When was the Kansas water protection fee excluded from state and local sales tax?

Plain-English summary

1990 Senate Bill 2765 removed the water protection fee from the state and local sales-tax base beginning July 1, 1990—but only when the fee was separately stated on the customer's bill.

If the water retailer absorbed the fee or included it in the water charge without identifying it separately, the fee remained subject to Kansas retailers' sales tax.

For reporting, the retailer included the fee in Line 1 gross receipts, then itemized it in the deduction section of the return.

Franchise fees, debt-reduction charges, late fees, and other water-sale charges remained taxable when the underlying water sale was taxable. Separately stating those charges did not remove them from the tax base. The notice's example says residential or agricultural water charges then carried only applicable local sales tax.

What this means for you

A water retailer needed a distinct water-protection-fee line on customer bills and a corresponding return deduction. Other charges could not be made exempt merely by listing them separately.

Common questions

Q: Was the fee exempt if built into the water rate?
A: No. It had to be separately identified.

Q: Were late fees excluded when separately stated?
A: No. They followed the tax treatment of the water sale.

Citations and references

• 1990 Senate Bill 2765 — sales-tax treatment of the water protection fee.

Subject

Water Protection Fee

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 90-0701

Original ruling text

Notice
Notice Number: Water Protection Fee
Tax Type: Water Protection Fee
Brief Description: Water Protection
Keywords:
Effective Date: 07/01/1990

Body:
NOTICE

TO: Water Retailers

FROM: Kansas Department of Revenue
Business Tax Bureau

SUBJECT: Water Protection Fee (Senate Bill No. 2765)

DATE: June 13, 1990

Senate Bill No. 2765, exacted by the 1990 Kansas Legislature, exempts the water protection fee from the gross receipts subject to
state and local retailers' sales tax. The effective date of this change is July 1, 1990.

When the water protection fee is separately stated on water bills to the customer, the fee is not subject to state and local retailers'
sales tax on water sales made on or after July 1, 1990. Accordingly, the water protection fee should be separately stated on customer
bills and should not be made subject to state or local retailers' sales tax.

Water protection fees absorbed or included in the water retailer's charges and not separately identified in the customer bills will
remain subject to the Kansas retailers' sales tax.

For water retailers to properly account and report the water protection fee on their retailers' sales tax return, the water retailer
should include the water fee in the gross receipts on Line 1. The water protection fee should be itemized in the deduction section
(Line 1) on the reverse side of the retailers' sales tax return.

Franchise taxes or fees, debt reduction charges, late fees and other charges remain subject to state and local retailers' sales tax, if the
sale of water is subject to tax. Such charges are a part of the total amount received from the sale of water and must be taxed at the
same rate that is imposed on the sale of water. For example, if the sale of water is for residential or agricultural use then only the
local retailers' sales tax would apply to the above mentioned charges. It is immaterial that such charges may be separately itemized or
are included in the water rate charges.

If you have any questions regarding the application of Kansas retailers' sales tax to the water protection fee, please write the
Business Tax Bureau, Kansas Department of Revenue, Topeka, Kansas 66625-0001, or call (913) 296-2461.

Date Composed: 10/06/1997 Date Modified: 10/10/2001

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