Form Pub. Ks-1525 - Kansas Sales & Use Tax For Contractors Subcontracotrs & Repairmen Page 13
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49You have a contract to clean an office
exemption under Section 501(c) of the Internal Revenue
building. As a part of the contract, you
Code. This designation exempts them from federal and
change light bulbs and apply a stain release
state income tax, not sales tax. Only nonprofit entities
coating to carpets in addition to vacuuming,
that have been issued a Tax Exempt Entity Exemption
dusting and emptying trash. If the taxable services of
Certificate by KDOR are exempt from sales tax on their
changing light bulbs and applying a stain-release coating
purchases.
are not separately stated when billed, the entire charge for
taxable and nontaxable services are subject to sales tax.
As a general rule, farmers and ranchers are not
exempt from paying sales tax on taxable labor services.
Materials used to construct barns, metal outbuildings,
or silos are taxable. Only farm machinery and equipment
EXEMPT PROJECTS
(sold, rented, or the repair parts and labor) are exempt
from sales tax. For detailed information about how sales
and use tax applies to this industry obtain a copy of
Pub. KS-1550, Sales and Use Tax for the Agricultural
Industry. This publication is available from our KDOR
EXEMPT CUSTOMERS
web site.
ALL of your customers must pay sales tax on your
What Sales are Exempt?
taxable services unless they have a specific statutory
exemption. The following entities are exempt from paying
Exempt customers are exempt only when buying
Kansas sales or use tax on their direct purchases of labor
materials OR taxable labor services directly from you.
services only. For a complete list of all tax exempt entities
To be a direct purchase, your invoice must be made
see Pub. KS-1520, Kansas Exemption Certificates.
out to the exempt buyer, and payment must be received
• The U.S. government, its agencies and
on a check, warrant, or voucher from the exempt
instrumentalities
customer. If either of these conditions is not met, the
• The state of Kansas and its political
sale is TAXABLE. A direct purchase does not include
subdivisions, including school districts,
purchases by an employee or agent of an exempt entity
counties, cities, port authorities and
with the employee’s personal funds even if they are
groundwater management districts
reimbursed by the exempt entity.
• Elementary or secondary schools
• FCC licensed noncommercial educational
CAUTION: An exempt customer’s exemption
television or radio stations
applies EITHER to materials OR to your taxable
• Nonprofit blood, tissue or organ banks
labor services. When you enter into a contract
• Nonprofit educational institutions
with any sales tax exempt entity to furnish BOTH the
• Nonprofit 501(c)3* historical societies
materials and labor services for a project, ONLY your
• Nonprofit hospitals
labor service are exempt as a direct purchase.
• Nonprofit 501(c)3* museums
• Nonprofit 501(c)3* primary care clinics or
The items purchased by an exempt entity indirectly
health centers
through you, such as the project materials, any leased
• Nonprofit 501(c)3* religious organizations
or rented equipment, or the services of subcontractors,
• Nonprofit 501(c)3* zoos
do not meet the definition of a direct purchase. When
*
The designation of 501(c)3 refers to the federal Internal Revenue
bidding a project for an exempt entity you must include
Code exempting the organization from federal and state income tax.
the sales tax you have to pay on these items. This sales
tax cost is then passed on to the exempt customer,
Exception: Some projects for the state of Kansas,
Kansas political subdivisions, and nonprofit hospitals
unless they have obtained (or advises they will obtain)
are fully taxable.
a PEC (Project Exemption Certificate) or other similar
exemption for the job.
Exempt entities must provide you with a completed
exemption certificate. KDOR has issued an exemption
You enter into a contract to furnish and
certificate to each and every tax exempt entity. The
install an electrical box for an elementary
certificate contains the exempt entity’s name, address and
school. The school may purchase your
exemption number.
labor services exempt from tax with its tax
exempt entity exemption certificate. Included in the total
Customers who are NOT exempt
contract cost will be the sales tax you paid or will self-
accrue on the materials. No sales tax is due on the labor
A common misconception is that all nonprofit
when you obtain the school’s sales tax exemption
organizations are exempt from sales tax. THIS IS NOT
certificate.
TRUE. Organizations may receive a federal nonprofit
13
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