Kansas Sales & Use Tax exemptions

Alert: Understand Kansas Sales and Use Tax Exemptions

Gerald Capps, JD

Gerald Capps, JD

Alert: Understand Kansas Sales and Use Tax Exemptions
to Avoid Overpayments

By Jerry Capps
AGH Specialized Tax Solutions
August 25, 2014

If you're not aware of all the exemptions for sales and use tax in the state of Kansas, you could be paying more tax than you need to. This brief overview of state sales and use taxes outlines the types of exemptions; you may benefit from a sales and use tax review if you believe you may qualify.

The Kansas Retailer's Sales Tax is imposed for the privilege of engaging in the business of selling tangible personal property (presumed taxable) or the furnishing of any specifically identified services. The current Kansas sales tax rate is 6.15%. In addition to the state sales tax, counties and cities in Kansas have the option of imposing a local sales tax rate.

The Kansas Compensating Use Tax is imposed for the privilege of using, storing or consuming, any article of tangible personal property in the state. The purpose of the use tax is to complement the sales tax and level the playing field between goods purchased in the state and out of the state. Without the compensating use tax, consumers would be able to order or purchase goods from other states with no sales tax, putting Kansas retailers at a distinct disadvantage.

Kansas retailers are responsible for collecting sales tax due on each sale to the final consumer, unless the goods or services are specifically exempt. Sales tax exemptions fall into three general categories:

  • Entities who are exempt
  • Specific items that are exempt
  • Uses of an item that makes it exempt

In many cases, a specific exemption may apply to the transaction and an exemption certificate must be provided.

The following are common exemptions in Kansas

  • Resale exemption
    A buyer can use a resale exemption certificate to purchase the property that will be held for resale in the course of the buyer's business.
  • Integrated production machinery and equipment
    Manufacturing machinery and equipment used as an essential part of an integrated production operation is exempt from tax. Installation, repair and maintenance services, and repair and replacement parts for such machinery and equipment is also exempt.
  • Consumed in production
    Items used in the process of manufacturing that are necessary and essential to the process are exempt from tax. The items must meet the following criteria:
    • necessary and essential to the process
    • consumed or dissipated by the process within one year
    • used in the process of producing, manufacturing, processing, mining, drilling, refining or compounding of tangible personal property
  • Ingredient or component part
    Items that become a part of a finished product to be sold to the final consumer are exempt as ingredient or component parts. In order to qualify the item must:
    • be necessary and essential to the finished product
    • be used in or on the finished product
    • become a physical part of the finished product, and
    • become an ingredient or compound part of property or service for retail sale

A sales and use tax review can identify potential reductions in tax liability as well as refunds which may be due for past overpayments. For more information about sales and use tax issues, please contact your AGH professional or AGH senior vice president of state and local tax Jerry Capps at (316) 267-7231 or email Jerry Capps.

Any discussion of tax matters contained herein is not intended or written to be tax advice, and cannot be relied upon as such, nor can it be used for the purpose of: (i) avoiding tax penalties that may be imposed by the IRS or states, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. If you seek definitive tax advice on a matter, please request a written tax memorandum from your AGH tax advisor.