow near or in a pen or pasture to gain access to livestock, farm pond building/cleaning, filing holes or tire tracks that are hazardous to livestock in a pasture or pen, fence repair work, windmill repair, lifting equipment used in farming operations, or pasture or fence shrub clearing, is exempt under the farm machinery and equipment exemption. If the skid loader is used for general snow removal, road grading, or building construction, the purchase would not be exempt under this exemption.
The following list is representative of items used by agribusiness, and typical sales tax treatment. Other examples are in the industry application section that begins on page 7.
USUALLY EXEMPT. These items are usually not subject to sales or use tax when used exclusively in farming or ranching:
- Antifreeze, hydraulic fluid, lubricating oils and greases for farm machinery and equipment
- Artificial insemination equipment
- Augers (attached to farm equipment)
- Baling twine and wire
- Barn ventilators
- Brooder houses
- Brush hogs
- Bulk milk coolers
- Bulk milk tanks
- Calf weaners and feeders
- Cattle currying and oiling machine
- Cattle feeder (portable)
- Chain saws used commercially to harvest timber, lumber and prune orchards
- Conveyers (portable)
- Corn pickers
- Corral panels (portable)
- Crawlers, tractor
- Crowding alley
- Ear tags
- Egg handling equipment
- Ensilage cutters
- Farm wagons
- Farrowing houses (portable and crates)
- Feed grinders
- Forage boxes
- Forage harvester
- Fruit graters
- Fruit harvesters
- Global positioning systems
- Grain augers (portable)
- Grain binders
- Grain conveyors
- Grain drills
- Grain dryers
- Grain planters
- Hay loaders
- Head gates
- Hog feeders (portable)
- Husking machines
- Incubators (portable)
- Irrigation equipment
- Land clearing tree shears
- Livestock feeding, watering and handling equipment (portable) Manure handling equipment (also front and rear end loaders)
- Manure spreaders
- Milk coolers
- Milk strainers
- Milking machine
- Mowers, hay and rotary blade
- Poultry feeders (portable)
- Poultry house equipment
- Precision farming equipment: soil testing sensors, yield monitors, GPS & mapping systems, guided systems, data communication equipment
- Pruning and picking equipment
- Refrigerators used to cool raw milk
- Repair and replacement parts for exempt machinery
- Root vegetable harvesters
- Rotary blade mowers
- Rotary hoes
- Seed cleaners
- Seed planters
- Silo unloaders (if part of feeding equipment)
- Skid Loaders
- Squeeze chutes
- Tarps to cover farm machinery, grain
- Threshing machines
- Tires for exempt machinery
- Tractors, farm
- Vacuum coolers
USUALLY TAXABLE. These items are usually subject to sales or use tax.
- Air compressors and tanks
- Antifreeze, hydraulic fluid, lubricating oils and greases for trucks/ vehicles
- Bale transportation equipment
- Building materials and supplies
- Cattle feeders (permanent)
- Cleansing agents and materials
- Clothes washers and dryers
- Construction tools
- Cow stalls
- Drainage tile
- Electrical wiring
- Equipment and supplies for home
- Fence building tools
- Fencing materials
- Field toilets
- Fire prevention equipment
- Fuel additives
- Garden hose
- Garden rakes
- Gasoline tanks and pumps
- Grain bins
- Hand tools, syringes, branding irons
- Hog rings
- Hog ringers
- Light bulbs
- Marking chalk
- Office supplies
- Post hole diggers
- Pumps, gasoline
- Pumps for household or lawn use
- Refrigerators for home use
- Repair tools
- Road maintenance equipment
- Road scraper
- Shipping containers used for storage
- Small tools
- Snow fence
- Snow plows and snow equipment
- Tanks, air
- Tanks, gasoline
- Tools (personal use)
- Tractors, garden
Attachments are defined as items essential to the operation of farm machinery and that contribute directly to the operation of the equipment. They are exempt from sales tax if used for a qualifying agricultural purpose. Items that should be regarded as farm machinery attachments include:
- Tractor-mounted loader/scoop/grapple fork
- Tractor-mounted snow plow or snow blower
- Tractor or combine cab
- Combine head
- Combine pick-up
- Planter monitoring system
- Radar ground speed sensor
- Agricultural global positioning system
- Grain yield monitor
- Sprayer control
- Electronic wind monitor
- After market lighting
Repair and Replacement Parts
Once it has been determined that a piece of equipment qualifies for a tax exemption as farm or aquaculture machinery or equipment, the repair and replacement parts for that item are also exempt from sales tax. However, not all items purchased for the equipment are considered to be repair and replacement parts.
Repair and replacement parts means any part which replaces an existing part, or which is necessary to maintain the working condition of a piece of farm machinery and equipment. Items which would be found on a manufacturer’s parts list, service parts list, or similar parts listing for a given piece of machinery or equipment, or the generic equivalent of such listed part, are exempt. Parts not included in such a listing do not qualify for exemption as repair and replacement parts of farm machinery and equipment.
EXAMPLE: Belts, bolts, cotter keys, hydraulic fluid, motor oil, nuts, and washers used to repair a combine or tractor are exempt when included on the original parts listing and the combine or tractor is used in farming and ranching.
Although repair and replacement parts for farm machinery and equipment are included in the exemption, tools and equipment used to maintain the machinery and equipment are not included in the sales tax exemption.
Labor services on farm machinery and equipment
Labor services to install a repair or replacement part or to maintain farm or aquaculture machinery and equipment in working order are also not subject to sales tax.
EXAMPLE: The air conditioning system on your combine your combine fails and it is replaced. All charges for parts and labor would be exempt from Kansas sales tax since the air conditioning system was factory installed equipment on your combine.
However, if the labor service is to install or repair an item that is NOT considered to be a repair or replacement part as defined in the previous section, then that labor fee, like the item, is subject to sales tax. This is true even when the machinery or equipment qualifies as farm or aquaculture machinery and equipment.
EXAMPLE: You install a CD player and speakers in your tractor. This is not a repair or replacement part of the tractor, therefore the CD player and speakers (and the labor for its installation) are subject to sales tax. In contrast, work on the tractor’s radio would be exempt if the radio was original equipment on the tractor.
PROPANE FOR AG USE
Propane used for an agricultural purpose is exempted from the state and local sales tax at K.S.A. 79-3606(w). Exempt agricultural uses of propane include, but are not limited to, propane used in:
- barns or sheds used to house livestock or agricultural machinery or equipment
- brooder or farrowing houses
- fire starters
- irrigation equipment
- tractors, combines and other farm implements
EXAMPLE: Propane used in a nursery where plants are produced from seed is exempt as an agricultural use of propane. Propane used to heat a retail flower shop is not exempt as an agricultural use of propane.
If the propane use is not agricultural in nature (as defined on page 4), the propane is subject to sales tax.
EXAMPLE: Sales tax is due on propane sold to heat a business (including farm or ranch buildings not devoted to agricultural production), to kennels that board animals for others and for recreational vehicles and barbecue grills.
Local Sales Tax on PropanePropane for ag use is exempt from the state and local sales tax. Propane used in a commercial operation is generally subject to both the state and local sales tax —unless its use qualifies as consumed in production. Propane used for a noncommercial residential purposes (home heat, cooking, hot water), is subject only to local sales tax, based on the location of the consumer [K.S.A. 12-189a(b)]. How the state and local sales tax applies to propane sales is summarized in the following table.
|PROPANE USE||STATE||LOCAL||TAX SITUS|
|Commercial Use||Taxable||Taxable||Where customer takes delivery|
|Consumer in Production||Exempt||Exempt||N/A|
|Residential Use||Exempt||Taxable||Where customer takes delivery|
|Recreation Vehicles or BBQ grills||Taxable||Taxable||Where customer takes delivery|
* Tax situs indicates which local tax is applicable to the retail sale of the propane. Sales of propane are taxed or “sourced” at the rate in effect where the customer takes delivery of the propane.
Propane Storage Tanks
The propane exemption applies only to the gas itself. Although a propane tank may house or store the propane for an agricultural use, the storage tank itself is not considered to be farm machinery and equipment. Farmers and ranchers must therefore pay sales tax when buying or renting a propane tank for farm, ranch or residential use. Also taxable are materials and labor to install, service, paint, repair or maintain a nonresidential-use propane storage tank.
EXAMPLE: A farmer contracts with an LP company to lease a tank and regularly deliver propane. The tank lease is subject to state and local sales tax based on the property where the tank is located. The propane used for an agricultural purpose is exempt from state and local sales tax.
Different rules apply to residential propane storage tanks. See Residential Labor Services herein.
SOIL EROSION PREVENTION
K.S.A. 79-3606(mm) exempts the following from state and local sales tax.
“all sales of seeds and tree seedlings; fertilizers, insecticides, herbicides, germicides, pesticides and fungicides; and services, purchased and used for the purpose of producing plants in order to prevent soil erosion on land devoted to agricultural use; ...”
Therefore all the components of a shelter belt or wind break planted on agricultural land are exempt from sales tax. The trees, fertilizers and pest control chemicals, and any services purchased to plant the trees are not taxable.
