Is installing or repairing a hot tub or spa at a residence exempt from Kansas sales tax, and what about the materials?

Plain-English summary

The Department applied the new residential remodeling exemption to hot tubs and spas installed at a home. It first laid out the same framework used for residential land improvements: under "1998 Senate Bill No. 493," effective July 1, 1998, install/apply services are exempt for the "original construction, reconstruction, restoration, remodeling, renovation, repair or replacement of a residence," and the Department "will construe and administer K.S.A. 79-3603(p)(4) as exempting the land improvements that immediately surround a residence" — with "swimming pools" among the listed land improvements.

The specific holding on spas. "[T]he service of installing or repairing a hot tub or spa, which is about to be or has become a permanent fixture to real property, at a residence would be exempt from sales tax in the state of Kansas."

Materials stay taxable. "However, the charges for the materials would continue to be taxable, even though a hot tub or spa may have been prescribed in writing by a person licensed to practice the healing arts, since, the hot tub or spa, when installed becomes a fixture to real property."

Bottom line: the installation or repair labor for a residential hot tub or spa that becomes a fixture to real property is exempt, but the materials remain taxable — and a doctor's written prescription for the spa does not change that result.

What this means for you

Install/repair labor on a residential spa is exempt

When a hot tub or spa is or will become a permanent fixture to real property at a residence, the labor to install or repair it is exempt under the residential remodeling exemption.

The materials remain taxable

The charges for the materials — the hot tub or spa itself and related components — continue to be taxable even though the labor is exempt.

A medical prescription does not exempt the materials

Even if the spa was prescribed in writing by a person licensed to practice the healing arts, the materials are still taxable, because once installed the spa becomes a fixture to real property rather than qualifying medical equipment.

Fixture status is the key

The result turns on the spa becoming a fixture to real property. That is what brings the labor within the residential exemption while leaving the materials taxable.

Common questions

Is installing a hot tub or spa at a home taxable?
The installation or repair labor is exempt when the spa is or becomes a permanent fixture to real property at a residence.

Are the spa materials exempt too?
No. The charges for the materials remain taxable even though the labor is exempt.

Does a doctor's prescription make the spa exempt?
No. A written prescription by a licensed healing-arts practitioner does not exempt the materials, because the installed spa becomes a fixture to real property.

Why is the labor exempt but not the materials?
The residential remodeling exemption covers the install/apply service; it does not exempt the tangible materials that go into the fixture.

Citations and references

• K.S.A. 79-3603(p)(4) — the residential remodeling exemption the Department construes to cover land improvements (including swimming pools) that immediately surround a residence; installation/repair labor for a residential spa fixture is exempt.
• 1998 Senate Bill No. 493 and Revenue Notice 98-02 ("Exemption of Residential Repair and Remodel Work") — the enabling law and guidance the Department enclosed.
• The ruling states in prose that spa materials remain taxable, and that a written healing-arts prescription does not change that result.
• 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 August 19, 1998 by Thomas P. Browne, Jr., Tax Specialist, Kansas Department of Revenue.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1998-75

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

August 19, 1998

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Dear Mr. TTTTTTT:

We wish to acknowledge receipt of your letter dated August 10, 1998, regarding the application of Kansas Retailers’ Sales tax.

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.

The department has determined that it will construe and administer K.S.A. 79-3603(p)(4) as exempting the land improvements that immediately surround a residence. This means the exemption for residential repair and remodeling services generally will be coextensive with the exemption for the original construction of the residence.

The test for whether something is a “land improvement” shall be whether tangible personal property has been erected upon or affixed to the land. To qualify as residential, the land improvement must be immediately near and must principally serve the residence. This means that repairs to a yard fence are exempt but that repairs to a fence designed to corral pleasure horses are not. Barns and machine sheds for farm equipment shall not be considered to be land improvement that principally serve the residence.

Land improvements shall include, but not be limited to, sidewalks, driveways, patios, fences, sodding, tree planting, utility pipes and wires, septic tanks, swimming pools, and tool sheds. Repair services to structures such as steps, stairs, access ramps, porches, and decks shall be exempt whether they are considered to be part of the residence because they are attached to it, or a land improvement because they are immediately nearby.

In closing, the service of installing or repairing a hot tub or spa, which is about to be or has become a permanent fixture to real property, at a residence would be exempt from sales tax in the state of Kansas. However, the charges for the materials would continue to be taxable, even though a hot tub or spa may have been prescribed in writing by a person licensed to practice the healing arts, since, the hot tub or spa, when installed becomes a fixture to real property.

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 affects this private letter ruling. If I may be of further assistance, please contact me at your earliest convenience at (785) 296-7776.

For your convenience, I have enclosed Revenue Notice 98-02, which is entitled, “Exemption of Residential Repair and Remodel Work”.

Sincerely yours,

Thomas P. Browne, Jr.
Tax Specialist

TPB

Enc

Date Composed: 09/14/1998 Date Modified: 10/10/2001

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