Form Pub. Ks-1527 - Kansas Business Tax For Political Subdivisons Page 10
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42gas, electricity or heat to others or any other
NOTE: The lease or rental of equipment with an operator is
business specifically taxable, and such items of
not considered to be the lease or rental of tangible personal
personal property or service are used or
property (taxable), but rather the providing of a service, which
proposed to be used in such business.”
may or may not be subject to sales tax.
If the purchase will be used in your taxable role as a
A county electric utility rents a cherry
utility provider (of gas, electricity or heat) or another
picker to be operated by a county
taxable business, the purchase is taxable, unless
employee. This equipment rental is
exempt for some other reason (see Other Sales Tax
taxable, however, when the electric utility
Exemptions on page 11). This provision of the law
contracts with a private firm to furnish a cherry picker
prevents political subdivisions who are furnishing utilities
and an operator (usually an employee of the firm), this
or who are engaged in a retail business from having a
is a contract for services. The contract would be taxable
tax advantage over private utility companies or retailers.
if the service is to repair the electric lines, but would be
exempt if the service is to trim the trees around the lines.
NOTE: Political subdivisions, rural water districts and other
public water suppliers making retail sales of water who are
Taxable Usage Test
paying the Clean Drinking Water Fee are exempt on all of
their purchases. These same entities who are not paying
the Clean Drinking Water Fee must pay sales tax on their
The factor that determines whether a purchase is
purchases and should follow the same guidance presented
taxable or exempt is its use or proposed use — not
herein for gas, electricity and heat providers.
the monetary fund used to pay the bill. You may use
utility department funds to purchase items for use by
Tangible Personal Property
other departments; this does not make the purchase
taxable. The purchase is taxable only if it is used or
The following is a representative (but not exclusive)
proposed to be used in your taxable role as a gas,
list of items that are taxable when purchased for use by
electricity or heat utility provider or as a retailer of taxable
your gas, electricity or heat utility department.
goods and services.
• books and maps
A city’s gas department buys a tanker truck
• computers and office equipment
that will be used exclusively by the sewer
• electrical line
department. The purchase of the truck is
• insulators
exempt even though it is purchased with
• meters
utility department funds.
• office furniture and supplies
• pipe, fittings, and plumbing supplies
The same item may be either taxable or exempt,
• subscriptions
depending on how it is used. Purchases by any
• tools and equipment
• transformers
department within a political subdivision should be
• utility poles
separately measured against the usage test to
• vehicles
determine taxability. See also Interdepartmental
Transfers on the next page.
The sales tax paid on these items is based on their
selling price. Selling price is the total cost to you, less
Orange cones, saw horses, lights, sand
any discounts allowed and credited, but including any
bags, and orange construction barrels
freight, postage or transportation charges from the
purchased by a city for its road
retailer to you.
maintenance department are exempt.
However, when these items are purchased by the city
A city’s electrical department (in the
for use by its gas department, or shared by the gas
business of selling electricity) orders
department and other departments, they are TAXABLE.
supplies from a retailer in Salina. The
retailer will charge the city the combined
state and local tax rate on the cost of the electrical
PARTIAL UTILITY USE
supplies plus any shipping charges.
An individual item or service will either be 100%
Leases and Rentals
taxable or 100% exempt. The law does not provide any
means by which the sales tax on a particular item may
When gas, electricity or heat utility departments lease
be prorated based upon the percentage of use by the
or rent tangible personal property, such as equipment
utility department. If the item or service will be used even
or office machines, the lease or rental is usually taxable.
partially in your business of selling gas, electricity or
heat to others, you must pay sales tax on the total selling
A city’s gas department leases a copy
price of the article.
machine. Each monthly lease payment is
subject to sales tax. The maintenance
If the item or service will be used even partially in
agreement, parts and labor to repair the
your business of selling water, and you are not paying
copier are also taxable to the city.
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