This exemption is only for those soil erosion projects on “land devoted to agricultural use.”
EXAMPLE: A farmer is buying 10 trees to plant on the north side of his residence as a windbreak. Since the land use is residential rather than agricultural, the farmer must pay sales tax on the purchase of the 10 trees. (The labor in this situation is not taxed because it is performed on residential property. See Residential Labor Services herein.)
Perhaps the most widely used sales tax exemption is for the purchase of items (inventory) intended for resale. Those engaged in agribusiness are often retailers as well as producers of agricultural products. See also Retail Sales by Agribusiness herein.
When buying your inventory from a wholesaler or another retailer, or selling inventory items to another retailer, you must use a Resale Exemption Certificate (ST-28A). In order to use a resale exemption certificate, the buyer must have a Kansas sales tax account number and the items purchased must be for resale in the usual course of the buyer’s business.
EXAMPLE: A Christmas tree farm not only grows and sells Christmas trees, but also sells tree stands, lights and prefabricated yard ornaments. As a registered retailer, it will purchase the stands, lights and other retail items without sales tax using a resale exemption certificate.
EXAMPLE: A co-op sells fertilizer, feed, tools, tires, batteries and other automotive supplies. As a registered retailer the co-op will use a resale exemption certificate to purchase its inventory of these items without sales tax.
INGREDIENT OR COMPONENT PART EXEMPTION
Kansas sales tax is designed to be paid only once by the final consumer or user; therefore, items that become part of a finished product or taxable service to be sold to the final consumer are exempt as ingredient or component parts.
To be considered an ingredient or compound part the item must be necessary and essential to the finished product or service; be used in or on the finished product or service; become a physical part of the finished product or service; and, become an ingredient or compound part of property or service for retail sale.
This exemption, found at K.S.A. 79-3606(m) and further explained by K.A.R. 92-19-54, is available to many types of businesses. The statutory definition specifically includes these examples for the agricultural industry:
Seeds, seedlings and fertilizer used in the production of plants and plant products produced for resale, and feed for animals, fowl and aquatic plants and animals, the primary purpose of which is the production of food for human consumption; the production of animal, dairy, poultry or aquatic plant and animal products, fiber or fur; or the production of offspring for use for any such purpose.
CAUTION: The seed, fertilizer and feed must meet the intended use portion of the definition cited above (i.e., for agricultural animals or plants) in order to be exempt from tax.
Whether a purchase qualifies for this exemption is determined SOLELY by how the item is used in the production activity. An item may be taxable for one use and exempt for another, even though purchased by the same consumer. Each transaction must therefore be separately measured against the definition and guidelines in the law and regulation to determine the taxability of the transaction.
EXAMPLE: Seeds and fertilizer for a home garden or flower bed are taxable while wheat and pumpkin seeds purchased to produce a crop for sale are exempt. Food, supplements and vitamins for animals or fish that are pets or pleasure animals are taxable.
Containers, Labels and Shipping Cases
Included in the definition of items considered to be ingredient or component parts are containers, labels, and shipping cases used to sell or distribute property produced for sale. To be exempt, the container or other shipping or handling materials must actually accompany the product and must not be returned for reuse by the manufacturer or producer. Examples of exempt component parts include:
- Paper or plastic bags for produce sold at a farmer’s market
- Pots, crates and other containers sold with plants, shrubs or trees
- Jars, lids and labels for honey, jams and jellies
- Bottles and labels for wine produced at a winery
IMPORTANT: Boxes, crates and flats used to transport agricultural products returned to and/or retained and reused by the producer are taxable.
CONSUMED IN PRODUCTION EXEMPTION
Another exemption available to many types of Kansas businesses is the exemption for items that are consumed in a production process [K.S.A. 79-3606(n) and K.A.R. 92-19-53]. A production process is defined as producing, manufacturing, processing, mining, drilling, refining or compounding tangible personal property; the treatment of by-products or wastes from any such production process; the providing of taxable services; the irrigation of crops; or, the storage and processing of grain.
To be exempt as consumed in production the item must meet four criteria—must be used in the actual process; essential or necessary to the process; consumed, depleted or dissipated within one year; and not reusable for such purpose.
Like the exemption for ingredient or component parts, it is not the buyer or the item itself that is exempt, but rather how the item is used in a production process that may qualify it for exemption. The law lists the following agricultural examples to illustrate this exemption.
- Insecticides, herbicides, germicides, pesticides, fungicides, fumigants, antibiotics, biologicals, pharmaceuticals, vitamins and chemicals for use in commercial or agricultural production, processing or storage of fruit, vegetables, feeds, seeds, grains, animals or animal products whether fed, injected, applied, combined with or otherwise used;
- electricity, gas and water; and,
- petroleum products, lubricants, chemicals, solvents, reagents and catalysts.
EXAMPLE: The retail sale of weed herbicides that are sprayed or applied to crops, crop land, pasture grass and/or range land grass used for grazing commercial livestock, are exempt from sales tax as consumed in production.
EXAMPLE: Lubricating oils and greases, antifreeze and hydraulic fluids for a harvester are exempt. These same items purchased for your cattle truck are taxable.
INDUSTRY APPLICATIONS AND EXAMPLES
Although Kansas sales tax laws and regulations contain definitions and specific examples for the agricultural industry, they remain general in nature. This section will illustrate the practical application of the sales tax principles previously discussed to selected segments of agribusiness.
Most of these examples are taken from written departmental advice in notices and private letter rulings available in the Policy Information Library on our website. If you are in doubt about the application of the law to a specific purchase or situation for your business, contact the department for advice. See Additional Information herein.
ANIMALS AND ANIMAL CARE
GENERAL RULE: ANIMALS USED IN PRODUCTION OR BREEDING OPERATIONS ARE EXEMPT.
If the animal is exempt as an agricultural animal (as defined on page 4), the feed and care vitamins and chemicals, whether fed, injected, applied or otherwise used on animals for agricultural production are also exempt.
Bull Semen. Purchase of semen by persons engaged in the business of breeding and raising cattle for ultimate resale is exempt as an ingredient or component part. The delivery charge is exempt if the item purchased is exempt.
Insemination Service. Gross receipts from the service of performing insemination services in connection with production of cattle, sheep, hogs or other breeding stock for resale is exempt.
Artificial Insemination Supplies. These items are exempt as consumed in production: disposable plastic gloves, lubricants, and paper toweling. Catheters and ear tags are exempt as farm machinery and equipment.
Artificial Insemination Equipment. Implanting guns, sheaths, thermometers and thaw units (for thawing frozen semen straws) are exempt as farm machinery and equipment.
Animal Care Products. These products are exempt as consumed in production: antibiotics, wormers, hormones, insecticide (that is applied directly on animals), teat dip, detail tail paint and liquid nitrogen. These animal care items are exempt farm machinery and equipment: kamar heat detectors, calf jackets and biostat tanks.
Animal Feed: Feed and feed supplements are exempt as an ingredient or component part if the animal is an agricultural animal as defined on page 4.
The cattle feed and any vitamin and mineral supplements mixed into the feed for feeder cattle may be purchased exempt from sales tax. Food, vitamins and minerals for a pet or pleasure animal are taxable.
GENERAL RULE: MATERIALS USED TO CONSTRUCT AND REPAIR BUILDINGS AND OTHER STRUCTURES FOR FARMERS AND RANCHERS ARE TAXABLE SALES OF TANGIBLE PERSONAL PROPERTY.
Also taxable is the sale or rental of construction equipment. The labor services to construct a new building or facility (feedlot or well) are not taxed. The labor services to repair or maintain an existing farm building, well or feedlot are taxable, unless the labor is to repair damage from a fire, flood, tornado, lightening, explosion, windstorm, ice loading and attendant winds, terrorism, or earthquake. A windstorm means straight line winds of at least 80 miles per hour as determined by a recognized meteorological reporting agency or organization.
The sale of construction materials to a farmer, rancher or contractor for use in improving real property are taxable retail sales of tangible personal property. This includes materials used to build barns, confinement buildings, corn cribs, drainage-tile systems, fences, grain storage bins, greenhouses, roads, silos, storage buildings and other buildings and structures.
The sale, rental or lease of construction equipment is taxable. This includes backhoes, graders, hand tools, posthole diggers, and power tools.
As a general rule, the labor services fee charged by contractors, subcontractors and repairmen is subject to sales tax. Labor services are taxed in Kansas when they involve the installation or application of tangible personal property, or when the labor is to repair, service, alter or maintain tangible personal property, even when the tangible personal property is attached to real property.
Farmers and ranchers must generally pay sales tax on all taxable labor services purchased for use in their farming and ranching operations. Only the labor to repair or maintain those items considered to be farm machinery and equipment may be purchased without sales tax. (Original construction labor services are not taxable labor services.)
EXAMPLE: Labor to repair an auger, a dairy’s milking equipment, or a harrow is exempt. Labor to repair a fence, grain truck, or storage building is taxable.
