Are the gross receipts for installing a building's overhead door exempt under the Kansas manufacturing machinery and equipment exemption?

Plain-English summary

A taxpayer asked whether the gross receipts for installing a building's overhead door qualify for the Kansas manufacturing machinery and equipment exemption. The Department's answer: no — the charge is taxable.

Why. Effective July 1, 2000, Kansas expanded the exemption so that businesses in certain manufacturing or processing activities do not pay sales or use tax on a broader range of machinery and equipment used in production — including installation and repair labor on qualifying machinery and equipment performed on or after that date. That expansion came from House Bill 2011, enacted by the 2000 Kansas Legislature.

But the exemption has a firm boundary. For its purposes, exempt production equipment does NOT include buildings, building fixtures, and other parts of real estate that are not otherwise exempt. An overhead door is part of the building. So the receipts for installing an overhead door fall outside the exemption in K.S.A. 79-3606(kk) and are subject to the appropriate Kansas sales tax(es).

What this means for you

Contractors installing doors, dock equipment, and building components

Charges to install a building's overhead door are taxable. The manufacturing exemption covers production machinery and its installation/repair labor — not the building shell or its fixtures, even at a manufacturing plant.

Manufacturers adding or replacing plant equipment

The July 1, 2000 expansion (2000 HB 2011) can exempt qualifying machinery and equipment and the labor to install or repair it. But building work — doors, walls, roofs, and other real-estate components that aren't themselves exempt equipment — stays taxable. Separate the production-equipment scope from the building scope on your contracts.

The dividing line

Ask whether the item is production machinery/equipment or a part of the building/real estate. Overhead doors are building fixtures, so they are on the taxable side of that line.

Common questions

Q: We installed an overhead door at a factory. Is the labor exempt under the manufacturing exemption?
A: No. The Department ruled that installing a building's overhead door is taxable; the 79-3606(kk) exemption excludes buildings, building fixtures, and other non-exempt real estate.

Q: Doesn't the exemption cover installation labor?
A: Only for qualifying machinery and equipment. Installation and repair labor on production machinery can be exempt (since July 1, 2000), but door installation is building work, not machinery installation.

Q: What changed on July 1, 2000?
A: 2000 House Bill 2011 expanded the exemption to a broader range of manufacturing/processing machinery and equipment and to installation/repair labor on that equipment — but it did not extend to buildings or building fixtures.

Q: Does this ruling apply to my business?
A: A Kansas private letter ruling addresses only the requesting taxpayer's facts and cannot be relied on as precedent by others, though it shows how the Department treats building-component installation under the manufacturing exemption.

Citations and references

• K.S.A. 79-3606(kk) — the manufacturing machinery and equipment exemption. The Department held it does not reach overhead-door installation because the exemption excludes buildings, building fixtures, and other non-exempt real estate.
• 2000 House Bill 2011 — the 2000 Kansas legislation that, effective July 1, 2000, expanded the exemption to a broader range of production machinery and equipment and to installation/repair labor on qualifying machinery and equipment.
• K.A.R. 92-19-59 — the regulation authorizing Kansas private letter rulings.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2003-013

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

March 7, 2003

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Dear Ms. TTTTTT:

We wish to acknowledge receipt of your letter dated March 3, 2003, regarding the application of Kansas Retailers' Sales tax.

Effective July 1, 2000, businesses engaged in certain manufacturing or processing activities will not be required to pay sales or use tax on an expanded range of machinery and equipment used in manufacturing and processing operations. This expanded exemption applies to purchases of machinery and equipment delivered on or after July 1, 2000. In the case of leased machinery and equipment, the exemption applies to payments for rental periods that occur on and after July 1, 2000. Service or labor charges for installing and repairing qualifying machinery and equipment are exempt when performed on or after July 1, 2000. These changes are contained in House Bill 2011 that was enacted by the 2000 Kansas Legislature.

For purposes of this exemption, exempt production equipment does NOT include: buildings, building fixtures, and other parts of real estate that are not otherwise exempt. Hence, the gross receipts received for the installation of a buildings overhead door, would not come within the scope of the sales tax exemption in K.S.A. 79-3606(kk), and, therefore would be subject to the appropriate Kansas sales tax(es).

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: 03/12/2003 Date Modified: 03/12/2003

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