Are limousine transportation services subject to Kansas sales tax, and does the operator owe tax on its equipment and supplies?

Plain-English summary

A limousine business asked whether its transportation services are subject to Kansas sales tax. The Department ruled that they are not - but with an important flip side about the operator's own purchases.

The service itself is not taxable. In the Department's words, "transportation services provided by a limousine business would not be subject to sales tax in the state of Kansas." Kansas sales tax reaches only tangible personal property and specifically enumerated services; passenger transportation by limousine is not one of the taxed services, so the operator does not charge sales tax on its fares.

But the operator is the taxable consumer of everything it uses. Because it is "providing a nontaxable service," the business "would need to pay sales tax on all articles of tangible personal property . . . purchased to provide the nontaxable service." The Department gave concrete examples: "the limousine, any repairs to the respective limousine, pop, water, pictures, flowers, and etc."

Bottom line: a limousine operator collects no sales tax from its passengers, but it pays Kansas sales or use tax when it buys the vehicle, has it repaired, and stocks the amenities it hands out during the ride. There is no resale exemption for those items because they are used to deliver a nontaxable service, not resold.

What this means for you

Limousine and car-service operators

Do not charge Kansas sales tax on your transportation fares - the service is not taxable. But budget for tax on the input side: you owe sales or use tax on the limousine, on repairs and maintenance, and on the consumable items (beverages, flowers, and similar amenities) you provide to riders.

No resale exemption for your supplies

Since you are not reselling the beverages or amenities as separate taxable items - they are folded into a nontaxable service - you cannot buy them tax-free for resale. You are the final consumer and pay the tax.

The pattern is general for nontaxable services

This is the standard Kansas treatment of a nontaxable service provider: no tax out on the service, tax in on the tangible personal property you consume to provide it.

Common questions

Q: Do I charge Kansas sales tax on limousine fares?
A: No. The Department ruled that transportation services provided by a limousine business are not subject to Kansas sales tax.

Q: Do I owe tax on the limousine and my supplies?
A: Yes. As a provider of a nontaxable service, you pay Kansas sales tax on all the tangible personal property you buy to provide the service - the vehicle, repairs, and items like pop, water, pictures, and flowers.

Q: Can I buy the beverages and amenities tax-free for resale?
A: No. Those items are consumed in delivering a nontaxable service rather than resold, so there is no resale exemption; you pay the tax as the final consumer.

Citations and references

• The Department based this ruling on the structure of the Kansas Retailers' Sales Tax Act, under which passenger transportation by limousine is not an enumerated taxable service - so no statute imposes tax on the fares. The corollary is the general rule that a provider of a nontaxable service is the final consumer of the tangible personal property it uses and owes sales or use tax on those purchases. No specific K.S.A. section was cited in the ruling for the holding.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2001-013

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

February 19, 2001

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Dear Ms. TTTTTT:

We wish to acknowledge receipt of your letter dated February 14, 2001, regarding the application of Kansas Retailers’ Sales tax.

Please be advised that transportation services provided by a limousine business would not be subject to sales tax in the state of Kansas.

Since, you are providing a nontaxable service, you would need to pay sales tax on all articles of tangible personal property, such as the limousine, any repairs to the respective limousine, pop, water, pictures, flowers, and etc., purchased to provide the nontaxable service.

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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