Original Construction Labor Services
An exception to the above general rule is that sales tax is not charged when the labor services of installing or applying tangible personal property are performed in connection with the original construction of a building or facility. The definition of a facility includes feedlots on next page and oil, gas or water wells (page 13).
Original construction is the first or initial construction of a building or the addition of a new wing or floor to an existing building, and includes the land improvements immediately surrounding the new structure.
EXAMPLE: You are building a new barn. Since this is new construction of a building, you do not owe sales tax for the contractors’ labor to build the barn or the labor to construct the land improvements immediately surrounding the barn, such as a driveway, ramp and exterior lighting.
Included in the definition of original construction is any reconstruction work to repair damage to an existing building, facility, or utility structure damaged or destroyed by fire, flood, tornado, lightning, explosion, windstorm (80 mph or more), ice loading and attendant winds, terrorism, or earthquake. Utility structure means transmission and distribution lines owned by an independent transmission company or cooperative, the Kansas electric transmission authority or natural gas or electric public utility. The labor for reconstruction work done for any other reason is taxable.
EXAMPLE: The labor to repair a barn roof that was destroyed by a tornado is exempt as original construction, but the labor to repair a barn roof due to age is taxable.
Residential Labor Services
Labor services performed at a residence are exempt from sales tax. A residence is defined as only those enclosures within which individuals customarily live, and includes the land improvements immediately surrounding the residence. To qualify as a residential land improvement it must be immediately near the residence and must principally serve the residence.
EXAMPLE: The labor to repair to a yard fence is exempt but the labor to repair the fence around a barn is taxable. The materials used for both fences are taxable.
Propane Storage Tanks
Included in the definition of residential property are tanks used to store heating oil and propane, both inside and outside the home. Although you must pay sales tax on the purchase, lease or rental of the storage tank, the labor to install, repair or maintain a propane tank used exclusively for residential purposes is not taxed. This tax treatment of the labor services on residential propane storage tanks is different than that for propane storage tanks used for agribusiness or other commercial purpose (see page 6).
Labor Services Not Taxed
Other services are not subject to sales tax because they do not involve the installation or application of tangible personal property. Examples of nontaxable services include:
- barn cleaning
- pasture cleaning
- snow removal
- tree trimming
Some contracts for labor services have both taxable and nontaxable components. In order to maintain their separate tax treatments, your service provider should bill the taxable and nontaxable portions separately on the invoice.
Crop dusting, fertilizer applicators and similar services performed in connection with the commercial production of fruit, vegetables, feeds, seeds, seedlings or plants for resale are exempt from sales tax. The items applied (herbicides, pesticides or fertilizer) are exempt as consumed in production, and the service of applying them (whether by air or ground) is also exempt as consumed in production.
Diesel fuel used in crop spraying or dusting formula by these providers of farm and ranch work for hire is exempt from sales tax as an ingredient or component part of the spray or dusting formula.
A farrier is someone who shoes horses and trims their hooves. Since a horse is considered to be tangible personal property, a farrier’s services are generally taxable. However, if the horse qualifies as an agricultural animal as defined on page 4, the farrier service is not taxed. Farrier services for horse-breeding operations are exempt only if the breeder is a registered Kansas retailer collecting tax on its horse sales.
EXAMPLE: Farrier services performed on race, competition or recreational (pet) horses are taxable. Farrier services performed on plow horses and on horses used primarily for herding are exempt.
As with any construction project, the materials used to build a new feedlot or to repair an existing one are taxable. For sales taxation of labor, a feedlot is considered to be a facility; therefore the labor services for the “original construction” of a feedlot are not taxable as the original construction of a facility. Original construction includes the labor to repair an existing feedlot damaged or destroyed by fire, flood, tornado, lightening, explosion or earthquake.
EXAMPLE: You operate a feedlot in Ford County and are adding 10 permanent pens to it. You must pay sales tax on the concrete, pipe, fencing and other materials used to construct the pens, but the labor for this addition to an existing facility is exempt as original construction. The portable feed bunkers are exempt as farm machinery and equipment.
EXAMPLE: You must replace the permanent fenced pens and two feed silos at your feedlot destroyed by a tornado. The materials are taxable, but the labor to rebuild the pens and silos (normally taxable as part of an existing facility) is exempt, since labor to repair damage caused by a tornado is considered to be original construction.
Farm Machinery and Equipment
In addition to the portable equipment used to feed and house livestock listed on page 6, the following specialized pieces of equipment used by a feedlot are specifically listed as implements of husbandry in K.S.A. 8-126(cc), and are considered to be exempt farm machinery and equipment.
- Fertilizer spreaders, nurse tanks or trucks with permanent mounted spreaders used only for dispensing or spreading water, dust or liquid fertilizers or agricultural chemicals.
- A truck mounted with a fertilizer spreader used or manufactured principally to spread animal manure.
- A mixer-feed truck owned and used by a feedlot, specially designed and used exclusively for dispensing food to livestock in such feedlot.
Other examples of equipment a feedlot may purchase without tax are a grinder used to recycle into feed the carcasses and remains of farm animals, or equipment used to mix or process the feed for livestock.
Consumed in Production
Feed yards may purchase the following items exempt because they are consumed in the production of livestock: antibiotics, biologicals, pharmaceuticals, vitamins and chemicals, whether fed, injected, applied or otherwise used on animals for agricultural production.
The taxation of motor fuels in Kansas falls into three general categories: fuel for highway (tagged) vehicles, off-road vehicles, and other agricultural purposes.
Gasoline and diesel fuels used in highway vehicles are subject to the motor fuels tax (see page 16). Fuels used in off-road vehicles and equipment are not subject to the motor fuel tax, but are subject to sales tax as the sale of tangible personal property. Fuels consumed by equipment used to construct farm ponds, lagoons, terraces and waterways; or in the grading, landscaping, and the preparation of building sites are subject to sales tax.
EXAMPLE: A co-op will collect state and local sales tax on motor fuels sold for use in the off-highway operation of motor vehicles, excavation equipment, and construction equipment.
IMPORTANT: The sales or use tax applies to fuels exempt from the motor fuel tax, including fuels purchased with the motor fuel tax paid if such tax is refundable under the provisions of the Kansas Motor Fuel Tax Act. The sales tax will apply whenever the motor fuel tax does not apply unless the use of the fuel qualifies for a sales tax exemption (such as consumed in production).
Consumed in Production
Motor fuels consumed in the production or processing of agricultural products or the irrigation of crops for ultimate sale at retail are exempt from Kansas sales or use tax. Exempt uses include fuel consumed in plowing, disking, harrowing, irrigating, planting or seeding, cultivating and harvesting.
Bulk Fuel Purchases
Motor fuel purchased in bulk where it’s taxable or nontaxable use cannot be determined until it is actually consumed should be purchased without retailers’ sales tax. Persons buying motor fuel in bulk without retailers’ sales tax are required to file and remit any tax due on a Consumers’ Compensating Use Tax return (CT-10U), reporting the cost of motor fuels withdrawn from storage for taxable off-highway uses (see How to Register on page 3). Persons buying motor fuel in bulk solely for taxable non-highway use should pay sales tax to their supplying dealer.
The application of sales tax to the operation of Kansas country and terminal elevators differs from a farming and ranching (production) operation. As a storage and processing facility, an elevator’s machinery qualifies for exemption as either integrated production or warehouse machinery and equipment.
Integrated Production Machinery and Equipment
An integrated production operation is a plant or facility located in Kansas that manufactures, processes, fabricates, finishes or assembles items for wholesale or retail distribution. The operation of a grain storage facility is considered to be an integrated production operation so, as such, the purchase, installation or repair of the machinery and equipment that is an integral part of its grain processing operation is exempt from sales tax. Also exempt are the parts, materials and labor furnished by contractors and repairmen to install, service, repair or fabricate qualified equipment. Exempt items include, but are not limited to: conveyors, sampling equipment, elevator legs, spouting components, manlifts, testing equipment, and railcar handling equipment.
To claim this exemption an elevator must furnish its supplier, vendor, or contractor with a completed exemption certificate. The Integrated Production Machinery and Equipment Exemption Certificate (ST-201) was designed for this purpose. This exemption certificate is available on our website (ksrevenue.org).
Examples of items that are taxable when purchased by an elevator are construction materials not used for special foundations for exempt equipment, cleaning equipment, communications equipment, office heating and cooling equipment, and railroad materials.
Warehouse Machinery and Equipment
The material handling equipment, racking systems and movement or storage of tangible personal property in a warehouse or distribution facility in Kansas are exempt from sales tax [K.S.A. 79-3606(fff)]. Also exempt are repair and replacement parts and all services to install, repair or maintain the warehouse machinery and equipment. Exempt equipment includes the equipment used by a commercial grain storage facility to aerate, clean, control dust, handle, process, refine, store or otherwise treat the grain.
Items that do not qualify are those not directly used in the storage or handling of the grain. Taxable equipment includes, but is not limited to, office furniture and equipment; equipment used to clean the building; equipment used to repair the machinery or equipment; or equipment to light, heat, or cool the facility.
