Which grain-elevator industrial fixtures, support facilities, and foundations are exempt from Kansas sales tax under the integrated-production exemption?
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This page answers the general question as of 2001. Ezel answers yours, under current Kansas tax law, with citations.
Plain-English summary
A representative asked, on behalf of a client, how Kansas sales tax applies to a list of items purchased for a grain storage facility or grain milling operation - thirteen diagrammed "industrial fixtures, devices, support facilities, and special foundations." The Department went item by item: most are exempt, one is taxable, and one it could not resolve on the facts.
The governing exemption. Kansas sales tax is imposed by K.S.A. 79-3603, with exemptions in K.S.A. 79-3606. The Department applied K.S.A. 79-3606(kk)(4)(D), which deems exempt - even if they would not otherwise qualify as integrated-production machinery - "industrial fixtures, devices, support facilities and special foundations necessary for manufacturing and production operations, and materials and other tangible personal property sold for the purpose of fabricating such fixtures, devices, facilities and foundations." An exemption certificate must be signed by the manufacturer or processor (and by the fabricator, if the fabricator buys the material). The statute does not define the key terms, so the Department applied them to each diagram.
The exempt items (11 of 13). The Department found the following exempt from sales tax: concrete dump pits/boot pits and the elevator leg (Diagram 1); foundation slabs for grain dryers (2); leg and machinery support towers including foundations (3); concrete deadman anchors (4); the support frame for a manlift (6); the sheeting covering a manlift and its support frame (7); support frames for conveyors, cleaners, and other exempt machinery (8); the sheeting covering those frames and machinery (9); weather enclosures around machinery (10); foundations, pits, and decks for truck scales, rail scales, and bulk weigher scale load-out systems (12); and overhead load-out bins including their foundations and support frames (13).
The taxable item. Diagram 11 - "concrete water run off valleys between grain bins" - is taxable. These valleys keep the bins from leaning toward each other over time, and the Department concluded they "would be subject to sales tax."
The unresolved item. Diagram 5 - "distributor support towers" - the Department called uncertain, because the diagram said only "[s]ame as [Diagram] 4 except for distribution system," and since an elevator leg is already part of a distribution system the intended distinction was unclear.
Bottom line: industrial fixtures, support facilities, and special foundations necessary to the grain-handling production operation are exempt under K.S.A. 79-3606(kk)(4)(D), with the concrete water run-off valleys the notable taxable exception - and the exemption requires the proper signed exemption certificate.
What this means for you
Grain elevators, mills, and other manufacturers
Kansas exempts not just production machinery but the industrial fixtures, support facilities, and special foundations necessary for the production operation - and the materials sold to fabricate them - under K.S.A. 79-3606(kk)(4)(D). Here that reached pits, legs, support towers and their foundations, manlift and conveyor frames, sheeting, weather enclosures, scale foundations, and load-out bins.
Some "site" concrete is still taxable
Not every concrete structure qualifies. The water run-off valleys between bins - which serve to keep the bins from leaning rather than to house or support production machinery - were taxable. Watch items whose function is site drainage or general real-property protection rather than supporting exempt equipment.
Use the exemption certificate
The exemption applies to purchases made on a certificate signed by the manufacturer or processor (and the fabricator, if the fabricator buys the fabricating material). Make sure the certificate is executed correctly for the purchase to be exempt.
Common questions
Q: Are the foundations and support towers for grain-elevator machinery exempt in Kansas?
A: Yes. The Department found the support towers, their foundations, deadman anchors, manlift and conveyor frames, and scale foundations exempt under K.S.A. 79-3606(kk)(4)(D).
Q: Was anything taxable?
A: Yes - the concrete water run-off valleys between grain bins were taxable.
Q: Did the Department decide every item?
A: No. It called the "distributor support towers" item uncertain because the diagram did not make clear how it differed from an already-covered item.
Citations and references
- K.S.A. 79-3603 - imposes the Kansas retailers' sales tax.
