Is the service of removing scale, coke, slag, and similar deposits from flowlines, pipelines, and refineries subject to Kansas sales tax?

Plain-English summary

A service provider asked how Kansas sales tax applies to the work of cleaning out industrial lines and equipment — specifically "removing coke, iron, sulphides, scale, brine, inferior welds and slag from flowlines, pipelines and refineries."

The statute. K.S.A. 79-3603(q) imposes sales tax on "the gross receipts received for the service of repairing, servicing, altering or maintaining tangible personal property."

The ruling. The Department held the cleaning/removal service "would be subject to sales tax in the state of Kansas, pursuant to K.S.A. 79-3603(q), since the respective services involve either servicing, maintaining or repairing tangible personal property." In other words, stripping deposits and defects out of flowlines, pipelines, and refinery equipment is treated as servicing or maintaining that equipment, and the charge for it is taxable.

Bottom line: this line-cleaning work is a taxable repair/maintenance service on tangible personal property, so the provider must collect and remit Kansas sales tax on the charges.

What this means for you

Industrial cleaning and pipeline-service contractors

When you clean, de-scale, or remove deposits and defects from lines and equipment, Kansas treats the charge as a taxable service of servicing, maintaining, or repairing tangible personal property under K.S.A. 79-3603(q). Bill Kansas sales tax on those service charges.

The label "cleaning" does not make it exempt

Do not assume cleaning is a nontaxable service. Here the Department looked at the substance — the work maintains or repairs the equipment — and found it taxable. Similar removal/maintenance services on tangible equipment should be analyzed the same way.

Property character matters

This ruling treats the flowlines, pipelines, and refinery equipment as tangible personal property being serviced. If your work instead involves labor on real property (for example, certain original-construction or residential work), a different Kansas rule can apply — so confirm the character of what you are working on.

Common questions

Q: Is removing scale, coke, and slag from pipelines taxable in Kansas?
A: Yes. The Department ruled the service is subject to Kansas sales tax under K.S.A. 79-3603(q) as servicing, maintaining, or repairing tangible personal property.

Q: Which statute makes it taxable?
A: K.S.A. 79-3603(q), which taxes the gross receipts from the service of repairing, servicing, altering, or maintaining tangible personal property.

Q: Does it matter that this is cleaning rather than a traditional repair?
A: No. The Department found the removal work amounts to servicing or maintaining the equipment, which is enough to make the charge taxable.

Citations and references

• K.S.A. 79-3603(q) — imposes sales tax on the gross receipts from the service of repairing, servicing, altering, or maintaining tangible personal property; the basis for taxing the removal of deposits and defects from flowlines, pipelines, and refineries.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-266

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

December 7, 1999

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Dear Mr. TTTTTTT:

We wish to acknowledge receipt of your letter dated November 10, 1999, regarding the application of Kansas Retailers’ Sales tax.

K.S.A. 79-3603(q) imposes a sales tax upon: “the gross receipts received for the service of repairing, servicing, altering or maintaining tangible personal property. . .”

Please be advised that the service of removing coke, iron, sulphides, scale, brine, inferior welds and slag from flowlines, pipelines and refineries would be subject to sales tax in the state of Kansas, pursuant to K.S.A. 79-3603(q), since the respective services involve either servicing, maintaining or repairing tangible personal 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 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: 12/16/1999 Date Modified: 10/11/2001

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