Did Kansas cities and counties impose local sales tax on piped water sold for residential noncommercial or agricultural use after January 1, 2006?

Plain-English summary

Effective January 1, 2006, Kansas ended city and county retailers' sales tax on water delivered through mains, lines, or pipes to residential premises for noncommercial use or for agricultural use.

Public water suppliers were instructed not to collect local sales tax on those qualifying sales. On Form ST-36 they reported total commercial, residential, and agricultural water sales in gross sales, then deducted the residential and agricultural amounts in the specified non-utility and other-allowable-deduction fields so no state or local sales tax was due on those sales.

Water-only cities and districts stopped completing Part IV after the December 2005 return. A return covering billing periods both before and after January 1, 2006 required a transition calculation described in the notice.

The change did not eliminate local sales tax on residential or agricultural electricity and gas. It also did not affect the Clean Drinking Water Fee or Water Protection Fee.

What this means for you

Public water suppliers

Separate commercial water from qualifying residential and agricultural water, report total sales, and take the prescribed deductions. Confirm current Form ST-36 instructions before using the historical line references.

Utility customers

The exemption described here was limited to water. Electricity and gas remained under different local-tax treatment.

Common questions

Q: Which water sales stopped bearing local sales tax?
A: Water delivered through mains, lines, or pipes for residential noncommercial or agricultural use.

Q: Did commercial water qualify?
A: No. The notice's local-tax change covered residential noncommercial and agricultural use.

Q: Did electricity and gas receive the same treatment?
A: No. The notice says local tax remained due on residential or agricultural electricity and gas.

Q: Were the drinking-water fees repealed?
A: No. The Clean Drinking Water Fee and Water Protection Fee were unaffected.

Citations and references

• 2003 House Bill 2003.
• K.S.A. 12-189a and 12-187 et seq.
• Form ST-36.

Subject

Local Sales Tax on Water

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 05-08

Original ruling text

Notice
Notice Number: 05-08
Tax Type: Kansas Retailers' Sales Tax
Brief Description: Local Sales Tax on Water
Keywords:
Approval Date: 09/15/2005

Body:
KANSAS DEPARTMENT OF REVENUE

                                                      NOTICE 05-08
                                               LOCAL SALES TAX ON WATER

Effective January 1, 2006 no local Kansas retailers’ sales tax (city and/or county) will be due on the retail sale of water which is
delivered through mains, lines or pipes to residential premises for noncommercial use or for agricultural use.

The statute was amended in House Bill 2003 (2003 legislative session) to read:

         K.S.A. 12-189a. The following sales shall be subject to the taxes levied and collected by all cities and counties under
         the provisions of K.S.A. 12-187 et seq. and amendments thereto:
         (a) All sales of natural gas, electricity, heat and water delivered through mains, lines or pipes to residential premises for
         noncommercial use by the occupant of such premises and all sales of natural gas, electricity, heat and water delivered
         through mains, lines or pipes for agricultural use, except that effective January 1, 2006, the provisions of this
         subsection shall expire for sales of water pursuant to this subsection……

Therefore, public water suppliers making retail sales of water to Kansas premises for noncommercial use or sales of water for
Kansas agricultural use should not collect the local retailers’ sales tax on sales occurring on or after January 1, 2006.

For cities or water districts which only sell water, do not complete Part IV of the sales tax return after the December 2005 return (due
January 25, 2006). For sales made on or after January 1, 2006, water retailers should report the total amount of commercial,
residential and agricultural water sales in the Gross Sales column 2 of Form ST-36. In column 4, Part III (Non-utility) Deductions
enter the amount of sales made for residential and agricultural use. Also report these itemized deductions in Part II Deductions, line
N, Other Allowable Deductions. The amount of water sales for residences or agricultural use is then included in gross sales and
entered as a deduction so no state or local sales tax is due.

If filing a return that contains sales of water for partial periods both prior to and after January 1, 2006, divide the total tax billed to
your customers by the consolidated tax rate. This is the new net sales amount. The new net sales, plus any other deductions, minus
the original gross sales is a deduction for the difference for the partial billing period. Add this deduction amount with the other
deductions on Other Allowable on Part II, line N. Also include this deduction on column 4 Part III.

If you are selling electricity or gas for residential or agricultural use please contact us. This will ensure you continue to receive Part
IV as local sales tax will still be due on this sale of electricity and gas. The Clean Drinking Water Fee and the Water Protection Fee
are not affected by this legislation.

Additional copies of this notice, forms or publications are available from our web site, www.ksrevenue.org. If you have
questions, please call 785-368-8222.

Date Composed: 10/27/2005 Date Modified: 10/27/2005

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