- K.S.A. 79-3606(kk)(4)(D) - deems exempt (even if not otherwise integrated-production machinery) industrial fixtures, devices, support facilities, and special foundations necessary for manufacturing and production operations, plus materials and other tangible personal property sold to fabricate them; the exemption certificate must be signed by the manufacturer or processor (and the fabricator, if it purchases the material). The Department applied this to find eleven of the thirteen diagrammed items exempt, the concrete water run-off valleys taxable, and the distributor support towers uncertain.
Source
- Landing page: Kansas Department of Revenue Policy Information Library
- Original document: P-2001-034
Original ruling text
Private Letter Ruling
Body:
Office of Policy & Research
April 12, 2001
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Re: Kansas Sales Tax
Dear XXXXX:
Your correspondence of January 15, 2001 has been referred to me for response. Thank you for your inquiry.
Your letter is submitted on behalf of your client, XXXXX, of XXXXXX. By your letter you inquire as to how certain repairs, installations, improvements, materials, etc., purchased for a grain storage facility or a grain milling operation adjacent or connected to a grain storage facility are treated for purposes of the Kansas sales tax.
The Kansas sales tax is imposed by K.S.A. 79-3603. Exemptions from tax are found in K.S.A. 79-3606. Subsection (kk)(4)(D) of the statute provides:
(4) The following machinery, equipment and materials shall be deemed to be exempt even though it may not otherwise qualify as machinery and equipment used as an integral or essential part of an integrated production operation: . . . . . . . . . . . . . (D) industrial fixtures, devices, support facilities and special foundations necessary for manufacturing and production operations, and materials and other tangible personal property sold for the purpose of fabricating such fixtures, devices, facilities and foundations. An exemption certificate for such purchases shall be signed by the manufacturer or processor. If the fabricator purchases such material, the fabricator shall also sign the exemption certificate; . . . .
The terms “industrial fixtures”, “[industrial] devises”, “support facilities”, and “special foundations” are not defined in the statute.
Your letter lists thirteen examples of “industrial fixtures”, “[industrial] devises”, “support facilities”, and “special foundations”, and provides a sketch showing each situation. You note that in each situation the described item is a necessary and integrated part of the machinery and/or storage facility and processing plants. The examples you list, and our response as to their tax treatment is set forth below:
Diagram 1. Concrete dump pits/boot pits.
Description: This diagram shows a dump pit which pours over into a boot pit. The boot pit has an elevator leg in it. An elevator leg is essentially a bucket lift. A bucket lift is a series of buckets mounted on a chain that runs from the pit, where grain is received or transferred, to the top of the elevator, where the grain is dumped from the buckets and distributed into the bins, often by means of a conveyor belt that runs the length of the elevator.
Sales tax treatment: Exempt. The dump pit, boot pit, and the elevator leg diagrammed would be exempt from sales tax.
Diagram 2. Foundation slabs for grain dryers or other exempt machines.
Description: This diagram shows a grain dryer on a poured concrete slab.
Sales tax treatment: Exempt. As depicted, the poured concrete slab would be exempt from sales tax.
Diagram 3. Leg and machinery support towers, including foundations.
Description: This diagram shows a machinery support tower, an elevator leg supported by the tower, and a guy-wire extending from the top of the tower to a poured concrete deadman anchor (see #4, below). From the diagram, it is not clear where this support tower is supposed to be or what the elevator leg intended to service. For the purpose of this discussion, we assume the support tower is located between, and that the leg serves, several corrugated steel bins.
Sales tax treatment: Exempt. The elevator leg, the support tower and the foundation of the tower shown in the diagram would be exempt from sales tax.
Diagram 4. Concrete for deadman anchors.
Description: See #3, above.
Sales tax treatment: Exempt. The deadman anchor shown in the diagram would be exempt from sales tax.
Diagram 5. Distributor support towers.
