Are a contractor's purchases of materials to construct or modify the Kansas Turnpike Authority roadbed exempt from Kansas sales and use tax?

Plain-English summary

A contractor asked how Kansas sales tax applies to the materials it buys for work on the Kansas Turnpike Authority (KTA) roadbed.

The holding. "Please be advised that purchases of tangible personal property, by contractors, for the construction, reconstruction or modification of the Kansas Turnpike Authority (KTA) roadbed, are purchases on behalf of the KTA, and, as such, are exempted from the tax imposed by the Kansas Retailers' Sales and Compensating Use Tax Acts."

Why it is exempt. The Department treats the contractor's purchases for the KTA roadbed as purchases made on the KTA's behalf. Because the KTA is the real purchaser, the transaction is exempt from both the Kansas retailers' sales tax and the complementary compensating (use) tax.

Bottom line: a contractor working on the KTA roadbed can buy the materials for that work exempt from Kansas sales and use tax, because those purchases are made on behalf of the KTA.

What this means for you

Materials for the KTA roadbed are exempt

When a contractor buys tangible personal property for the construction, reconstruction, or modification of the KTA roadbed, those purchases are exempt from Kansas sales and use tax. The exemption flows from the purchases being made on the KTA's behalf.

The exemption covers both sales and use tax

The ruling exempts the purchases from both the Kansas Retailers' Sales Tax Act and the Compensating Use Tax Act, so materials bought in Kansas and materials brought in from out of state for this roadbed work are both covered.

This is tied to the KTA roadbed project specifically

The exemption rests on the purchases being for the KTA roadbed and made on the KTA's behalf. A contractor should keep documentation tying the purchased materials to the KTA project, since the exemption depends on that relationship rather than on the contractor's general status.

Document the purchase properly

As with other purchases made on behalf of an exempt entity in Kansas, the contractor should ensure the paperwork reflects that the materials are for the KTA project — typically handled through the appropriate exemption or project documentation for the job.

Common questions

Q: Does a contractor pay Kansas sales tax on materials for the KTA roadbed?
A: No. The Department ruled those purchases are made on behalf of the KTA and are exempt from Kansas sales and compensating use tax.

Q: Does the exemption also cover use tax on out-of-state materials?
A: Yes. The ruling exempts the purchases from the tax imposed by both the Kansas Retailers' Sales and Compensating Use Tax Acts.

Q: Is any contractor purchase exempt, or just KTA roadbed work?
A: The exemption here is specific to purchases for the construction, reconstruction, or modification of the KTA roadbed, treated as made on the KTA's behalf. It does not make a contractor's purchases generally exempt.

Citations and references

• Kansas Retailers' Sales and Compensating Use Tax Acts — the ruling holds that a contractor's purchases of materials for the KTA roadbed are made on the KTA's behalf and are therefore exempt from the tax imposed by these Acts; the released ruling does not cite a specific exemption subsection.
• K.A.R. 92-19-59 — the regulation authorizing private letter rulings; this ruling was issued under it and binds the Department only as to the requesting taxpayer.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-115

Original ruling text

Private Letter Ruling

Body:

Office of Policy and Research

May 21, 1999

TTTTTTTTTTT
TTTTTTTTTTT
TTTTTTTTTTT
TTTTTTTTTTT

Dear Mr. TTTTTTTT:

We wish to acknowledge receipt of your letter dated May 19, 1999, regarding the application of Kansas Retailers’ Sales tax.

Please be advised that purchases of tangible personal property, by contractors, for the construction, reconstruction or modification of the Kansas Turnpike Authority (KTA) roadbed, are purchases on behalf of the KTA, and, as such, are exempted from the tax imposed by the Kansas Retailers’ Sales and Compensating Use Tax Acts.

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: 07/06/1999 Date Modified: 10/11/2001

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