Are labor services to install a flue for a manufacturer's industrial oven exempt from Kansas sales tax?

Plain-English summary

A representative, writing on behalf of a manufacturer, asked the Department to rule that labor services to install a flue for the manufacturer's new industrial oven (used in its product-testing area) are exempt. The flue vents the oven's heat and smoke to the outside air through the roof, and the requester argued the flue is a necessary part of the oven.

But the Department had recently received a separate letter from a roofing company describing the same job differently: the roofer's work "consisted on fabricating, installing and flashing a curb for this flue" on the roof. The Department concluded that the "installation" services the requester was asking about are really the "roofing" services the roofing company described.

So rather than issue a separate holding, the Department enclosed a redacted copy of its private letter ruling to the roofing company — which treats the curb/flashing work as taxable roofing work on the building, not exempt flue installation — and told the requester to treat that enclosed ruling as resolving the issue. If the services in question were not the roofing company's work, the requester was invited to resubmit, identify the service company, and describe the work in more detail.

(The companion ruling to the roofing company is Kansas P-2003-017, "Roof repairs," which holds the roof-curb fabrication and installation taxable.)

What this means for you

Manufacturers adding equipment that requires roof penetrations

Labor to modify your building to accommodate new machinery — such as fabricating and flashing a roof curb for an oven flue — is generally taxable building work, even though the machinery itself may be exempt. Don't assume that because the flue serves exempt production equipment, the roofing labor is exempt.

Get the facts (and the right contractor) straight

The Department resolves these by looking at what the contractor actually did. Where two descriptions of the same job conflict, it may rely on the contractor's own account. If your situation genuinely differs, resubmit with the service company identified and the work described in detail.

Watch for companion rulings

Here the manufacturer's question was answered by a ruling issued to its roofing contractor. The tax treatment of building modifications often turns on the contractor-side ruling.

Common questions

Q: Are the labor services to install my oven's flue exempt?
A: The Department found the work at issue was really taxable roof-curb (roofing) work, addressed in a companion ruling to the roofing company, and did not grant an exemption.

Q: Why did the Department point me to another ruling?
A: Because the "installation" described matched the roofing company's account of fabricating, installing, and flashing a roof curb for the flue — taxable roofing work on the building.

Q: What if my situation is actually different?
A: The Department invited a resubmission that identifies the service company and explains the nature of the work in more detail.

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 characterizes roof work tied to equipment installation.

Citations and references

• Companion ruling to the roofing company (Kansas P-2003-017, "Roof repairs") — the enclosed, redacted private letter ruling the Department treated as resolving this request; it holds the fabricate/install/flash roof-curb work taxable as building work.
• Building modifications for new machinery — the Department's position that roofing work to accommodate a flue is taxable work on the building, not exempt installation of the flue itself.
• 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-2003-019

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

April 14, 2003

XXXX
XXXX
XXXX

RE: Your e-mail dated February 6, 2003

Dear XXXX:

Thank you for your recent e-mail that you wrote on behalf of your client, XXXX. You explain that XXXX recently purchased an industrial oven for use in its product testing area. You request a private letter ruling that states that labor services to install a flue for the oven are exempt. A flue is essentially a channel in a chimney that diverts flame and smoke to the outside air. Your letter states:

The oven must be vented to the outside via a flue that exits on the roof of the XXXX manufacturing facility. . . The flue is a necessary part of the oven, in that the heat generated from the oven must be vented to the outside air. The contractor, however, insists that the installation of the oven flue is subject to Kansas sales tax.

The department recently received another letter concerning work done for XXXX by a roofing company. Its description of the work done on the flue differs materially from yours. Their letter states:

They [XXXX] purchased an industrial oven for use in its product testing area. . . . The oven must be vented to the outside via a flue that exits on the roof. The flue is a necessary part of the oven to vent the heat to the outside. Our work consisted on fabricating, installing and flashing a curb for this flue.

I have enclose a redacted copy of my private letter ruling to the roofing company. I suspect that the "installation" services that you refer to in your letter are really the "roofing" services that the roofing company discussed in its letter. Accordingly, you should treat the enclosed letter as resolving the issue you raise. If these roofing services aren't the ones that are referred to in your letter, please resubmit your request, identify the service company involved, and explain the nature of their work in more detail than your earlier letter.

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,

Thomas E. Hatten
Attorney/Policy & Research

Enclosure

Date Composed: 04/16/2003 Date Modified: 04/16/2003

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