Description: This diagram says, “Same as 4 except for distribution system.” Since a leg is part of a distribution system, the distinction here is unclear.
Sales tax treatment: Uncertain.
Diagram 6. Support frame for manlift.
Description: This diagram shows a manlift on the side of an elevator. A manlift is an elevator that is similar to a bucket lift. Essentially, a worker grabs a rung on a continuous chain or ladder and is carried to the top of the elevator like buckets would be on a bucket lift.
Sales tax treatment: Exempt. The frame that ties the manlift to the elevator bin shown in the diagram would be exempt from sales tax.
Diagram 7. Sheeting on manlift support frame.
Description: See Description #6. The diagram also shows sheeting that covers the manlift and support frame to protect the lift occupants from weather, and to reduce falls.
Sales tax treatment: Exempt. The sheeting that covers the manlift and support frame shown in the diagram would be exempt from sales tax.
Diagram 8. Support frames for conveyors, cleaners, and any other exempt machinery.
Description: This diagram shows a conveyor on top of an elevator that runs the length of the elevator. Conveyor belts of this type are frequently used in older elevators to carry grain to the bins after the grain has been lifted by the bucket lifts in the legs. They may also be used in connection with cleaning of the elevator.
Sales tax treatment: Exempt. The support frames for conveyors, cleaners, and other exempt machinery shown in the diagram would be exempt from sales tax.
Diagram 9. Sheeting for above support frames.
Description: See Description #8. The diagram also shows sheeting that covers the conveyors, cleaners, and any other exempt machinery and their support frames to protect them from weather.
Sales tax treatment: Exempt. The sheeting that covers the conveyors, cleaners, and any other exempt machinery and the support frames shown in the diagram would be exempt from sales tax.
Diagram 10. Weather enclosures around machinery on grain elevators.
Description: This diagram shows a machine identified as a cleaner on top of an elevator under what is called a “weather enclosure around machinery.” The enclosure protects the machinery from weather.
Sales tax treatment: Exempt. The “weather enclosure” shown in the diagram would be exempt from sales tax.
Diagram 11. Concrete water run off valleys between grain bins.
Description: This diagram shows two grain bins standing close to, but apart from, each other. Between the bins is an area called “concrete water run off valleys.” The diagram notes with regard to the valleys that “if not installed bins would lean towards each other after time.”
Sales tax treatment: Taxable. The concrete water run off valleys shown in the diagram would be subject to sales tax.
Diagram 12. Foundations, pits and decks for truck scales, rail scales and bulk weigher scale load out systems.
Description: This diagram shows a weighing scale. It shows “approach slabs”, foundations for scales”, a “scale pit” and a “scale deck”. The basic procedure for receiving grain at an elevator is to drive a truck filed with grain onto the scale, weigh it, dump the grain from the truck, reweigh the empty truck, and figure bushels based on the weight of the grain.
Sales tax treatment: Exempt. The foundations, pits and decks for truck scales, rail scales and bulk weigher scale load out systems shown in the diagram would be exempt from sales tax.
Diagram 13. Overhead load-out bins, including foundations and support frames.
Description: This diagram shows overhead load-out bins and the support frames and foundations on which they rest.
Sales tax treatment: Exempt. The overhead load-out bins and the support frames and foundations on which they rest shown in the diagram would be exempt from sales tax.
This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.
I trust this information is of assistance. If I can be of further service, please feel free to contact me.
Sincerely,
Jim Weisgerber
Attorney
Tax Specialist
JW:jw
Date Composed: 04/12/2001 Date Modified: 10/11/2001
Table 1
| Ruling Number: | P-2001-034 |
|---|---|
Table 2
| Tax Type: | Kansas Retailers' Sales Tax |
|---|---|
| Brief Description: | Repairs, installations, improvements, materials purchased for a grain storage facility or a grain milling operation adjacent or connected to a grain storage facility. |
| Keywords: | |
| Approval Date: | 04/12/2001 |
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