Are receipts from coin-operated car washes subject to Kansas sales tax, and how does the operator calculate the tax from the money in the machine?

Plain-English summary

An operator asked how coin-operated car washes are taxed under the Kansas retailers' sales tax act. The Department's answer was straightforward: "The receipts from car washes of all types are taxed in Kansas. This includes all coin operated car washes, whether operated automatically or manually by the consumer (wand-type car washes)."

Two statutes impose the tax, both part of Kansas law since 1970:

• K.S.A. 79-3603(f) taxes "the gross receipts from the operation of any coin-operated device dispensing or providing tangible personal property, amusement or other services except laundry services, whether automatic or manually operated."
• K.S.A. 79-3603(j) taxes "the gross receipts from the rendering of the services of washing and washing and waxing of vehicles."

How to compute the tax ("factoring"). Because the coins in the machine already include the sales tax, the operator has to back the tax out. The Department explains: take the total receipts in the machine and divide by 1 plus the combined state and local tax rate expressed as a decimal. That yields the "gross receipts" to report to the state. Subtract those gross receipts from the total in the machine and the remainder is the tax due. (Equivalently, the tax due always equals the reported gross receipts times the tax rate, and total collected = gross receipts + tax.)

Bottom line: all car-wash receipts are taxable, coin-operated and wand-type included, and operators must factor the tax out of the money collected rather than adding it on top.

What this means for you

Car-wash operators

Whether your bays are fully automatic or self-serve wand-type, the receipts are taxable in Kansas. You cannot treat coin-operated self-service washes as exempt — the coin-operated-device statute and the vehicle-washing statute both reach them.

Back the tax out by factoring

The money in your machines is tax-inclusive. Divide total collections by 1 plus the state-plus-local rate to get the gross receipts you report; the difference is the tax you remit. Applying the rate to the full amount in the machine would over-report your receipts.

Use the correct combined rate

Factoring depends on the combined state and local rate in effect where the wash is located, so keep the rate current if local rates change.

Common questions

Q: Are coin-operated and self-service (wand-type) car washes taxable in Kansas?
A: Yes. The Department ruled that receipts from car washes of all types are taxable, including all coin-operated washes, whether automatic or manually operated wand-type.

Q: Which statutes tax car washes?
A: K.S.A. 79-3603(f), taxing coin-operated devices, and K.S.A. 79-3603(j), taxing the service of washing and waxing vehicles.

Q: How do I figure the tax on the coins collected?
A: By "factoring" — divide the total in the machine by 1 plus the state and local tax rate as a decimal to get the reportable gross receipts; the remainder after subtracting those receipts is the tax due.

Citations and references

• K.S.A. 79-3603(f) — imposes sales tax on the gross receipts from the operation of any coin-operated device dispensing or providing tangible personal property, amusement, or other services (except laundry), automatic or manual; a basis for taxing coin-operated car washes.
• K.S.A. 79-3603(j) — imposes sales tax on the gross receipts from the service of washing and washing and waxing of vehicles; the basis for taxing car-wash services generally.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2000-004

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

February 2, 2000

XXXX
XXXX
XXXX

RE: Your letter dated January 24, 2000

Dear XXXX:

Thank you for your letter that we received late last month. In it, you ask how coin operated car washes are taxed under the Kansas retailers sales tax act. The receipts from car washes of all types are taxed in Kansas. This includes all coin operated car washes, whether operated automatically or manually by the consumer (wand-type car washes). The statutes that imposes the tax are K.S.A. 79-3603(f) and K.S.A. 79-3603(j), which have been part of Kansas law since 1970. They tax:

(f) the gross receipts from the operation of any coin-operated device dispensing or providing tangible personal property, amusement or other services except laundry services, whether automatic or manually operated;

and

(j) the gross receipts from the rendering of the services of washing and washing and waxing of vehicles;

To determine the amount of sales tax to report on the receipts contained in a coin-operate device, retailers must first calculate the gross receipts to be reported to the state. To do this, you must take the total receipts in the machine and divide them by 1 plus the state and local tax rates stated as a decimal. This yields the “gross receipts” to report to the state. Once this is done, the state and local sales tax due can be figured by subtracting the gross receipts so computed from the total receipts that were in the machine. The remainder will be the tax due. (The tax due will always equal the gross receipts times the tax rate.) The total amount in the machine will equal the sum of the gross receipts plus the tax. This process is sometimes referred to as “factoring.”

I have enclosed a copy of an Instruction that the department issued concerning the tax on car washes in 1970 when the law was first enacted.

Sincerely,

Thomas E. Hatten
Attorney/Policy & Research

Enclosure

Date Composed: 02/17/2000 Date Modified: 10/11/2001

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