After Kansas repealed tax on original-construction labor, which contractors still needed sales-tax registration?

Plain-English summary

Kansas repealed the 2.5% state sales tax on labor services performed on original-construction projects, effective April 15, 1995.

Contractors had previously reported both the ordinary 4.9% state tax and the 2.5% original-construction labor tax on special return Form BT/st-46C. Once a contractor reported all outstanding 2.5% tax, that special return was no longer needed. The Department said it was converting remaining contractor accounts to the ordinary Kansas Retailers' Sales Tax return, Form STD-16, or Form STD-36 for semimonthly filers.

A contractor performing only original-construction labor services no longer needed to be registered to collect sales tax and could cancel the registration. The notice instructed contractors to return a change or cancellation form by July 15, 1996 so the Department could convert or close the account correctly.

The notice defined original construction to include:

1. The first construction of a building or facility.
2. Adding an entire room or floor to the exterior of an existing building or facility.
3. Completing an unfinished portion required by the original plans for the first owner or lessee.
4. Restoring, reconstructing, or replacing a building or facility damaged or destroyed by fire, flood, tornado, lightning, explosion, or earthquake.
5. Constructing, reconstructing, restoring, replacing, or repairing a bridge or highway.

Labor on projects other than original construction remained subject to the historical 4.9% state sales tax plus applicable local sales tax.

What this means for you

A contractor's registration depended on the work actually performed. A business limited to original-construction labor could cancel its collection registration, while a contractor also doing taxable repair, remodeling, or other non-original-construction labor still needed a regular sales-tax account.

Common questions

Q: Did every contractor cancel sales-tax registration?
A: No. Only a contractor performing exclusively original-construction labor could cancel on that basis.

Q: What happened to the special contractor return?
A: After outstanding 2.5% tax was reported, the Department converted the account to Form STD-16 or STD-36 if taxable work remained.

Q: Did labor outside original construction become exempt?
A: No. The notice says it remained subject to 4.9% state tax plus applicable local tax.

Q: Was bridge or highway repair treated as original construction?
A: Yes under the definition listed in the notice.

Citations and references

• Kansas 1996 Contractor Notice — repeal of the 2.5% original-construction labor tax and account conversion.
• Forms BT/st-46C, STD-16, and STD-36 — historical contractor and retailer returns identified in the notice.

Subject

Important Registration Notice to Contractors

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 96-00

Original ruling text

Notice
Notice Number: 1996 Contractor Notice
Tax Type: Kansas Retailers’ Sales Tax
Brief Description: Contractors
Keywords:
Effective Date: 04/15/1995

Body:
Division of Taxation

                           IMPORTANT REGISTRATION NOTICE TO CONTRACTORS

 Our records indicate we are still sending you our special contractor return, form BT/st-46C, to report and remit your Kansas
 sales tax. This return has two state tax columns — one for the 4.9% state sales tax and one for the 2.5% state sales tax on labor
 services performed on "original construction" projects.
                                      The 2.5% sales tax was repealed effective April 15, 1995.
 Since labor services on "original construction" contracts are no longer subject to sales tax, once all your outstanding 2.5% tax
 has been reported, you no longer need to complete this type of sales tax return. A notice about this law change and a
 registration form were sent to all contractors in May 1995. The Department of Revenue is now in the final stages of converting
 the remaining contractor accounts to receive the Kansas Retailers' Sales Tax return, form STD-16 (or STD-36 for semi-
 monthly filers).
 IMPORTANT: In order to make sure your account is properly converted, please take a few minutes to complete the enclosed
 "Contractor Notice of Change/Cancellation" form. Be sure to provide your telephone numbers and use the "Comments"
 section to advise us of any changes in your business (name, business location, officers, etc.). Please return the enclosed form
 no later than July 15, 1996. If you prefer, you may FAX it to us at (913) 291-3614.
 NOTE: If you perform ONLY "original construction" labor services, you no longer need to be registered to collect sales tax.
 Complete the requested information to cancel your sales tax registration. "Original construction" is:
        1) The first or initial construction of a building or facility;

       2) The addition of an entire room or floor to the exterior of an existing building or facility;

       3) The completion of any unfinished portion of an existing building or facility called for in the original blueprint or plan
       for the first owner or lessee

       4) The restoration, reconstruction, or replacement of a building or facility damaged or destroyed by fire, flood, tornado,
       lightning, explosion, or earthquake; and

        5) The construction, reconstruction, restoration, replacement, or repair of a bridge or highway.
 Labor services on projects other than original construction remain subject to the 4.9% sales tax plus any applicable local
 sales tax.
 Taxpayer Assistance
 If you have questions about this notice or need assistance in completing the form, please contact our customer service
 personnel. Our office hours are 7:30 a.m. to 5:00 p.m., Monday through Friday.

 Topeka - (913) 296-0222 Kansas City - (913) 677-0158 Wichita - (316) 337-6140
 Docking State Office Bldg. Cloverleaf Office Park, Wichita State Office Bldg.
 915 SW Harrison St 6405 Metcalf Ave., Suite 120 230 E William, Room 7150
 Topeka, KS 66625-0001 Overland Park, KS 66202-3928 Wichita, KS 67202-4002

Date Composed: 10/02/1997 Date Modified: 10/10/2001

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