Are crane services taxable in Kansas, and how does renting a crane with or without an operator affect the tax?

Plain-English summary

A crane service company asked which jobs are taxable and which are exempt. The answer turns on how Kansas taxes construction services — and on whether a crane is provided with an operator or without one.

Crane services (crane with operator). Kansas taxes construction services that involve the installation or application of tangible personal property. For a typical crane job, the contract only requires property to be lifted and put in place — that is not an installation or application service, so it is not subject to sales tax. But the contract controls: if the company contracts to move something and to install or attach it — bolting it down, wiring it, or otherwise affixing it to real property after it is lifted and placed — the entire billing becomes taxable.

Crane rentals (crane without operator). The Department distinguishes renting equipment from providing a service based on whether an operator is furnished:

• If the crane is provided with an operator who is responsible for completing the job, the transaction is a service, not a rental (K.A.R. 92-19-55a(b)(7)), and is taxed under the lift-versus-attach rule above.
• If no operator is provided, the transaction is an equipment rental, which is taxable — unless the person renting the crane provides a project exemption certificate.

What this means for you

Crane operators billing for services

If your crew only lifts and places property, don't charge sales tax on that service. But once your contract has you fastening the load to real property (bolting, wiring, affixing), the whole contract amount is taxable — so watch the scope of what you agree to do.

Companies that rent out cranes without an operator

Treat a bare crane rental as taxable tangible-personal-property rental. You can accept a project exemption certificate from the renter to exempt the rental on a qualifying project.

Cranes furnished with an operator

If you supply the crane and an operator responsible for the job, it's a service, not a rental — so the taxability follows whether the work is mere placement (not taxable) or includes attachment/installation (fully taxable).

Common questions

Q: My crane crew just lifts equipment and sets it in place. Is that taxable?
A: No. Lifting and placing property is not an installation or application service and is not subject to Kansas sales tax.

Q: What if the job also involves bolting or wiring the item down?
A: Then the entire billing for the job is taxable, because you've contracted to install or attach the property to real property.

Q: I rent out a crane without an operator. Is the rental taxable?
A: Yes — a bare equipment rental is taxable unless the renter provides you a project exemption certificate.

Q: I furnish the crane with an operator. Rental or service?
A: If the operator is responsible for completing the job, it's a service (not a rental) under K.A.R. 92-19-55a(b)(7), taxed based on whether the work is placement only or includes attachment.

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 taxes crane services and rentals.

Citations and references

• K.A.R. 92-19-55a(b)(7) — treats equipment furnished with an operator responsible for completing the job as a service rather than a rental; without an operator, it is a taxable equipment rental.
• Construction-service rule — Kansas taxes construction services that involve installing or applying tangible personal property; merely lifting and placing property is not such a service, but a contract that also attaches the property to real property is taxable in full.
• Project exemption certificate — allows a bare crane rental to be exempt when furnished by the renter on a qualifying project.
• 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-2003-031

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

May 28, 2003

XXXX
XXXX
XXXX

RE: Your letter dated May 21, 2003

Dear XXXX:

Thank you for your letter that we received earlier this week. You work for a crane service and ask which jobs are taxable and which jobs are exempt. This requires a discussion of how Kansas taxes construction services.

Kansas taxes construction services that involve the installation or application of tangible personal property. In the case of crane services, contracts between the crane operators and their customers normally only require property to be lifted and put in place. These services are not considered to be installation or application services and are not subject to Kansas sales tax.

Your contracts will determine whether a particular transaction should be taxed. If you follow the normally business practice for crane operators and do not provide taxable installation services or hook up services, your services are not subject to sales tax. However, the entire billing for your services will be subject to Kansas sales tax if you contract to move something and to install or attach it by bolting it down, wiring it, or otherwise affixing it to real property after the property is lifted and placed.

Some crane companies occasionally rent equipment without an operator. The tax treatment of crane rentals differs from the tax treatment of crane services. Kansas distinguishes between construction equipment rental and the providing of services by operators who operate such equipment on the basis of whether or not the equipment is furnished with an operator. If equipment is provided with an operator who is responsible for completion of the job, the transaction is considered to be a service and not a rental. K.A.R. 92-19-55a(b)(7). If an operator is not provided, the transaction is considered to be a rental of equipment. Crane rentals, that is providing a crane without an operator, are taxable unless the person renting the property can provide you with a project exemption certificate. If you do not rent the cranes and only furnish them with an operator, the transaction with your customer is treated as a services and is taxed as discussed above. That is, if your service only involves lifting and placing property, no tax applies. However, if you are required to bolt, wire, or otherwise attach the property being moved to real property, the entire amount of the contract is taxable.

I hope that this answers your questions clearly. If you need to discuss this further, please call me at 785-295-3081. This is private letter ruling. It 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 ruling.

Sincerely,

Thomas E. Hatten

Attorney/Policy & Research

Date Composed: 05/29/2003 Date Modified: 05/29/2003

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