To claim this exemption, use the Warehouse Machinery and Equipment Exemption Certificate (ST-203). For more information about how sales tax applies to an elevator operation, obtain a copy of NOTICE 01-07, Sales Taxation of Kansas Grain Elevator Purchases on and after January 1, 2001. It identifies purchases that are exempt under the integrated plant exemption [K.S.A. 79-3606(kk)], the items and services that were exempt during calendar years 1999 and 2000 by special legislation, and the items that have been taxable since January 1, 2001.
Consumed in Production
The storage and processing of grain is one of the production processes that qualifies an item for the consumed in production exemption. Property and utilities that are necessary to grain storage and processing at an elevator qualify for the consumed in production exemption. Examples of exempt items include fumigants; lubricants for exempt equipment; and, electricity used by the equipment that turns and cleans the grain.
Grain storage bins are farm buildings (improvements to real property). Like any other commercial use building, the materials to build it are taxed as a retail sale of tangible personal property. The labor services expended in the original construction (as defined on page 8) are exempt, while labor on an existing bin is taxable. However, a grain bin may house exempt farm machinery and equipment. Equipment such as augers and blowers used to manage the extended storage of the grain are exempt as farm machinery and equipment.
EXAMPLE: You are building a new grain storage bin. The structural materials that make up the bin (corrugated siding, anchor bolts, access doors, foundations, ladders, roof and vents) are subject to sales tax. The grain storage bin accessories – such as augers, electric control panels, fans, stirring devices and spreaders – are exempt as farm machinery and equipment. The labor services to build the bin are not taxed since this is a new bin.
Portable Grain Bins
Portable bins mounted on wheels or work bins intended to be frequently moved along with wheel-mounted grain augers, dryers or other portable grain handling equipment are exempt as farm machinery and equipment. A tarp used to cover the top of an agricultural gravity or hopper box is also exempt.
Irrigation equipment has two components for sales tax purposes—the parts considered to be farm machinery and equipment, and the items that are improvements to real property. The parts of an irrigation system considered to be farm machinery and equipment are exempt if purchased for farm use (e.g., none of the water pumped is used for human consumption and/or sanitation). Services to assemble or repair irrigation equipment for farm use are also exempt from sales tax.
Following are representative (but not exclusive) lists of exempt and taxable irrigation and well-related items.
- EXEMPT (as farm machinery and equipment): Pivot system, heat exchanger, flowmeter, gear drive, bowl units, column pipe, tubing and shaft assembly, check valve, and the discharge head, as well as submersible pumps and motors, gate and check valves, drop pipe and chemical tank. The repair parts (including tires) and labor to install, repair or maintain these exempt components of irrigation equipment are also exempt from sales or use tax.
- TAXABLE (improvements to real property): The cement base, casing, gravel, underground discharge pipe, and underground plastic PVC irrigation pipe, along with the pressure tank, galvanized nipples and fittings, used on underground pipe well pits and lids, well seals, and pitless units and/or adapters, pump stand, surge pot and any underground or partially buried pipe up to the first above ground flange and partially buried pipe not mentioned. The labor to repair a taxable item is also taxable.
Any labor services performed in or on irrigation wells are subject to sales tax, unless the service of installing or applying tangible personal property is in connection with the original construction of the irrigation well. Original construction might be either the first or initial construction of the well, or the reconstruction or repair of a well damaged by fire, flood, tornado, lightening, explosion, windstorm, ice loading and attendant winds, terrorism, or earthquake. A windstorm means straight line winds of at least 80 miles per hour as determined by a recognized meteorological reporting agency or organization. See Wells, herein.
GENERAL RULE: IF THE TANGIBLE PERSONAL PROPERTY IS SUBJECT TO SALES TAX, THEN ANY MAINTENANCE AGREEMENT OR EXTENDED WARRANTY FOR THAT PROPERTY IS ALSO TAXABLE.
The extended warranties and maintenance agreements you purchased for exempt farm machinery or equipment (combines, milking machines, etc.) are exempt. The extended warranty on your pickup is taxable because the pickup is taxable. (See Vehicles and Trailers, herein.)
OTHER BUSINESS EQUIPMENT
Aside from the farm machinery and equipment sales tax exemption, farmers and ranchers must generally pay sales tax on other items purchased for use in their farming and ranching operations (i.e., boots, building materials, CB radios, cell phones, fencing materials, gloves, hand tools, hay tarps, office supplies, work clothes, vehicles etc.).
Computers and Software
Computers and software used by farmers and ranchers do not qualify as farm machinery and equipment, even though these items perform a valuable and necessary part of your operation and are tailored to agribusiness. The purchase of computer hardware, software, repair and replacement parts and the labor to install or maintain the hardware and software are taxable. Also taxable is the sale of warranty or maintenance agreements on these items. Portable computers or computers installed or purchased to be installed on farm machinery and equipment are exempt from sales tax when used only in computer-assisted farming, ranching or aquaculture production operations.
EXAMPLE: The bunkreader and veterinary record keeping software used to track cattle feeding operations is not exempt as farm machinery and equipment.
Equipment purchased by a farmer or rancher in order to repair, maintain or service farm machinery and equipment is not exempt. The exemption for farm machinery and equipment extends only to the items actually used in the production process. Equipment used to repair or clean production equipment is not used directly in the production process, and is therefore not exempt.
EXAMPLE: You buy tire repair equipment to mount and repair the tires on your irrigation equipment. You must pay sales tax on the tire repair equipment, as well as any repair or replacement parts or labor on the tire repair equipment.
Tools, high pressure washers and welding equipment (see page 13) are other examples of repair equipment on which farmers and ranchers must pay sales tax.
Pest control is exempt when used on land devoted to agricultural use, but is taxable for any other use.
EXAMPLE: You are buying bait to control the gopher population on your pasture land. Since this product is being used to control pests on agricultural land, its purchase qualifies for exemption as consumed in the production of an agricultural product (crops or livestock). As a result, the gopher bait is exempt from Kansas sales tax.
EXAMPLE: You purchase a pesticide to keep mice from entering an area where you store machinery and vehicles. Since this pest control product does not become a part of an agricultural product produced and does not qualify as farm equipment, it is taxable.
PLANT NURSERIES/CHRISTMAS TREE FARMS
The definition of farming and ranching was expanded in 1995 to include the operation of a plant nursery or Christmas tree farm. A nursery operation is the planting, cultivating and harvesting of nursery or greenhouse products, or both, for sale or resale. The term Christmas tree operation includes the planting, cultivating and harvesting of Christmas trees and the sale or transportation of Christmas trees. (A greenhouse is a location where plants are stored and maintained while being held for sale – see also page 8.)
Machinery and Equipment
The term Christmas tree machinery and equipment means the personal property actually and regularly used in any Christmas tree operation. Specialized equipment used by a nursery to transplant mature trees from the growing site is exempt machinery and equipment.
Passenger vehicles, trucks, truck tractors, trailers, semitrailers or pole trailers are specifically listed as equipment that is not exempt. However, lawn-type trailers, gators and other small farm trailers may be purchased by Christmas tree farmers and plant nurseries without tax if they meet the requirements on next page, Farm Trailers.
Ingredient or Component Parts
Among the items a nursery or tree farm may purchase without tax as ingredient or component parts are soil; peat, vermiculite, or other plant medium; peat pots, pots and other growing containers for trees and plants; seeds and seedlings; burlap to protect the root ball; and, netting used to wrap a tree for transportation.
Crates and packaging for the sale or transportation of fruits or vegetables or the decorative pot wrapping, bows, sacks, etc. used in the sale of these items are exempt if they are not returned to the orchard or nursery for reuse.
Consumed in Production
Fertilizers, fuel for smudge pots to keep frost from fruit trees, fuels to heat a greenhouse growing plants from seed, insecticides and water are consumed in the production of plants and trees.
GENERAL RULE: THE SALE OF NATURAL GAS, ELECTRICITY, HEAT, AND WATER DELIVERED THROUGH MAINS, LINES OR PIPES FOR AGRICULTURAL OR RESIDENTIAL USE IS EXEMPT FROM “STATE” SALES TAX — BUT, WITH THE EXCEPTION OF WATER, THEY ARE SUBJECT TO “LOCAL” SALES TAX.
The sale of water delivered through mains, lines or pipes for agricultural or residential use is not subject to state or local sales tax. When subject to sales tax, the rate that is due is the rate in effect at the utility user’s location.
EXAMPLE: Water used to clean dairy equipment is not subject to state or local sales tax. Electricity used to light a dairy barn is subject to local sales tax in effect where the dairy is located.
Electricity, gas and water are also often consumed in production. In this capacity, the utility is not subject to either the state or a local sales tax.
EXAMPLE: Electricity used to pump water for irrigating crops or electricity used to power an incubator at a turkey farm is exempt from state and local sales tax, as consumed in production.
