Are the labor to dispose of drilling dirt and the purchase of fly ash used in that disposal subject to Kansas sales tax?

Plain-English summary

A company drilling a deep disposal well needed to dispose of dirt excavated from the hole off-site, and to do that it added fly ash (to absorb liquids) to the dirt in roll-off containers before shipping it out. It asked whether the disposal labor and the purchase of the fly ash are subject to Kansas sales tax.

The Department drew a clean line: the service to dispose of the dirt is not a taxable service — but any tangible personal property purchased, rented, used, or consumed in the disposal process is subject to Kansas sales or use tax. So the disposal labor is nontaxable, while the fly ash the company buys and consumes in that disposal is taxable.

What this means for you

Businesses paying for waste or dirt disposal

The disposal service itself isn't taxable, but don't overlook the materials. Anything you buy, rent, use, or consume to carry out the disposal — absorbents like fly ash, and similar supplies — is taxable. If your vendor doesn't charge sales tax on those materials, you may owe use tax.

Disposal-service providers

Your disposal service charge isn't taxable, but you (or your customer) owe tax on the consumable materials used to perform it.

Common questions

Q: Is a dirt or waste disposal service taxable in Kansas?
A: No, the Department said the service to dispose of the dirt is not a taxable service.

Q: Is the fly ash taxable?
A: Yes. Tangible personal property purchased, rented, used, or consumed in the disposal process — including the fly ash — is subject to Kansas sales or use tax.

Citations and references

• Kansas sales/use tax on property used in a nontaxable service — the Department's position that disposal is a nontaxable service, but tangible personal property purchased, rented, used, or consumed to perform it (here, fly ash) is taxable. (No specific statute section is cited in the ruling.)

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2011-009

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

December 28, 2011

XXXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXXX

Dear XXXXXXX:

The purpose of this letter is respond to your letter dated December 14, 2011. The content of your letter is duly noted and states in part.

We would like to request a Private letter of Ruling. We have an XXX to drill a deep disposal well. When drilling the well the dirt that comes out of the hole may need to be disposed of off-site depending on the results from analyzing the soil. We currently have some dirt in roll-off containers that needs to be disposed of off-site. Fly ash needs to be added to the dirt in the dumpsters before it is shipped off-site.

The fly ash is used to absorb liquids from the dirt. A PO was written to XXXXXXXXXXXXXXX to add the fly ash to the dumpsters; the fly ash was purchased separately.
Our question is whether the XXXXXlabor and the purchase of the fly ash are subject to sales tax. All costs related to the disposal of the dirt is not charged to theXXX, but is charged directly to expense. Therefore, it is not covered XXXXXXXX.

The service to dispose of the dirt is not a taxable service. Any items of tangible personal property purchased, rented, used or consumed in the disposal process are subject to Kansas sales or use taxes.

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.

Sincerely,

Mark Ciardullo
Office of Policy and Research

Date Composed: 01/10/2012 Date Modified: 01/10/2012

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