Are transportation charges taxable when billed as part of a taxable repair service, and when are they exempt?

Plain-English summary

A representative asked whether a roustabout service can "separately state for purposes of imposing or exempting from Kansas retailers' sales tax, the various activities of a roustabout service." The Department explained when transportation charges follow the taxability of the underlying work.

Taxable repair carries its transportation. "If your roustabout client is engaged in a taxable repair service, then all charges associated with the service are subject to tax. This would include transportation charges whether separately stated or included in a lump sum."

Transportation alone is not taxable. "Transportation charges are not subject to sales tax, only when the transportation service is the primary or the only service being performed." The Department's example: "a home owner who … engages a moving company to move his household furniture, is contracting for a nontaxable service." So "if your client entered into a contract to load, transport and unload pipe, this would not be subject to sales tax."

Transportation as part of a repair is taxable. "A repairman who replaces a pipeline on a gathering system provides an example of transportation charges that are subject to tax." When the repairman "bills the owner … for transporting the replacement pipe from the supplier to the job site," those charges "are an element of the repairman's gross receipts and subject to sales tax."

Delivery on a sale is always taxable. "Any time a retailer makes a sale of property, and charges the consumer for delivery or transportation, this charge is subject to sales tax. This is the case even when the shipping charges are not, by [themselves], subject to sales tax."

Bottom line: you cannot make a transportation charge exempt by separately stating it when it is part of a taxable repair or a taxable sale. Transportation stands alone as non-taxable only when hauling is the primary or only service.

What this means for you

The primary service controls

If the roustabout is performing a taxable repair, all associated charges — including transportation — are taxable, whether separately stated or included in a lump sum. Separately stating them does not make them exempt.

Standalone transportation is not taxable

When transportation is the primary or only service — like a moving company moving furniture, or a contract just to load, transport, and unload pipe — the charge is for a nontaxable service.

Transportation inside a repair is taxable

Hauling replacement pipe to a pipeline repair job is part of the repairman's taxable gross receipts, because it is an element of the taxable repair service.

Delivery on a sale of property is taxable

When a retailer sells property and charges for delivery, that delivery charge is taxable — even in situations where standalone transportation would not be.

Common questions

Can I make transportation exempt by billing it separately?
No. If the transportation is part of a taxable repair service or a taxable sale of property, it is taxable whether separately stated or lumped in.

When is transportation not taxable?
Only when transportation is the primary or the only service — for example, a moving company moving furniture, or a contract just to load, transport, and unload pipe.

Is hauling replacement pipe to a repair job taxable?
Yes. It is an element of the repairman's gross receipts for the taxable repair service and is subject to tax.

Is a delivery charge on a sale taxable?
Yes. When a retailer sells property and charges the customer for delivery, that charge is taxable — even if standalone transportation would not be.

Citations and references

• The ruling states in prose that transportation charges tied to a taxable repair service are taxable (whether separately stated or lump-sum), that standalone transportation is non-taxable only when it is the primary or only service, and that delivery charged by a retailer on a sale of property is taxable. No numbered statute is cited.
• 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 July 1, 1998 by Mark D. Ciardullo, Tax Specialist, Kansas Department of Revenue.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1998-59

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

July 1, 1998

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Dear XXXXXXXXXXXX:

The purpose of this letter is to respond to your letter dated June 4, 1998.

In your letter you asked if it would be appropriate to separately state for purposes of imposing or exempting from Kansas retailers’ sales tax, the various activities of a roustabout service.

If your roustabout client is engaged in a taxable repair service, then all charges associated with the service are subject to tax. This would include transportation charges whether separately stated or included in a lump sum.

Transportation charges are not subject to sales tax, only when the transportation service is the primary or the only service being performed. For example a home owner who is engages a moving company to move his household furniture, is contracting for a nontaxable service. Therefore, if your client entered into a contract to load, transport and unload pipe, this would not be subject to sales tax.

A repairman who replaces a pipeline on a gathering system provides an example of transportation charges that are subject to tax. As part of the service, the repairman bills the owner of the gathering system for transporting the replacement pipe from the supplier to the job site. In this example the transportation charges are an element of the repairman’s gross receipts and subject to sales tax.

Another aspect of transportation charges should also be noted. Any time a retailer makes a sale of property, and charges the consumer for delivery or transportation, this charge is subject to sales tax. This is the case even when the shipping charges are not, by the themselves, subject to sales tax.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 07/14/1998 Date Modified: 10/10/2001

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