How state and local sales tax applies to electricity, gas, or heat delivered through mains, lines, or pipes is summarized in the following table.
|PROPANE USE||STATE||LOCAL||TAX SITUS|
|Consumer in Production||Exempt||Exempt||N/A|
|Irrigation of Crops||Exempt||Exempt||N/A|
How state and local sales tax applies to water delivered through mains, lines, or pipes is summarized as follows:
|PROPANE USE||STATE||LOCAL||TAX SITUS|
|Consumer in Production||Exempt||Exempt||N/A|
|Irrigation of Crops||Exempt||Exempt||N/A|
The sales tax exemptions for agricultural and consumed in production uses of utilities are not automatic. You must complete and file a Utility Exemption Request (ST-28B) with your utility provider to receive this exemption. For more details see How to Claim a Utility Exemption, herein.
VEHICLES AND TRAILERS
Motor vehicles are a necessary and integral part of many types of businesses, including agribusiness. Trucks and trailers are needed to transport animals, grain, milk or other agricultural commodities. However the statutory definition of exempt farm machinery and equipment [K.S.A. 79-3606(t)] specifically excludes passenger vehicles, trucks, truck tractors, trailers, semitrailers, or pole trailers. Only farm trailers (as defined on this page) may be purchased without tax as farm machinery and equipment.
Property Installed or Mounted
Kansas state and local sales tax is imposed on the total selling price of each motor vehicle or trailer and includes all tangible personal property mounted, installed, applied or otherwise attached or affixed to the motor vehicle/trailer. K.A.R. 92-19-30a provides that “the retailer shall not exclude or deduct for the tangible personal property, regardless of how any contract, invoice or other evidence of the transaction is stated or computed, and whether separately charged or segregated on the same contract or invoice.”
EXAMPLE: A new truck is purchased with a dealer-installed grain box. The truck and the grain box are both subject to sales tax, despite the fact that the grain box by itself may qualify for farm machinery and equipment exemption.
The sales tax base for the sale of any vehicle includes, but is not limited to, the following:
- Transportation and freight charges
- Administrative fees, handling, dealer preparation and similar charges
- Undercoating protection
- Cost of all options
- Cost of all regular and extended warranties, service contracts, maintenance contracts, etc.
Interest, finance or carrying charges on installment purchases are not subject to sales tax when separately stated on the invoice.
A trailer may be exempt from sales or use as farm machinery and equipment. K.S.A. 8-126(z) defines a farm trailer as any trailer or semitrailer designed and used primarily as a farm vehicle. As outlined in Revenue Ruling 19-1997-3, there are two tests that must be met for exemption of a trailer as a farm trailer. It must be used only in farming and ranching and designed to allow for farm or ranch use. The criteria necessary to meet each of these tests is explained below.
Used Only in Farming and Ranching. The buyer’s certification on the invoice or the Agricultural Exemption Certificate (ST-28A), is sufficient to satisfy the first test. The trailer must be for the farmer’s or rancher’s own use in their farming or ranching operation. A trailer that qualifies for the farm machinery and equipment exemption is exempt from sales tax whether it is tagged for highway use or not. A trailer used to haul commodities, livestock or other goods for others or utilizing the trailer for commercial use other than farming and ranching are uses that are incompatible with the exempt use.
CAUTION: Buyers using trailers for incompatible uses are required to pay sales or use tax and are not allowed to claim an exemption based on the exemption for farm and ranch machinery or equipment. Should an exemption later be disqualified, the buyer is subject to the retailers’ sales or use tax on the original purchase price, plus penalty and interest.
EXAMPLE: As a cattle rancher, your purchase of a livestock trailer to haul cattle is exempt from sales tax as a farm trailer provided you do not use it for any other commercial purpose. The horse trailer, purchased to haul show horses, is taxable.
Designed for Farm and Ranch Use. Semitrailers such as grain, flatbed, dump, tank, and van are designed to allow for farm and ranch work. When the buyer certifies the purchase of these types of trailers will be used only in farming and ranching, the purchase is exempt from sales and use tax. Converter gears utilized to facilitate the transport of farm trailers are also exempt as farm machinery.
All Terrain Vehicles (ATVs)
ATVs are often used on a farm or ranch, however, ATVs are not farm machinery and equipment and are; therefore, subject to Kansas sales or use taxes, as are accessories for an ATV. An ATV is defined as:
... any motorized nonhighway vehicle 48 inches or less in width, having a dry weight of 1,000 pounds or less, traveling on three or more low-pressure tires, and having a seat designed to be straddled by the operator. As used in this subsection, low-pressure tire means any pneumatic tire six inches or more in width, designed for use on wheels with rim diameter of 12 inches or less, and utilizing an operating pressure of 10 pounds per square inch or less as recommended by the vehicle manufacturer. (Emphasis added.)
EXAMPLE: A box blade that can be pulled by all terrain vehicles and garden tractors and is used to level dirt and gravel driveways and for the removal of snow is taxable.
Work-Site Utility Vehicles
The sale of a “work-site utility vehicle” equipped with a bed or cargo box for hauling materials may be purchased exempt from sales tax under the farm machinery and equipment sales tax exemption. K.S.A. 8-126 defines a work-site utility vehicle as:
... any motor vehicle not less than 48 inches in width and overall length including the bumper of not more than 135 inches; has an unladen weight including fuel and fluids of more than 800 pounds; is equipped with four or more low pressure tires, a steering wheel, and bench or bucket-type seating allowing at least two people to sit side-by-side; and may be equipped with a bed or cargo box for hauling materials. (Emphasis added.)
The same law provides that a work-site utility vehicle, equipped with a bed or cargo box for hauling materials, is included within the definition of farm machinery and equipment or aquaculture machinery and equipment [K.S.A. 79-3606(t)]. To qualify for the farm machinery and equipment exemption, the following must apply.
- The purchase must be of a work-site utility vehicle, as defined above that is equipped with a bed or cargo box for hauling materials, or for repair or replacement parts therefor, or services performed in the repair or maintenance thereon; and,
- the work-site utility vehicle must be used only in farming, ranching, aquaculture production, farm and ranch work for hire, operation of a feed lot, nursery or for Christmas tree farming; and,
- the retailer must retain in its records an Agricultural Exemption Certificate (ST-28F) completed by the purchaser. As an alternative to the exemption certificate, the purchaser may certify in writing on a copy of the invoice or sales ticket to be retained by the seller that the work-site utility vehicle will be used only in farming, ranching or aquaculture production.
Medical services provided by veterinarians are not subject to sales tax, whether the animal is a pet or an agricultural animal (defined on page 4). Because the medical services are not taxed, a veterinarian must pay sales tax on all equipment and medical supplies used in the practice, except for those items used by the veterinarian in the professional treatment of animals raised for human consumption or for producing dairy products. The latter may be purchased by a veterinarian exempt from sales tax with a completed Veterinarian Exemption Certificate (ST-28V).
EXAMPLE: Vaccines for pets are subject to sales or use tax when purchased by a veterinarian. Vaccines for livestock intended for resale or breeding are exempt when purchased by a veterinarian with a completed ST-28V exemption certificate. The medical service of vaccinating an animal (pet or agricultural animal) is not taxable.
The drugs and pharmaceuticals dispensed by a veterinarian pursuant to a prescription order are exempt regardless of whether the animal is an agricultural animal or a pet or pleasure animal [K.S.A. 79-3606(p)].
Boarding services for animals are not subject to sales tax since this service is not enumerated in the law as a taxable service.
A well is an improvement to real property, and as such is not farm machinery and equipment even though the well is for farm or ranch use. However, an oil, gas or water well is a facility for purposes of the sales taxation of labor services.
The service of drilling a new well is exempt from sales tax as the original construction of a facility. Materials expended or installed in a new well are taxable. These rules apply regardless of the type or use of the well or the identity of the buyer. Materials and services on an existing well are subject to sales tax, even when the well has an agricultural use. Exception: No tax on the labor services performed on an existing well that principally serves a residence.
Well materials are taxable, whether sold for an old well, new well, residential well, or dry hole. Structural pipes purchased by farmers or ranchers for other uses such as cattle guards, fencing and gates are also taxable. The pipe becomes an improvement to, and part of, real property and is not exempt as farm machinery or equipment.
The purchase of welding equipment, rods, oxygen and acetylene by a farmer or rancher is taxable. Also taxable are the cylinder rental and delivery charge for the gases. These items are repair equipment and supplies and are not farm machinery and equipment or repair or replacement parts for farm machinery or equipment.
When a farmer or rancher also performs welding services for others for a fee, that person is engaged in the retail business of providing a taxable service, and as such, must register to collect sales tax on the gross receipts received from providing this taxable service (see Retail Sales by Agribusiness, herein). However, as a registered retailer, a welder is then eligible to claim the sales tax exemptions available to retailers of taxable services—such as the consumed in production exemption for rods, oxygen, etc.
The sale of windmills, windmill repair parts and services to install and repair windmills, used for agricultural purposes, are exempt from Kansas retailers’ and compensating taxes as farm machinery and equipment.
Exempt property includes the wheel (blades) gear box, shaft, tail, tower, pump rod, packer head, discharge connector, sucker rod, piston pump and strainer. Services and parts to repair agricultural windmills are also exempt.
