Form Pub. Ks-1550 - Kansas Business Taxes For The Agrcultural Industry Page 7
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32Local Sales Tax on Propane
Labor services on farm machinery & equipment
Propane for ag use is exempt from the state and
Labor services performed to install a repair or
local sales tax. Propane used in a commercial operation
replacement part or to maintain farm or aquaculture
is generally subject to both the state and local sales tax
machinery and equipment in working order are also not
(unless it’s use qualifies as “consumed in production”).
subject to sales tax.
Propane used for a noncommercial residential purposes
(home heat, cooking, hot water), is subject only to local
The air conditioning system on your
sales tax, based on the location of the consumer (K.S.A.
combine fails and it is replaced. All charges
12-189a(b)). How the state and local sales tax applies
for parts and labor would be exempt from
to propane sales is summarized in the following table.
Kansas sales tax since the air conditioning
system was factory installed equipment on your combine.
Propane Use
State
Local
Tax Situs*
However, if the labor service is to install or repair an
Ag Use
Exempt
Exempt
N/A
item that is NOT considered to be a repair or
replacement part as defined in the previous section,
Where customer
Commercial Use
Taxable
Taxable
then that labor fee, like the item, is subject to sales tax.
takes delivery
This is true even when the machinery or equipment
Consumed in
qualifies as farm or aquaculture machinery and
Exempt
Exempt
N/A
Production
equipment.
Where customer
Residential Use
Exempt
Taxable
takes delivery
You install a CD player and speakers in
your tractor. This is not a repair or
Recreation Vehicles
Where customer
Taxable
Taxable
or BBQ grills
takes delivery
replacement part of the tractor, therefore
the CD player and speakers (and the labor
*
for its installation) are subject to sales tax. In contrast,
Tax situs indicates which local tax is applicable to the retail sale
of the propane. Sales of propane are taxed or “sourced” at the
work on the tractor’s radio would be exempt if the radio
rate in effect where the customer takes delivery of the propane.
was original equipment on the tractor.
Propane Storage Tanks
PROPANE FOR AG USE
The propane exemption applies only to the gas itself.
Although a propane tank may house or store the propane
Propane used for an agricultural purpose is exempted
for an agricultural use, the storage tank itself is not
from the state and local sales tax at K.S.A. 79-3606(w).
considered to be farm machinery and equipment.
Exempt agricultural uses of propane include, but are
Farmers and ranchers must therefore pay sales tax when
not limited to, propane used in:
buying or renting a propane tank for farm, ranch or
residential use. Also taxable are the materials and labor
• barns or sheds used to house livestock or
involved to install, service, paint, repair or maintain a
agricultural machinery or equipment
nonresidential-use propane storage tank.
• brooder or farrowing houses
• fire starters
A farmer contracts with an LP company to
• nurseries
lease a tank and regularly deliver propane.
• irrigation equipment
The tank lease is subject to state and local
• tractors, combines and other farm implements
sales tax based on the property where the
tank is located. The propane used for an agricultural
Propane used in a nursery where plants
purpose is exempt from state and local sales tax.
are produced from seed is exempt as an
agricultural use of propane. Propane
Different rules apply to residential propane storage
used to heat a retail flower shop is not
tanks. See Residential Labor Services on page 11.
exempt as an agricultural use of propane.
SOIL EROSION PREVENTION
If the propane use is NOT agricultural in nature (as
defined on page 4), the propane is subject to sales tax.
K.S.A. 79-3606(mm) exempts the following from state
and local sales tax.
Sales tax is due on propane sold to heat a
business (including farm or ranch buildings
“all sales of seeds and tree seedlings; fertilizers,
not devoted to agricultural production),
insecticides, herbicides, germicides, pesticides
to kennels that board animals for others
and fungicides; and services, purchased and
and for recreational vehicles and barbecue grills.
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