Form Pub Ks-1520 - Kansas Exemption Certificates Page 8
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49IMPORTANT: Contractors may NOT use the
Examples include utilities to power manufacturing
Consumed in Production or the Ingredient or
machinery, or fertilizers and insecticides used in growing
Component Part exemptions to buy their materials.
crops. Additional examples are in the Consumed in
Production Exemption Certificate (ST-28C).
Ingredient or Component Part
Exempt Agricultural Uses
Items that become a part of a finished product to be
sold to the final consumer are exempt as ingredient or
Since many items used in agriculture are exempt
component parts. In order to qualify the item must:
either as ingredient or component parts or are
consumed in production, these two exemptions are part
• be necessary and essential to the finished
of the Agricultural Exemption Certificate (ST-28F). Form
product,
PR-78SSTA may also be used. Other exempt agricultural
uses are:
• be used in or on the finished product,
• become a physical part of the finished product,
Agricultural animal (cattle, hogs, sheep, chickens,
and
ostriches, etc.) and aquatic animals and plants. These
• become an ingredient or compound part of
are exempt when used in the production of food for
property or service for retail sale.
human consumption; the production of animal, dairy,
poultry, or aquatic plant and animal products, fiber, or
As a general rule, if the item leaves with the product
fur; or the production of offspring for the above
and is not returned for reuse by the manufacturer or
purposes. The purchase of pleasure animals or pets is
retailer, it is an ingredient part. Examples include, but
taxable.
are not limited to:
Agricultural Soil Erosion Prevention. Seeds,
tree seedlings, chemicals, and services purchased and
• paper and ink for publishing newspapers and
used for the purpose of producing plants to prevent
magazines;
soil erosion on land devoted to agricultural use are
• containers, labels, shipping cases, twine, and
exempt from sales tax.
wrapping paper which are not returned to the
Propane for Agricultural Use. Propane used for
manufacturer;
an agricultural purpose is exempt from sales tax.
• food that will be prepared and sold as meals;
Examples include propane to power farm implements
• paper bags, drinking straws, and paper plates
or to provide heat for brooder or farrowing houses.
used in food sales;
Propane for recreational use, such as RVs and
• feed for commercial livestock, and
barbecue grills, is taxable.
• fertilizer used in the production of plants and
plant products produced for resale.
THE UTILITY EXEMPTION
To use the Ingredient or Component Part Exemption
Certificate (ST-28D) or Form PR-78SSTA, the buyer
Utilities may be exempt from sales tax in much the
must have a Kansas sales tax account number OR a
same way as goods or services — certain buyers are
Kansas manufacturers’ or processors’ exemption
exempt, and certain uses are exempt. As used here,
number (see Manufacturers and Processors herein).
“utilities” are electricity, gas, water or heat.
Consumed in Production
Buyers Who Are Exempt
Like ingredient or component parts, items that are
The exempt buyers listed on page 6 do not pay sales
“consumed in production” must meet certain
tax on their utilities. However, when the state of Kansas,
qualifications to be exempt. The item must be:
a political subdivision or a nonprofit hospital is also
engaged in a taxable business, utilities used in that
• necessary and essential to the process,
business are TAXABLE, unless the use itself qualifies
• used in the actual process,
for exemption. Exempt and taxable uses for political
• consumed or dissipated by the process within one
subdivisions and nonprofit hospitals are illustrated below.
year,
City Electric Departments. Exempt: Utilities used to
• used in the process of:
generate the electricity. Taxable: Utilities used to
- producing, manufacturing, processing, mining,
heat, cool and/or light the generating plant and/or
drilling, refining or compounding of tangible
administrative offices.
personal property,
- the treatment of by-products or wastes from
Nonprofit Hospitals. Exempt: Utilities used to provide
any such production process,
medical
services
and
nonprofit
hospital
- the providing of services,
administration; electricity/gas to operate grills and
- the irrigation of crops, or
ovens in the public cafeteria. Taxable: Utilities used
- the storage and processing of grain, and
by a gift shop; water to clean a cafeteria open to
• not reusable for such purposes.
the general public.
8
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