Is repair and handyman labor (and mileage) taxable in Kansas, and is work done to a residence exempt?

Plain-English summary

An individual had construction/repair work done and was surprised that the whole bill — labor and mileage included — was taxed. They asked the Department a series of questions about what Kansas actually taxes. The key point: labor is generally taxable, but labor done to a residence is exempt.

Kansas taxes service labor. The Department explained that Kansas taxes labor to install, apply, alter, maintain, service, and repair tangible personal property, whether it stays personal property or is incorporated into real property. The imposition statute is K.S.A. 79-3603(p).

The residential exemption (1998 Senate Bill 493). Effective July 1, 1998, Senate Bill 493 exempted services to install or apply tangible personal property when the work involves the original construction, reconstruction, restoration, remodeling, renovation, repair, or replacement of a residence. The statute's definition of "residence" (79-3603(p)(4)) includes the land improvements immediately surrounding it, so residential repair/remodel labor is broadly exempt.

But materials and commercial labor stay taxable. The Department stressed the exemption did not change the tax on materials and supplies used in residential or commercial construction — those remain subject to state and local sales tax — and that non-residential (commercial) labor is still taxable, since the exemption reaches only residences.

The specific answers.

• Is labor taxed? Yes (generally).
• Is mileage taxed? Yes — the tax is on the retailer's gross receipts, which include all charges, including mileage.
• Is this a Phillips County tax? Kansas had a 4.9% state retailers' sales tax; Phillips County had no county sales tax.
• Is handyman service taxed? Generally yes — but if the repair is to a residence, the service is exempt. Any materials or repair parts are still taxable.
• Is hosing out an air conditioner (plus mileage) taxed? That service would be exempt if performed at a residence.

Bottom line: Kansas taxes repair/service labor and folds mileage into the taxable price, but residential repair, maintenance, and remodel labor is exempt under the 1998 SB 493 change to 79-3603(p). The exemption is for the labor — materials and parts remain taxable, and commercial labor stays taxable.

What this means for you

Homeowners

Labor to repair or remodel your residence should not be taxed — including things like a handyman visit or hosing out an A/C unit at the home. If a contractor taxes the labor on residential work, that may be incorrect. But expect to pay tax on the materials and parts used, which remain taxable.

Contractors and service providers

Residential labor is exempt; commercial/non-residential labor is taxable. When a job's labor is taxable, the taxable base is your gross receipts, including mileage and other charges — you cannot strip out mileage. Bill residential and commercial work correctly, and always charge tax on materials.

Mileage and add-on charges

Because the tax follows gross receipts, add-on charges like mileage are taxable whenever the underlying service is taxable. They are not a separate, non-taxable pass-through.

Common questions

Q: Is repair labor taxable in Kansas?
A: Generally yes, Kansas taxes labor to install, apply, alter, maintain, service, or repair tangible personal property — but labor for residential repair, remodeling, or replacement is exempt under K.S.A. 79-3603(p) after 1998 Senate Bill 493.

Q: Is mileage taxable?
A: Yes, when the service is taxable. The tax is on the retailer's gross receipts, which include all charges, including mileage.

Q: Is a handyman repair at my home taxable?
A: The labor is exempt if the repair is to a residence, but any materials or repair parts remain taxable.

Q: What was the tax rate?
A: The State of Kansas had a 4.9% retailers' sales tax, and Phillips County had no county sales tax at the time of the ruling.

Citations and references

• K.S.A. 79-3603(p) — imposes Kansas sales tax on the service of installing or applying tangible personal property, with an exclusion for the original construction of a building or facility and for the construction, remodeling, repair, or replacement of a residence; subsection (p)(4) defines "residence" to include the immediately surrounding land improvements.
• 1998 Senate Bill 493 (effective July 1, 1998) — exempted the residential construction/repair/remodel labor services described in the ruling.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2001-095

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

September 6, 2001

XXXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXX

Dear XXXXXXXXXXXXX:

The purpose of this letter is to respond to your letter dated July 23, 2001.

Kansas taxes labor service to install, apply, alter, maintain, service and repair tangible personal property that remains tangible personal property or has been incorporated into real property. There are exclusions to the imposition. The first or initial construction of a building or facility or the remodeling of a residence. Allow to explain in detail.

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 term ‘residence’ in K.S.A. 79-3603(p)(4) to include the land improvements that immediately surround the 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 new law does not change the taxation of sales of materials and supplies that are purchased for use in residential or commercial construction, maintenance and repair. These sales continue to be subject to state and local sales tax. Similarly, sales tax continues to apply to non-residential labor services, since the new exemption extends only to residences. Repair, maintenance, installation and application services remain subject to sales tax when done to tangible personal property.

In your letter you stated:

We recently had some work done by a construction company but when I paid the bill the total amount, including the labor and mileage, was taxed.

Your letter continues with the following questions:

Is labor taxed in this state?

Answer: Yes.

Is mileage taxed in this state?

Answer: Yes, the law taxes the gross receipt of the retailer. The gross receipt includes all charges including mileage.

Is this a Phillips County specific tax?

Answer: The State of Kansas has a retailers’ sales tax in the amount of 4.9% and Philips County does not have a county sales tax.

We thought that only product or materials used/purchased were to
be taxed. (sand, cement, etc.)

Is a service such as handyman to be taxed?

Answer: Generally yes, however if the repair is to a residence the service is exempt. Any materials or repair parts would be taxable.

Is a service such as washing the air conditioner out with a hose and charging mileage to do so, taxed?

Answer: This service would be exempt if performed at a residence.

My elderly parents have much of this work done for them and they pay taxes inclusive on all of the receipts. Thank you for any answers you may find.

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.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 09/14/2001 Date Modified: 10/11/2001

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