Are repair and calibration services taxable in Kansas, and what about related consulting, inspection, and sales of test standards?

Plain-English summary

A company that performs calibration, testing, and related work asked how Kansas retailers' sales tax applies to its various activities. The Department sorted them into taxable and nontaxable buckets.

Taxable. K.S.A. 79-3603(q) taxes the gross receipts from "repairing, servicing, altering or maintaining tangible personal property." Repair and calibration services fall under it. So do setting the compensation parameters on milling machines and repairing granite and steel plates, because those activities alter tangible personal property. (Services physically performed in another state are not subject to Kansas tax.)

Not taxable. Kansas taxes only enumerated services, and consulting, training, certification, and inspection are not on the list. Those services are not taxed — but the provider must pay sales tax on all tangible personal property and taxable services it buys to provide them.

Sales of goods. Selling gages and conductivity standards is a taxable retail sale under K.S.A. 79-3603(a). The Department also explained that shipping, handling, and expediting charges are part of the taxable "selling price" under K.S.A. 79-3602(g) even if separately stated (unless the underlying property is exempt), that resale purchases can be made exempt with a resale exemption certificate, and that an out-of-town inspector's meals, lodging, tolls, mileage, and travel time are overhead that is taxable when tied to performing taxable services.

What this means for you

If you run a calibration, repair, or testing business in Kansas, split your billings by activity.

• Repair, calibration, and "altering" work is taxable. Charges to repair, service, alter, or maintain a customer's tangible personal property are taxed under 79-3603(q) — including calibrating instruments, setting machine parameters, and repairing plates.
• Consulting, training, certification, and inspection are not taxed. But you owe sales/use tax on the property and taxable services you buy to provide them, because you are the final consumer.
• Selling test gear is a taxable sale. Selling gages and conductivity standards is taxable under 79-3603(a).
• Shipping/handling ride along with the goods. Freight, handling, and expediting are part of the taxable selling price under 79-3602(g), even if separately stated — unless the property shipped is itself exempt.
• Use resale certificates for resale inventory. Get a completed resale exemption certificate from customers who buy merchandise for resale.
• Out-of-state work isn't Kansas-taxable. Services performed in another state are not subject to Kansas sales tax; travel costs tied to taxable Kansas work are taxable overhead.

Common questions

Is calibration taxable in Kansas?
Yes. Calibration is treated as repairing/servicing/altering tangible personal property and is taxable under K.S.A. 79-3603(q).

Are my consulting and inspection services taxable?
No — they are not enumerated services. But you must pay sales or use tax on the tangible personal property and taxable services you buy to provide them.

Do I charge tax on shipping and handling?
Yes, when the item shipped is taxable. Shipping, handling, and expediting are part of the taxable selling price under 79-3602(g), even if separately stated; if the property is exempt, the related charge is exempt too.

What about work I do outside Kansas?
Services performed in a state other than Kansas are not subject to Kansas sales tax.

Can I buy resale merchandise tax-free?
Yes, if you provide the seller a properly completed resale exemption certificate for items you buy to resell.

Citations and references

• K.S.A. 79-3603(q) — taxes gross receipts for "repairing, servicing, altering or maintaining tangible personal property"; the Department held repair, calibration, milling-machine parameter setting, and plate repair taxable under it.
• K.S.A. 79-3603(a) — taxes gross receipts from the retail sale of tangible personal property; applied to the sale of gages and conductivity standards.
• K.S.A. 79-3606(a) — quoted for the imposition of tax "upon the gross receipts received from the sale of tangible personal property at retail within this state."
• K.S.A. 79-3602(g) — defines "selling price" as the total cost to the consumer, "exclusive of discounts allowed and credited, but including freight and transportation charges," supporting the taxation of shipping and handling.

Source

• Original ruling (DOCX): https://www.ksrevenue.gov/pildocs/rulings/P-1999-80.docx
• Kansas Policy Information Library: https://www.ksrevenue.gov/prpil.html

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

March 24, 1999

TTTTTTTTTTTT
TTTTTTTTTTTT
TTTTTTTTTTTT
TTTTTTTTTTTT

Dear Ms. TTTTTT:

We wish to acknowledge receipt of your letter dated March 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. . . which when services are rendered is not held for sale in the regular course of business, and whether or not any tangible personal property is transferred in connection therewith. . .”

Repair and/or calibration services would be subject to sales tax in the state of Kansas, pursuant to K.S.A. 79-3603(q). Likewise, setting the compensation parameters on milling machines and the repair of granite and steel plates would be taxable under K.S.A. 79-3603(q), as these services would encompass the altering of tangible personal property. However, if your company performs services in a state other than Kansas, said services would not be subject to Kansas sales tax.

The state of Kansas taxes only enumerated services. The consulting, training, certification and inspection services that you are providing are not currently subject to sales tax in the state of Kansas. However, you must pay sales tax on all articles of tangible personal property and all taxable services purchased to provide the nontaxable services.

K.S.A. 79-3606(a) imposes a sales tax: "upon the gross receipts received from the sale of tangible personal property at retail within this state."

"Gross receipts" means the total selling price or the amount received as defined in the Kansas Retailers' Sales Tax Act, in money, credits, property or other consideration valued in money from sales at retail within this state.

K.S.A. 79-3602(g) defines the "selling price" to be: "the total cost to the consumer exclusive of discounts allowed and credited, but including freight and transportation charges from the retailer to the consumer."

Please be advised that it is immaterial that the shipping, handling or expediting charges may be separately stated or segregated in the purchase price on the respective invoice. In either case the appropriate Kansas sales/use tax would apply. Further, if the property that is being shipped is exempt from sales tax, then the corresponding shipping, handling or expediting charge would likewise be exempt.

The selling of gages, as well as conductivity standards would be subject to sales tax in the state of Kansas, pursuant to K.S.A. 79-3603(a).

The Kansas sales tax is imposed upon retail sales only. Retail sales are sales to final users or consumers. You indicated in our telephone conversation that your company sells certain merchandise items for resale to your customers. With this in mind, you merely need to obtain a properly completed resale exemption certificate from your customer, in order that the sale can be made exempt from Kansas sales tax(es).

In closing, if your company sends an inspector out of town to perform taxable services, the meals, lodging, tolls, mileage and travel time would be apart of overhead, and subject to the appropriate Kansas sales tax(es).

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: 04/06/1999 Date Modified: 10/11/2001

Table 1

Table 2