Is cable television installation labor subject to Kansas sales tax at a residence versus a commercial building?

Plain-English summary

The question was whether cable television installation labor is subject to Kansas sales tax. The Department ruled that it depends on the location: exempt at a residence, taxable at a commercial building.

The residential exemption applies at a home. 1998 Senate Bill No. 493 exempted certain construction services that had been taxable. Effective July 1, 1998, "services performed to install or apply tangible personal property are exempt from sales tax when the services involve the original construction, reconstruction, restoration, remodeling, renovation, repair or replacement of a residence." The imposition statute, K.S.A. 79-3603(p), taxes the service of installing or applying tangible personal property but exempts that service for residential work, and the Department construes K.S.A. 79-3603(p)(4) to also cover land improvements that immediately surround a residence.

So cable TV installation at a home is not taxable. The Department concluded that "services performed at a residence, which include, but are not limited to, cable television installation would not be subject to sales tax in the state of Kansas."

But the same work at a commercial building is taxable. "However, if the cable television installation services[] are performed in a commercial building, the gross receipts received from the respective service would be subject to the appropriate Kansas sales tax(es), unless the installation services are rendered in connection with the original construction of a building." So the only way commercial cable-installation labor escapes tax is if it is part of the original construction of the building.

Bottom line: cable television installation labor is exempt at a residence, but taxable at a commercial building unless it is performed as part of the building's original construction.

What this means for you

Cable and low-voltage installers

When you install cable television service at a residence, do not charge Kansas sales tax on the installation labor - it falls under the residential installation-services exemption. When you do the same work in a commercial building, charge sales tax on the installation charge.

The commercial "original construction" exception

Installation labor in a commercial building is exempt only if it is done in connection with the original construction of the building. Retrofits, upgrades, and service calls in an existing commercial building are taxable.

Track the setting, not just the task

The identical task - running and hooking up cable - is exempt or taxable depending on whether the location is a residence or a commercial building. Bill accordingly.

Common questions

Q: Is cable TV installation at a house taxable in Kansas?
A: No. The Department ruled that cable television installation performed at a residence is not subject to Kansas sales tax, under the residential installation-services exemption.

Q: Is it taxable in a commercial building?
A: Yes, the installation charge is taxable - unless the work is done in connection with the original construction of the building.

Q: What is the legal basis?
A: K.S.A. 79-3603(p) taxes installation/application labor but exempts residential work (added by 1998 Senate Bill No. 493), and the Department construes K.S.A. 79-3603(p)(4) to cover residential settings and their surrounding land improvements.

Citations and references

• K.S.A. 79-3603(p) - imposes Kansas sales tax on the service of installing or applying tangible personal property, but exempts that service for the original construction of a building or facility and for the reconstruction, remodeling, renovation, repair, or replacement of a residence (as amended by 1998 Senate Bill No. 493, effective July 1, 1998).
• K.S.A. 79-3603(p)(4) - construed by the Department to exempt residential installation services (and land improvements immediately surrounding a residence); cable television installation at a residence is therefore not taxable, while the same service in a commercial building is taxable unless it is part of the building's original construction.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2001-006

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

January 31, 2001

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RE: TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT

Dear Mr. TTTTTTTT:

We wish to acknowledge receipt of your letter dated March 1, 2000, regarding the application of Kansas Retailers’ Sales tax. I apologize for the delay in a getting a response to you.

1998 Senate Bill No. 493 exempts certain construction services that were formerly subject to Kansas sales tax. Effective July 1, 1998, services performed to install or apply tangible personal property are exempt from sales tax when the services involve the original construction, reconstruction, restoration, remodeling, renovation, repair or replacement of a residence.

K.S.A. 79-3603(p) imposes a sales tax upon: “the gross receipts received for the service of installing or applying tangible personal property which when installed or applied is not being held for sale in the regular course of business, and whether or not such tangible personal property when installed or applied remains tangible personal property or becomes a part of real estate, except that no tax shall be imposed upon the service of installing or applying tangible personal property in connection with the original construction of a building or facility, the original construction, reconstruction, restoration, remodeling, renovation, repair or replacement of a residence or the construction, reconstruction, restoration, replacement, remodeling, restoration, renovation or reconstruction, restoration, replacement or repair of a bridge or highway. . .”

The department has determined that it will construe and administer K.S.A. 79-3603(p)(4) as exempting the land improvements that immediately surround a residence. This means the exemption for residential repair and remodeling services generally will be coextensive with the exemption for the original construction of the residence.

The test for whether something is a “land improvement” shall be whether tangible personal property has been erected upon or affixed to the land. To qualify as residential, the land improvement must be immediately near and must principally serve the residence. This means that repairs to a yard fence are exempt but that repairs to a fence designed to corral pleasure horses are not. Barns and machine sheds for farm equipment shall not be considered to be land improvement that principally serve the residence.

Land improvements shall include, but not be limited to, sidewalks, driveways, patios, fences, sodding, tree planting, utility pipes and wires, septic tanks, swimming pools, and tool sheds. Repair services to structures such as steps, stairs, access ramps, porches, and decks shall be exempt whether they are considered to be part of the residence because they are attached to it, or a land improvement because they are immediately nearby.

Please be advised that services performed at a residence, which include, but are not limited to, cable television installation would not be subject to sales tax in the state of Kansas. However, if the cable television installation services, are performed in a commercial building, the gross receipts received from the respective service would be subject to the appropriate Kansas sales tax(es), unless the installation services are rendered in connection with the original construction of a building.

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: 02/23/2001 Date Modified: 10/11/2001

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