Form Pub. Ks-1560 - Kansas Business Taxes For Schools & Educational Institutions Page 20
ADVERTISEMENT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37The Construction and Sale of Real Property
A college’s heating and air conditioning
class is replacing the air conditioning
G
R
: M
–T
compressor at a dental office. This is a
ENERAL
ULE
ATERIALS
AXABLE AS THE FINAL
.
CONSUMER OF THE MATERIALS ON A REAL PROPERTY PROJECT
commercial remodel project. MATERIALS:
L
S
–O
ABOR
ERVICES
RIGINAL CONSTRUCTION AND RESIDENTIAL
This real property project is not residential in nature,
;
.
LABOR IS EXEMPT
COMMERCIAL REMODEL WORK IS TAXABLE
therefore the college may buy the compressor and other
job materials without tax using its School or Educational
A school that is engaged in the construction of real
Institution Exemption Certificate. LABOR SERVICES:
property is functioning as a contractor, and as such is
Labor services on a commercial remodel project are
considered to be the final consumer of the materials
taxable. TAX ON THE SALE: The college must charge
used for the real property project. Like a private building
the dentist sales tax on its labor services, profit (including
contractor, the school is required to pay sales tax to its
any mark-up on the materials) and overhead.
suppliers on all tangible personal property (materials)
purchased for incorporation into a home, storage shed
The Construction and Sale of Tangible Personal
or similar structure which will be classified as real
Property
property when it is sold. Although generally exempt on
its direct purchases, a school’s exemption found at
G
R
: M
–E
ENERAL
ULE
ATERIALS
XEMPT AS INGREDIENT OR
K.S.A. 79-3606(c) specifically does not apply to tangible
COMPONENT PARTS OF TANGIBLE PERSONAL PROPERTY FOR
personal property or services used for the erection,
. L
S
–T
RESALE
ABOR
ERVICES
AXABLE ON TANGIBLE PERSONAL
construction, repair, enlargement or equipment of
PROPERTY UNLESS THE PROJECT QUALIFIES AS RESIDENTIAL OR
.
buildings used primarily for human habitation. Therefore,
THE ORIGINAL CONSTRUCTION OF A BUILDING OR FACILITY
an educational institution cannot use its Tax-Exempt
A school selling homes, storage sheds or similar
Entity Exemption Certificate to purchase materials for
structures classified as tangible personal property, as
either its own residential property (dormitories, faculty
well as furniture, art, and other types of tangible personal
or student housing) or for any residential real property
property is considered to be a retailer of these items,
it is constructing or repairing for resale; it must pay the
and must collect sales tax on the gross receipts received
tax on them.
from such sales (79-3603(a)). The rate of tax collected
will be the state and local sales tax in effect where the
However, the labor services to install or apply
buyer takes delivery of the property. However, as a
tangible personal property in connection with the original
retailer of tangible personal property, the school is
construction of a building or facility, or the construction,
entitled to purchase its raw materials without tax since
remodel or repair of a residence are not subject to sales
the sales tax will be collected when the property is sold
tax. The exemption of residential labor services
to the final consumer (retail sale).
supersedes the prohibition against a school’s purchase
of residential labor without tax, therefore the labor
A college’s class is constructing a modular
purchased by the school to build or repair residential
home on campus. When complete, the
property (whether school property or a residential project
home will be sold at auction and moved to
for resale) is exempt. Only the labor on a commercial
the buyer’s designated location. The
remodel project is taxable.
sales tax treatment is as follows. MATERIALS: The
college may buy the materials to construct this tangible
For the purpose of this publication, a home, storage
personal property without tax using a Resale Exemption
shed or similar structure which is permanently affixed
Certificate. LABOR SERVICES: The labor services of
to the land on which it is located at the time it is sold
students are not taxed; the labor of outside contractors
should be classified as real property. Conversely, a
is not taxed since this project is the original construction
home, storage shed or similar structure which is not
of a residence. TAX ON THE SALE: The sale of a
permanently affixed to the land on which it is located at
manufactured or modular home is subject to sales tax.
the time it is sold should be classified as tangible
However, the sales tax base is 60% of the home’s value.
personal property.
K.S.A. 79-3606(ff). The tax will either be collected and
remitted by the school or by the auctioneer.
A community college’s vo-tech class is
building a home for ultimate sale; sale
A woodworking class builds furniture and
proceeds are used to buy materials for
bookcases for resale. MATERIALS: The
its next building project and other school
school should purchase the materials
needs. Much of the labor is supplied by the students
without tax using a Resale Exemption
and outside contractors are used. MATERIALS: The
Certificate. LABOR SERVICES: Student labor not taxed.
college must pay sales tax to its vendors on all of the
The school may purchase the direct labor of outside
building materials, wiring, etc. used on the home.
contractors with a Resale Exemption Certificate. TAX
LABOR SERVICES: Labor services to construct,
ON THE SALE: The school must charge sales tax when
reconstruct or remodel a residential property are not
the furniture and bookcases are sold to the general
subject to sales tax. TAX ON THE SALE: The sale of
public at the state and local rate in effect where the
real property is not subject to sales tax.
customer takes delivery of the items.
20
ADVERTISEMENT
0 votes
Related Articles
Related forms
Related Categories
Parent category: Financial