The sales and use tax exemption does not apply to the materials or labor to install or repair the footing, pier, foundation or slab upon which the windmill is attached.
CLAIMING THE EXEMPTIONS
To claim agribusiness-related exemptions, two conditions must be met: 1) the buyer must be engaged in farming or ranching as defined on page 3; and 2) the property purchased, repaired or serviced must be used only in farming or ranching.
When making retail sales to customers, Kansas retailers are required to collect the full amount of sales tax due on each sales receipt, invoice or bill. When an exemption is requested, retailers must obtain documentation (usually an exemption certificate) that shows why a particular sale is exempt.
As an agribusiness customer eligible to claim one of the exemptions discussed in this guide, it is therefore your responsibility to provide the appropriate documentation to your suppliers and vendors when claiming an exemption. You may either provide a signed certification on the copy of the invoice or sales ticket which sets out the reason for the exemption; or complete an exemption certificate.
SIGNING THE INVOICE
The law allows those claiming a farm machinery and equipment exemption to complete a certification on the invoice instead of an exemption certificate.
... Each purchaser of farm machinery and equipment or aquaculture machinery and equipment exempted herein must certify in writing on the copy of the invoice or sales ticket to be retained by the seller that the farm machinery and equipment or aquaculture machinery and equipment purchased will be used only in farming, ranching or aquaculture production. [K.S.A. 79-3606(t)]
Many retailers of farm and ranch supplies have a stamp or other printed certification statement on their invoices for the farmer/rancher to sign. As a matter of practical application, this method is also used by ranchers and others when buying livestock for ranching or breeding purposes.
IMPORTANT: To claim the exemption, you must sign the invoice for each purchase made.
If you do not complete a certification on the invoice, you must complete an exemption certificate for the retailer in order for the sale to be exempt from sales tax.
USING AN EXEMPTION CERTIFICATE
An exemption certificate is a document that shows why sales or use tax was not charged on a retail sale of goods or taxable services. The buyer furnishes or completes the exemption certificate. The seller keeps the certificate on file with other sales tax records. When the appropriate certificate is used, and all the blanks are accurately filled out, the certificate may be accepted by a retailer.
Certificates most often used by agribusiness are described in the following section and are included in this publication. For more information about all sales tax exemptions currently provided in Kansas law and the exemption certificates to use, obtain a copy of Pub. KS-1520, Kansas Exemption Certificates, from our website.
Blanket Exemption Certificates
If you make recurring exempt sales of the same type to the same purchaser, it is not necessary to have an exemption certificate for each transaction. You may accept a blanket exemption certificate to cover future sales. Most exemption certificates may be used as blanket exemption certificates.
IMPORTANT: When you use a blanket exemption certificate for your regular exempt customers, ask them to verify or renew this document every year. Renewing yearly will help guarantee that the exempt customer’s information (i.e., exact business name and location, tax account number, etc.) remains accurate and up-to-date.
CAUTION: When you use blanket exemption certificates, you should segregate any taxable purchases from that vendor and pay for them separately. Each buyer signs the exemption certificate acknowledging responsibility for payment of the tax if:
“... the tangible personal property or service is used other than as stated ... or for any other purpose that is not exempt from sales or compensating tax ...”
EXAMPLE: You have a blanket agricultural exemption certificate on file at the farm supply store. While in the store to pick up a belt for your combine, you purchase a pair of work gloves and a case of motor oil for your truck. Since the gloves and motor oil are subject to sales tax, segregate these purchases and pay the sales tax on them.Completing an Exemption Certificate
Follow these three rules when completing any exemption certificate.
- Print or type all information, except for the authorized signature. The information on the certificate must be legible both to you and to our auditors. Do not print a signature on paper forms, although it is often helpful to print or type the name below the signature. (A signature is not required on an electronic exemption certificate.)
- Fill in all the blanks. A certificate is complete only when
all the information is provided. If there is a blank on the
form, it must be filled in. Addresses must include the street
or PO Box, city, state, and zip code.
When the certificate requires a tax registration number, be sure your customer provides it. An exemption certificate is not complete unless the customer supplies the proper registration number(s). A seller may lawfully require a copy of the buyer’s sales tax certificate of registration as a condition of honoring the Resale Exemption Certificate (ST-28A). [K.A. R. 92-19-25b]
- Give specific descriptions. Be as precise as possible when describing the property or services purchased. You may use an itemized list, refer to an itemized invoice number, or at the very least provide a general description of the items. When describing a business activity, include the principal product(s) sold or manufactured.
EXEMPTION CERTIFICATES FOR AGRIBUSINESS
Agricultural Exemption Certificate (ST-28F)
The Kansas Department of Revenue has designed this certificate to assist those in agribusiness and their retailers and vendors in documenting exempt agribusiness sales. It combines four of the seven exemptions available to agribusiness on one form. This certificate may be used to claim the exemptions for farm machinery and equipment, ingredient or component parts, consumed in production and propane for agricultural use.
Designated or Generic Exemption Certificate (ST-28)
This certificate may be used to claim any sales or use tax exemption authorized by Kansas sales tax law. The Kansas Department of Revenue has developed separate certificates for many of the exemptions. It is designed to cover the remaining exempt transactions that require an exemption certificate and newly-legislated exemptions for which a specific exemption certificate has not yet been designed. Whenever possible it is recommended that exempt buyers use the exemption certificate designed especially for their exemption.
Although the designated certificate may be used to claim any of the exemptions available for agribusiness, it is especially useful for claiming the exemptions for agricultural animals and soil erosion prevention, since these two exemptions are not part of the Agricultural Exemption Certificate (ST-28F).Resale Exemption Certificate (ST-28A)
When you are a retailer of taxable products or services, you must have a sales tax account number to collect tax from your customers. A common misconception is that a sales tax account number is also a tax-exempt number, allowing you to purchase items without tax just by giving your vendor the registration number. A sales tax account number is only half of the requirement—it shows that the buyer is a registered retailer but it does not indicate or validate why the purchase is exempt. This is done on the resale exemption certificate. So when buying items for your resale inventory, you must use a resale exemption certificate, providing your sales tax account number as part of the certificate.
The items purchased with a resale exemption certificate must be for resale and not for personal or other non-exempt use. The property purchased must be of the type normally sold at retail in the usual course of your business. It cannot be used to buy equipment, fixtures, and other non-inventory items without tax. As added protection for sellers accepting a resale exemption certificate, the seller may demand a copy of the buyer’s sales tax certificate of registration as a condition of honoring a resale exemption certificate.
Multi-Jurisdiction Exemption Certificate (ST-28M)
If you are a wholesaler (never make a retail sale), you are not required to have a Kansas sales tax account number— one of the requirements to use a resale exemption certificate. Wholesalers will use a Multi-Jurisdiction Exemption Certificate (ST-28M) instead of the resale certificate when buying their inventory from a Kansas vendor. This exemption certificate is also used when a Kansas business is buying exempt items from an out-of-state company registered to collect Kansas sales or use tax. This certificate can be found on our website.
HOW TO CLAIM A UTILITY EXEMPTION
To claim a sales tax exemption on an exempt use of electricity, gas or water, you must first measure the amount of each utility that qualifies for the exemption and express this as a percentage of the total utility purchase through that meter. Once the percentage of exempt use has been calculated, complete a utility exemption request (ST-28B).
An exemption request must be submitted for each meter on which you are requesting an exemption. Submit this form to your utility provider along with your workpapers and calculations to document the exempt percentage being claimed. The utility provider may forward an exemption request to the Department of Revenue for review and approval before granting the exemption.
Keep a copy of all worksheets and calculations used to determine the percentage of exempt utility usage. The Department of Revenue may ask to see the worksheets when auditing the utility exemption or approving a request.
IMPORTANT: When there is a change in your “exempt percent,” it is your responsibility to immediately file a revised utility exemption form with your utility provider.
EXAMPLE: You have one water meter that serves the dairy barn on your farm. You analyzed your water usage in the barn and arrived at these percentages: 65% used to clean milking machines, coolers, strainers, bulk milk tanks, and barn; 20% used to water the dairy cattle; 10% used to bathe and care for the dairy cattle; and, 5% for other use (outside faucet for washing vehicles and watering the home garden). You conclude that 80% of your water from this meter is exempt from state sales tax because it was for agricultural or residential use (subject to local sales tax). The other 20% of the water is exempt from the state and local sales tax because it was consumed in the production of the milk.
OTHER KANSAS TAXES
RETAIL SALES BY AGRIBUSINESS
Farmers and ranchers often not only produce agricultural products, but also make retail sales of the items or products produced. Others engaged in agribusiness may provide taxable services, such as farrier or welding services.
Examples of agribusiness producers who are also retailers include those who both produce and sell flowers, plants, shrubs or trees; fruits, nuts, and vegetables; flour, honey, jams and jellies; and, wine and flavorings.
When you are making retail sales of goods or taxable services, you must register with the Kansas Department of Revenue to collect and remit the appropriate state and local sales taxes from your customers. See How to Register, herein.
