What purchases can a Kansas county make exempt from sales tax, and does the exemption cover hotel/transient guest tax?

Plain-English summary

A Kansas county asked what it can buy free of sales tax. Under K.S.A. 79-3606(b), political subdivisions of Kansas get a sales-tax exemption on purchases, leases, and rentals of tangible personal property and taxable services — but only when the purchase is:

1. a direct purchase by the political subdivision, and
2. used exclusively for political-subdivision purposes, and not used (or proposed to be used) in the business of furnishing gas, electricity, or heat.

Applying that, the Department explained:

• Exempt (direct, public-purpose use): utility purchases (not used in a gas/electric/heat business), and by the same logic telephone service, vehicle rentals, hotel purchases, and food purchases.
• Not exempt: purchases by the county water department that are used in the business of furnishing water, if the county is not paying the clean drinking water fee.
• Transient guest (hotel) tax: a county employee is exempt from the transient guest tax only if the room is rented for more than 28 consecutive days. For stays of 28 days or fewer, there is no transient-guest-tax exemption — even if the state or political subdivision pays for the room directly.
• Out-of-state possession: property shipped into Kansas is not subject to Kansas sales tax (for qualifying use), but if the county takes possession outside Kansas, another state's tax may apply.
• Federal taxes: the county must consult the federal government separately.

What this means for you

Counties, cities, and other Kansas political subdivisions

Your direct purchases for public purposes are broadly exempt under K.S.A. 79-3606(b) — including utilities, phone service, vehicle rentals, lodging, and food. Keep the purchase direct (billed to and paid by the subdivision) and tied to governmental use.

Watch the utility-business and water-fee limits

The exemption does not extend to purchases used in a business of furnishing gas, electricity, or heat. And a water department's purchases used to furnish water are not exempt unless the county is paying the clean drinking water fee.

Hotel stays: the 28-day rule

Sales tax on a qualifying direct lodging purchase may be exempt, but the transient guest tax is different — it is only avoided when the stay exceeds 28 consecutive days. Short government trips remain subject to the transient guest tax.

Common questions

Q: Can a Kansas county buy utilities, phone service, and vehicle rentals tax-free?
A: Yes, when they are direct purchases used exclusively for political-subdivision purposes and not used in a business of furnishing gas, electricity, or heat.

Q: Is the county's hotel stay exempt from tax?
A: The sales tax on a qualifying direct lodging purchase can be exempt, but the transient guest tax is only exempt if the room is rented for more than 28 consecutive days — not for shorter stays, even if the county pays directly.

Q: Are the water department's purchases exempt?
A: Not if they are used in the business of furnishing water and the county is not paying the clean drinking water fee.

Q: Does this ruling apply to my entity?
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 applies the political-subdivision exemption.

Citations and references

• K.S.A. 79-3606(b) — exempts a Kansas political subdivision's direct purchases, leases, and rentals of tangible personal property and taxable services when used exclusively for political-subdivision purposes and not in a business of furnishing gas, electricity, or heat. The Department applied it to utilities, telephone, vehicle rentals, hotel, and food purchases, and explained the water-department and transient-guest-tax limits.
• 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-2003-039

Original ruling text

Private Letter Ruling

Body:

Office of Policy and Research

September 4, 2003

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Dear Ms. TTTTTTT:

We wish to acknowledge receipt of your letter dated August 11, 2003, regarding the application of Kansas Retailers' Sales tax.

K.S.A. 79-3606(b) grants a sales tax exemption to political subdivisions of the state of Kansas, on the purchase, lease or rental of tangible personal property and taxable services. However, the purchase must be:

1) A direct purchase,
2) Used exclusively for political subdivision purposes and not used or proposed to be used in the business of furnishing gas, electricity or heat.

When the county purchases utilities, that are not used in the business of furnishing gas, electricity or heat, said purchase would be exempt from state and local sales tax(es). The same logic would apply to telephone service purchases, vehicle rentals, hotel purchases, and food purchases. However, if the county is not paying the clean water drinking fee, then purchases made by the county water department, which are used in the business of furnishing water, would not be sales tax exempt.

An employee of TTTTTT County, however, would only be exempt from the transient guest tax if the room is rented for a period of more than twenty-eight (28) consecutive days. There is no exemption from the transient guest tax for an employee of the state of Kansas or its political subdivision when the room is rented for less than twenty-eight (28) consecutive days even if the room rental is paid directly by the state of Kansas or its political subdivision.

Tangible personal property shipped into this state would not be subject to Kansas sales tax, if said purchases are not used or proposed to be used in the business of furnishing gas, electricity or heat. However, if TTTTTTTTTT County takes possession of the tangible personal property outside the state of Kansas, then the other states tax may apply.

In closing, you will need to consult the Federal Government on federal 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: 10/01/2003 Date Modified: 10/01/2003

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