When can a rock quarry sell rock exempt from Kansas sales tax — to a trucker, a contractor, or a concrete plant?

Plain-English summary

A rock quarry asked when it can sell rock without charging Kansas sales tax. The Department explained that Kansas sales tax is imposed on retail sales only — sales to final users or consumers — and then walked through three types of buyer:

• A trucker who resells: if a trucker gives the quarry a properly completed Kansas resale exemption certificate in good faith, the trucker may buy the rock exempt. The trucker is then obligated to collect and remit the appropriate Kansas sales tax from its own customer.
• A contractor/subcontractor/repairman: under K.S.A. 79-3603(l), sales of materials to contractors, subcontractors, or repairmen for improving, altering, or repairing real or personal property of others are taxable. So a contractor may not give, and the quarry may not accept, a resale certificate to buy rock tax-free to erect a fence for a customer — that sale is taxable.
• A concrete plant: under K.S.A. 79-3606(m), tangible personal property that becomes an ingredient or component part of property manufactured for ultimate retail sale is exempt. A concrete plant whose rock becomes an ingredient or component of finished concrete products for ultimate sale at retail may buy the rock exempt, if it provides the quarry a properly completed resale exemption certificate.

What this means for you

If you operate a quarry (or any business selling materials that can go to different kinds of buyers), the taxability of the sale turns on who the buyer is and how they will use the rock — and on getting the right paperwork.

• Resellers and manufacturers can buy exempt — with a certificate. A trucker reselling the rock, or a concrete plant incorporating it into products for retail sale, may buy tax-free only if they hand you a properly completed Kansas resale exemption certificate. Keep it on file.
• Contractors are taxable buyers. A contractor, subcontractor, or repairman using the rock to build or repair for a customer is the final user. Do not accept a resale certificate from them; charge Kansas sales tax.
• The certificate protects you. Accepting a completed resale certificate in good faith supports the exempt treatment; without one, treat the sale as taxable.

Common questions

Can a quarry sell rock tax-free to a trucker?
Yes, if the trucker provides a properly completed Kansas resale exemption certificate. The trucker then collects and remits Kansas sales tax from its own customer.

Can a contractor buy rock tax-free with a resale certificate?
No. Under K.S.A. 79-3603(l), a contractor, subcontractor, or repairman is the final user; the quarry must not accept a resale certificate and the sale is taxable.

What about a concrete plant?
A concrete plant may buy the rock exempt under K.S.A. 79-3606(m) because the rock becomes an ingredient or component of finished concrete products made for ultimate retail sale — provided it gives the quarry a completed resale exemption certificate.

What paperwork does the quarry need?
A properly completed Kansas resale exemption certificate from any buyer claiming an exempt (resale/ingredient) purchase; keep it to support the exemption.

Citations and references

• K.S.A. 79-3603(l) — imposes tax on sales of tangible personal property to contractors, subcontractors, and repairmen of materials and supplies used in improving, altering, or repairing real or personal property of others.
• K.S.A. 79-3606(m) — exempts sales of tangible personal property that becomes an ingredient or component part of property produced, manufactured, or compounded for ultimate sale at retail within or without Kansas.

Source

• Original ruling (DOCX): https://www.ksrevenue.gov/pildocs/rulings/P-1998-26.docx
• Kansas Policy Information Library: https://www.ksrevenue.gov/prpil.html

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

February 27, 1998

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Dear Ms. TTTT:

We wish to acknowledge receipts of your letter dated December 17, 1997, regarding the application of Kansas Retailers’ Sales tax.

The Kansas sales tax is imposed upon retail sales only. Retail sales are sales to final users or consumers. A trucker who provides a properly completed Kansas resale exemption certificate in good faith to your quarry, would be able to purchase said rock exempt from sales tax. The trucker would be obligated to collect and remit the appropriate Kansas sales tax(es) from their respective customer.

K.S.A. 79-3603(l) imposes a sales tax upon: “the gross receipts received from the sales of tangible personal property to all contractors, subcontractors or repairmen of materials and supplies for use by them in. . . improving, altering, or repairing real or personal property of others.”

Therefore, a contractor, subcontractor or repairmen shall not give, and a rock quarry shall not accept, a resale exemption certificate to purchase rock without tax to erect a fence for his customer.

K.S.A. 79-3606(m) imposes a sales tax upon: “all sales of tangible personal property which become an ingredient or component part of tangible personal property or services produced, manufactured or compounded for ultimate sale at retail within or without the state of Kansas.”

In closing, a concrete plant would be able to purchase rock from your quarry which will become an ingredient or component part of finished concrete products manufactured for ultimate sale at retail within or without the state of Kansas by the respective concrete plant. The concrete plant would need to provide your rock quarry with a properly completed Kansas resale exemption certificate, in order to purchase these items of tangible personal property exempt from sales tax.

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: 03/04/1998 Date Modified: 10/10/2001

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