COMPENSATING USE TAX
Throughout this guide we have referred to sales and use tax. When an item is taxable or exempt, it applies to both the application of sales and of use tax. The purpose of compensating use tax is to protect Kansas businesses from unfair competition with retailers in other states. There are two types of use tax — Consumers’ Compensating Use and Retailers’ Compensating Use.
Consumers’ Compensating Use Tax
The consumer’s use tax is due when Kansas residents (individuals or businesses) buy goods or merchandise for their use or consumption in Kansas from vendors in other states on which a state and local sales tax equal to the Kansas rate has not been paid. The Kansas use tax rate is the same as the Kansas state and local sales tax rate in effect where the item is used, stored or consumed. If the state and local sales tax paid in another state is less than the Kansas state and local sales rate, the difference is due to Kansas (illustrated by Situation 1, shown below).
Use tax applies to any type of tangible personal property that would be subject to sales tax if purchased in Kansas (clothes, food, supplies), but is instead purchased in or from another state without a sales tax equal to the Kansas rate. Use tax does not apply to labor services. Form type CT-10U is used to file and pay consumers’ use tax.
EXAMPLE: While on a trip, a Kansas rancher buys an ATV and takes delivery at the store in Nebraska. Nebraska does not charge sales tax on ATVs, but because this item would be subject to sales tax had it been purchased it Kansas, the ATV is subject to Kansas use tax. The Kansas rancher must pay the state and local consumers’ use tax on the ATV at the rate in effect at the rancher’s location.
Retailers’ Compensating Use Tax
Retailers’ use tax is collected by retailers in other states who are registered with the Kansas Department of Revenue to collect it from their Kansas customers. Retailers in other states are required to register to collect this use tax if they have a physical presence in Kansas (retail store, warehouse, delivery into Kansas, etc.), or they have voluntarily registered to collect the tax as a convenience to their Kansas customers. Retailers in other states that do not have a physical presence in Kansas are not required to collect Kansas sales or use tax.
EXAMPLE: You are a Sample County, KS rancher and order new fencing and cattle guards from a retailer in Guymon, OK. Following are the various tax treatments for this type of sale.
SITUATION 1: You pick up the items in Oklahoma. Since the sale was transacted in Oklahoma, you will pay Oklahoma sales tax if it imposes tax on these items. The Oklahoma state and local sales tax rate is 5.5%. The Sample County state and local sales/use tax rate is 7.3%. As a Kansas consumer, you will owe the difference between the two rates (7.3% - 5.5% = 1.8%) to Kansas as consumers’ use tax. (If Oklahoma does not tax these items, you would owe the full 7.3% Kansas consumers’ use tax on the purchase.)
SITUATION 2: The Oklahoma retailer delivers the items to your Kansas ranch. As a retailer delivering into Kansas, the Oklahoma retailer is in direct competition with a Kansas retailer providing the same items, and is therefore required to be registered to collect the state and local Kansas retailers’ use tax. The Oklahoma retailer would charge the 7.3% state and local Sample County retailers’ use tax on the total invoice amount, including any delivery fee.
SITUATION 3: You place an order with the Oklahoma retailer through their website and the items are shipped to your Sample County ranch by common carrier (UPS, freight company, etc.). Retailers shipping into Kansas do not have to register to collect the state and local Kansas retailers’ use tax, so there is no tax on the invoice. As a Kansas consumer you will owe the state and local Sample County consumers’ use tax of 7.3% on the total cost, including the charge for shipping.
To summarize, whether the fencing and cattle guards are purchased in Sample County or from outside Kansas and delivered to you in Sample County, the sale is subject to a total tax equal to the state and local sales/use tax rate in effect for Sample County. For more information about use tax, obtain a copy of Pub. KS-1510, Kansas Sales Tax and Compensating Use Tax, from our website.
To register for Kansas compensating use tax, complete a Business Tax Application (CR-16). It is the same form used to apply for a Kansas sales and/or withholding tax numbers. See How to Register, herein.
MOTOR FUEL TAX
This tax is imposed on the use, sale or delivery of all motor vehicle fuels (gasoline and gasohol) or special fuels (diesel and alcohol) in Kansas. Tax revenues are used to defray the cost of constructing Kansas public highways.
Although the tax is included in the price of every gallon of gasoline or diesel purchased by consumers at the pump, it is remitted to the Kansas Department of Revenue by fuel distributors. The tax on motor vehicle fuels is 24 cents per gallon; on special fuels it is 26 cents per gallon, and on LP gas it is 23 cents per gallon.
Sales of fuels subject to the motor fuel tax are not subject to sales tax. However, if the fuel is not subject to motor fuel tax (such as the sale of dyed diesel fuel used only for nonhighway purposes), or if the fuel use qualifies for a refund of the motor fuels tax paid, the fuel is automatically subject to sales or use tax unless its use qualifies for another exemption (such as consumed in production). See also Fuels, herein.
If you are in the business of growing grapes and other fruits and produce and sell wine, you must register to collect Kansas liquor taxes on your retail wine sales. There is an 8% liquor enforcement tax collected on the sale of alcoholic beverages by a farm winery to Kansas consumers. There is also a retail liquor drink tax of 10% on sales of alcoholic drinks. Farm wineries and microbreweries selling to customers for on-premises consumption must collect the 10% liquor drink tax. See How to Register, herein.
In addition to a sales tax registration, farm wineries and microbreweries must also have a liquor license issued by the Department of Revenue’s Division of Alcoholic Beverage Control. Call 785- 296-7015 for more information.
TIRE EXCEISE TAX
A tire excise tax of 25 cents per tire is imposed on the retail sale of new vehicle tires. Vehicle includes any device by which persons or property may be transported on drawn upon a highway, including agricultural implements. Although you are exempt from paying sales tax on new tires for farm machinery, farmers and ranchers are not exempt from the tire excise tax. New tires for combines, construction equipment, farm machinery, tractors, trailers, trucks and truck tractors are subject to the tire excise tax. For more information about this excise tax, obtain a copy of Pub. KS-1530 from our website.
This tax is deducted by employers and payors from the wages and other taxable payments made to employees and payees to help pre-pay the income tax liability of that individual. Generally, you are required to withhold Kansas income tax from a payment if federal withholding is required. Withholding is also required on certain taxable non-wage payments. For more information see KW-100, A Guide to Kansas Withholding Tax.
REGISTRATION AND FILING KANSAS BUSINESS TAXES
Before you open your hotel or restaurant, you must have all of the necessary tax registrations. To register with the Division of Taxation to collect all required taxes, visit ksrevenue.org and sign in to the KDOR Customer Service Center. After you complete the application you will receive your account number and may print your Certificate of Registration. For complete instructions about the application process, obtain Pub. KS-1216, Kansas Business Tax Application and Instructions.
Retailers registering for the Liquor Drink Tax must post a bond with the Department of Revenue of either $1,000 or 3 months estimated liquor drink tax liability, whichever is greater, and have a liquor license issued by our Division of Alcoholic Beverage Control. Follow the detailed instructions in Pub. KS-1216 to complete an accurate application.
GENERAL FILING INFORMATION
How often you report and pay your taxes depends on the annual amount of taxes collected, with the exception of liquor tax returns, which are remitted monthly. Most hotels and restaurants will remit their sales, withholding, liquor and transient guest taxes on a monthly basis, and file quarterly returns for use taxes. Retailers filing sales tax on a quarterly or annual basis can elect to file the Transient Guest Tax return at the same time. See Pub. KS-1510 for more information.
Monthly sales, liquor, and transient guest tax returns are due on the 25th of the month following the close of the reporting period; monthly withholding tax returns are due on the 15th of the following month. Returns for other filing frequencies are generally due on the 25th of the month following the end of the reporting period.
IMPORTANT: You must file a tax return for each reporting period even if you have no taxable sales or tax to report. These returns are called zero-based and the Department of Revenue has a simple, online process for filing them. See information that follows.
KANSAS CUSTOMER SERVICE CENTER
FILE, PAY and MAKE UPDATES ELECTRONICALLY
Most businesses have chosen the KDOR Customer Service Center (KCSC) for their online filing and payment solution. To use this solution, you simply create a user login ID and select a password, then you can attach your business tax accounts. Each tax account has a unique access code that only needs to be entered once. This access code binds your account to your login ID. For future filings, you simply log into your account using your self-selected user login and password. A history of all filed returns and/or payments made is retained in the KCSC.
WHAT CAN I DO ELECTRONICALLY?
