Are mineral oil purchases used in the grain handling business exempt from Kansas sales tax as property consumed in production?

Plain-English summary

A grain handler asked whether its purchases of mineral oil — used in connection with grain handling and dust suppression — are subject to Kansas sales tax. The Department pointed to the "consumed in production" exemption.

The statute. K.S.A. 79-3606(n) exempts "all sales of tangible personal property which is consumed in the production, manufacture, processing, mining, drilling, refining or compounding of tangible personal property, the providing of services or the irrigation of crops for ultimate sale at retail within or without the state of Kansas."

The ruling. "[I]t is the opinion of this office that the mineral oil purchases would come within the scope of the sales tax exemption in K.S.A. 79-3606(n), when the respective property is used in the grain handling business." So the mineral oil is exempt when it is consumed in that grain-handling use.

How to claim it. The Department enclosed an exemption certificate for the buyer to give its vendors when making qualifying mineral-oil purchases, noting that "[t]he department does not assign numbers to these exemption certificates." It also enclosed Form BT/ST-28B, the statement for a sales-tax exemption on electricity, gas, or water furnished through one meter.

Bottom line: mineral oil consumed in the grain handling business qualifies for the K.S.A. 79-3606(n) consumed-in-production exemption, claimed with a properly completed (unnumbered) exemption certificate.

What this means for you

Grain handlers and similar producers

Consumables like mineral oil used in your grain handling operation can be bought free of Kansas sales tax under the consumed-in-production exemption, provided the property is actually consumed in that production/processing activity. Match your purchase to the statutory categories in K.S.A. 79-3606(n).

Use the exemption certificate correctly

Claim the exemption by giving each vendor a properly completed consumed-in-production exemption certificate. Kansas does not assign a number to these certificates, so do not wait for one — the completed certificate itself is what supports the exempt purchase.

Separate utility exemptions have their own form

If you also seek a sales-tax exemption on electricity, gas, or water furnished through a single meter, that is claimed on its own form (BT/ST-28B), not the general consumed-in-production certificate.

Common questions

Q: Is mineral oil used in grain handling taxable in Kansas?
A: No. The Department ruled it is exempt under K.S.A. 79-3606(n) as property consumed in production, when used in the grain handling business.

Q: How does the buyer claim the exemption?
A: By giving vendors a properly completed consumed-in-production exemption certificate at the time of purchase. The Department does not assign numbers to these certificates.

Q: What is Form BT/ST-28B?
A: It is the separate statement for claiming a sales-tax exemption on electricity, gas, or water furnished through one meter — a different exemption from the consumed-in-production one for the mineral oil.

Citations and references

• K.S.A. 79-3606(n) — exempts tangible personal property consumed in the production, manufacture, processing, mining, drilling, refining, or compounding of tangible personal property (or providing services / irrigating crops) for ultimate retail sale; the basis for exempting mineral oil consumed in the grain handling business.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-268

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

December 3, 1999

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Dear Mr. TTTTTTT:

We wish to acknowledge receipt of your letter dated October 21, 1998, regarding the application of Kansas Retailers’ Sales tax.

K.S.A. 79-3606(n) exempts from sales tax: "all sales of tangible personal property which is consumed in the production, manufacture, processing, mining, drilling, refining or compounding of tangible personal property, the providing of services or the irrigation of crops for ultimate sale at retail within or without the state of Kansas. . .”

Please be advised that it is the opinion of this office that the mineral oil purchases would come within the scope of the sales tax exemption in K.S.A. 79-3606(n), when the respective property is used in the grain handling business. For your convenience, I have enclosed an exemption certificate that you may supply your vendors when making qualified purchases of mineral oil exempt from sales tax. The department does not assign numbers to these exemption certificates. Additionally, I have enclosed Form BT/st-28B, which is a Statement for Sales Tax Exemption on Electricity, Gas, or Water Furnished Through One Meter.

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

Enc

Date Composed: 12/20/1999 Date Modified: 10/11/2001

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