Are a community action group's materials and labor to repair or weatherize low-income housing exempt from Kansas sales tax?

Plain-English summary

A community action group asked whether the materials and labor it uses to repair or weatherize low-income housing are subject to Kansas sales tax. The Department pointed to two separate exemptions.

Materials are exempt. K.S.A. 79-3606(oo) exempts "all sales of tangible personal property purchased by a community action group or agency for the exclusive purpose of repairing or weatherizing housing occupied by low income individuals." So "materials purchased by your organization to repair or weatherize housing occupied by low income individuals m[a]y be purchased exempt from sales tax in the state of Kansas."

Labor is exempt too. Separately, "1998 Senate Bill No. 493 exempts certain construction services that were formerly subject to Kansas sales tax." Effective July 1, 1998, "services performed to install or apply tangible personal property are exempt from sales tax when the services involve the original construction, reconstruction, restoration, remodeling, renovation, repair or replacement of a residence." Applying that, the Department concluded that "services rendered at a residence to repair or weatherize housing occupied by low income individuals[] would not be subject to sales tax in the state of Kansas."

Bottom line: the community action group gets a double exemption. The building materials it buys are exempt under the specific community-action exemption, K.S.A. 79-3606(oo), and the repair/weatherization labor is exempt as residential construction service under 1998 SB 493.

What this means for you

Two exemptions cover the whole job

For a community action group weatherizing low-income homes, both sides of the project are tax-free: the materials under K.S.A. 79-3606(oo), and the residential repair labor under the 1998 construction-services exemption. There is no residual sales tax to build into the project cost.

The materials exemption is purpose-specific

K.S.A. 79-3606(oo) applies to property the group buys "for the exclusive purpose of repairing or weatherizing housing occupied by low income individuals." Keep the purchases tied to that purpose; property bought for other uses would not be covered.

The labor exemption is broad but residential

The 1998 SB 493 exemption covers services to install or apply property in the original construction, reconstruction, restoration, remodeling, renovation, repair, or replacement of a residence. It is the work being done to a residence that makes the labor exempt.

Effective date matters

The construction-services labor exemption took effect July 1, 1998. Work performed before that date is analyzed under the prior rules.

Common questions

Do we pay sales tax on materials to weatherize low-income homes?
No. K.S.A. 79-3606(oo) exempts tangible personal property a community action group or agency buys for the exclusive purpose of repairing or weatherizing housing occupied by low-income individuals.

Is the repair/weatherization labor taxable?
No. Under 1998 Senate Bill 493, residential repair, remodeling, and renovation labor is exempt, so the work rendered at a residence is not subject to Kansas sales tax.

Does the materials exemption cover anything the group buys?
Only property bought for the exclusive purpose of repairing or weatherizing qualifying low-income housing. Tie the purchases to that purpose.

When did the labor exemption take effect?
July 1, 1998, under 1998 Senate Bill 493.

Citations and references

• K.S.A. 79-3606(oo) — exempts tangible personal property purchased by a community action group or agency for the exclusive purpose of repairing or weatherizing housing occupied by low-income individuals.
• 1998 Senate Bill No. 493 — effective July 1, 1998; exempts services to install or apply tangible personal property in the original construction, reconstruction, restoration, remodeling, renovation, repair, or replacement of a residence. The ruling references the bill without citing a codified statute number for the services exemption.
• K.A.R. 92-19-59 — authorizes Kansas private letter rulings; this ruling binds the Department only as to the requesting taxpayer and the facts presented.
• Issued October 8, 1998 by Thomas P. Browne, Jr., Tax Specialist, Office of Policy & Research, Kansas Department of Revenue.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1998-157

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

October 8, 1998

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Dear Mr. TTTTT:

We wish to acknowledge receipt of your letter dated September 29, 1998, regarding the application of Kansas Retailers’ Sales tax.

K.S.A. 79-3606(oo) exempts from sales tax: “all sales of tangible personal property purchased by a community action group or agency for the exclusive purpose of repairing or weatherizing housing occupied by low income individuals. . .”

Therefore, materials purchased by your organization to repair or weatherize housing occupied by low income individuals my be purchased exempt from sales tax in the state of Kansas.

1998 Senate Bill No. 493 exempts certain construction services that were formerly subject to Kansas sales tax. Effective July 1, 1998, services performed to install or apply tangible personal property are exempt from sales tax when the services involve the original construction, reconstruction, restoration, remodeling, renovation, repair or replacement of a residence.

Services rendered at a residence to repair or weatherize housing occupied by low income individuals, would not be subject to sales tax in the state of Kansas, since the legislation contained in 1998 Senate Bill No. 493, would exempt these services from taxation.

This is a private letter ruling pursuant to K.A.R. 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This ruling will be revoked in the future by the operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or published revenue ruling, that materially effects this private letter ruling. If I may be of further assistance, please contact me at your earliest convenience at (785) 296-7776.

Sincerely yours,

Thomas P. Browne, Jr.
Tax Specialist

TPB

Date Composed: 10/12/1998 Date Modified: 10/10/2001

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