- Register to collect, file and pay taxes and fees
- Add new locations
- Complete and submit a Power of Attorney form
- Update contact information
- Update mailing address
- Upload W-2’s and 1099’s
- Upload and retain Sales and Compensating Use Tax jurisdictions
- File the following tax returns:
- Retailers’ Sales Tax
- Retailers’ Compensating Use Tax
- Consumers’ Compensating Use Tax
- Liquor Drink and Liquor Enforcement Tax
- Make payments for the following taxes:
- Individual Income
- Individual Estimated Income
- Corporate Income
- Corporate Estimated Income
- Privilege Estimated Income
- Sales and Use
- Liquor Drink and Liquor Enforcement
- ABC Taxes and Fees
- Petition for Abatement Service Fee
- Motor Fuel
- Environmental and Solvent Fee
- Dry Cleaning Payment Plan Fee
- Tire Excise
- Charitable Gaming
- Vehicle Rental
- Cigarette Tax, Fees, Fines and Bonds
- Tobacco Tax, Fees, Fines and Bonds
- Transient Guest
REQUIREMENTS TO FILE and PAY
You must have the following in order to file and pay your taxes online:
- Internet Access
- Access Code(s) by calling 785-368-8222 or send an email to firstname.lastname@example.org (email@example.com)
- ACH Debit: Kansas Department of Revenue debits the tax payment from your bank account
- ACH Credit: Complete an EF-101 online to initiate a tax payment through your bank
Electronic tax payments must settle on or before the due date. Using the KCSC, you may have your tax payment electronically debited from your bank account (ACH Debit) or you may initiate your tax payment through your bank (ACH Credit). This payment method requires a completed authorization EF-101, available on our Customer Service Center.
Our FREE electronic systems are simple, safe, and conveniently available 24 hours a day, 7 days a week. You will receive immediate confirmation that your return is filed and/or payment is received. If you need assistance with your access code, you may call 785-368-8222 or email firstname.lastname@example.org (email@example.com).
PAY BY CREDIT CARD
Taxpayers can make their Individual Income tax and Business tax payments by credit card. This service is available on the Internet through third-party vendors; ACI, Inc (ACI) or Value Payment Systems (VPS). These vendors charge a convenience fee based on the amount of tax being paid. This fee may vary by vendor. Credit card transactions are strictly between the vendor and the taxpayer. Likewise, any disputes specific to the card payment will be between those two parties. Rules regarding the credit card transactions are available at each vendor’s website.
Credit cards that are available for each vendor are as follows:
ACI, Inc. (ACI)
- American Express
Payments can be made by accessing their website at www.acipayonline.com or by calling 1-800-2PAYTAX (1-800-272-9829). The Kansas jurisdiction code is 2600. For payment verification inquiries, call 1-866-621-4109. Allow 48 hours for processing.
Tax types that can be paid through ACI, Inc. are as follows:
- Individual Income Tax Return
- Individual Estimated Income Tax
- Corporate Income
- Privilege Tax
- Liquor Tax
- Mineral Tax
- Motor Carrier Property Tax
- Motor Fuels Tax
- Sales and Use Tax
- Withholding Tax
- Bill Me Later ®
- Debit Card
VPS processes payments for Kansas Individual Income Tax only. For payment verification inquiries, call 1-888- 877-0450. Allow 48 hours for processing.
Tax types that can be paid through Value Payment Systems are as follows:
- Individual Income Tax
- Individual Estimated Income Tax
Wire Transfers are accepted from both domestic and foreign banking institutions as long as it is received as American currency. For more information call 785-368-8222.
When there is a question not answered in this publication, contact the Department of Revenue. Do not guess. Clarification of whether a purchase or sale is taxable or exempt will save you time in dealing with the issue in the future. Resolving issues of taxability could also save you money; you will be taking full advantage of the exemptions available and avoiding costly sales or use tax deficiencies on taxable purchases.
Many business questions can be answered by the customer representatives in our Tax Assistance Center in Topeka. However, like many businesses, the Department of Revenue uses an automated answering system to direct incoming phone calls to the appropriate area. See TAXPAYER ASSISTANCE for the address and phone numbers of our assistance center.
WEBSITE – ksrevenue.org
Our website contains information about all aspects of the Kansas Department of Revenue. Forms and publications, exemption certificates, and information about all the taxes administered are published here. Each division of the Department of Revenue is represented.
POLICY INFORMATION LIBRARY (PIL)
Another service available to taxpayers is an online library of policy information (PIL) for all taxes administered by the Kansas Department of Revenue. The PIL contains Kansas statutes and regulations, Revenue Notices, Revenue Rulings and other written advice issued by the Department of Revenue. Opinion Letters and Private Letter Rulings are also included.
At times there are unique situations that may require an interpretation or clarification based upon the law, regulations, and specific facts of the case. To assist you in understanding how the law applies to your business, the Department of Revenue issues three types of written advice: revenue notices, revenue rulings, and private letter rulings. This written advice is binding on the Department of Revenue and may be relied upon as long as the statute or regulation on which they are based is not altered by the Legislature, changed by a court decision, or the ruling itself modified or rescinded by the Department of Revenue.
You should not rely on a verbal opinion from the Department of Revenue regarding taxability not specifically addressed in the law. When an issue arises in your business that is not directly addressed in the law, document the problem in writing and request a Private Letter Ruling or an Opinion Letter from the Department of Revenue. Fax or mail your request for a written ruling to:
Tax Policy Group
Kansas Department of Revenue
PO Box 3506
Topeka, KS 66601-3506
You will receive a written ruling within 30 days after your request (and any additional information necessary for the ruling) is received. Private letter rulings are published in our Policy Information Library (PIL), but the letters have been “scrubbed” to protect the privacy of the taxpayer—any information identifying the taxpayer, such as name, address, product, etc., is blanked out.
CAUTION: Although published in our PIL, a private letter ruling is limited to the requesting taxpayer and that taxpayer’s specific factual situation. It cannot be relied upon or cited by any other person.
KEY STATUTES AND REGULATIONS
In preparing this guide we cited the following laws and regulations. The full text of these are a part of the PIL on our website and are also available in libraries throughout the state.
- K.S.A. 8-126 - Vehicle definitions
- K.S.A. 12-187 et seq. - Local sales tax
- K.S.A. 79-3201 et seq. - Income tax
- K.S.A. 79-3401 et seq. - Motor fuel tax
- K.S.A. 79-3601 et seq. - Retailers’ sales tax
- K.S.A. 79-3606 et seq. - Sales tax exemptions
- K.S.A. 79-3701 et seq. - Compensating use tax
- K.A.R. 92-19-25b - Exemption certificates
- K.A.R. 92-19-53 - Consumed in production
- K.A.R. 92-19-54 - Ingredient or component part
- K.A.R. 92-19-66b - Labor services
KANSAS EXEMPTION CERTIFICATES
FORMS AND CERTIFICATES
The following pages have many of the sales and use tax forms and exemption certificates used by Hotels, Motels and Restaurants. You may reproduce any form in this publication as needed or download the certificates from our website at ksrevenue.org.
- AGRICULTURAL EXEMPTION CERTIFICATE - ST28F
- DESIGNATED OR GENERIC EXEMPTION CERTIFICATE - ST-28
- RESALE EXEMPTION CERTIFICATE - ST-28A
- STATEMENT FOR SALES TAX EXEMPTION ON ELECTRICITY, GAS, OR WATER FURNISHED THROUGH ONE METER - ST-28B
TAX ASSISTANCE CENTER
This publication is a general guide and will not address every situation. If you have questions or need additional information, please contact taxpayer assistance at the Kansas Department of Revenue.
By Phone - 785-368-8222
By Mail - Tax operations, PO Box 3506, Topeka, KS 66625-3506
By Appointment - Go to ksrevenue.org to set up an appointment at the Topeka or Overland Park office by using the Appointment Scheduler.
Office hours are 8 a.m. to 4:45 p.m., Monday through Friday.
Below is a list of publications available on the Kansas Department of Revenue’s website. These publications contain instructions applicable to specific business industries and general information for all business owners.
- Publication KS-1216, Kansas Business Tax Application
- Publication KS-1510, Kansas Sales Tax and Compensating Use Tax
- Publication KS-1515, Kansas Tax Calendar of Due Dates
- Publication KS-1520, Kansas Exemption Certificates
- Publication KS-1525, Kansas Sales and Use Tax for Contractors, Subcontractors and Repairmen
- Publication KS-1526, Kansas Business Taxes for Motor Vehicle Transactions
- Publication KS-1527, Kansas Business Taxes for Political Subdivisions
- Publication KS-1530, Kansas Tire Excise Tax
- Publication KS-1540, Kansas Business Taxes for Hotels, Motels and Restaurants
- Publication KS-1550, Kansas Business Taxes for Agricultural Industries
- Publication KS-1560, Kansas Business Taxes for Schools and Educational Institutions
- Publication KS-1700, Kansas Sales & Use Tax Jurisdiction Code Booklet
- KW-100, Kansas Withholding Tax Guide
STATE SMALL BUSINESS WORKSHOPS
As part of our commitment to provide tax assistance to the business community, Tax Specialists within the Kansas Department of Revenue conduct small business workshops on Kansas taxes at various locations throughout Kansas. Whether you are a new business owner, an existing business owner, or an accountant, these workshops will give you the tools and understanding necessary to make Kansas taxes easier and less time consuming for you. Topics covered include filing and reporting requirements and methods, what is taxable, what is exempt and how to work with the department in collecting and remitting Kansas taxes.
For a schedule of our workshops, visit our website. Pre-registration is required and a fee may be charged by the sponsoring Small Business Development Center (SBDC).