Form Pub. Ks-1560 - Kansas Business Taxes For Schools & Educational Institutions Page 7
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37ABC Elementary School of Anywhere,
therefore exempt from sales tax using the KDOR-issued
Tax-Exempt Entity Exemption Certificate.
Kansas has its KDOR-issued exemption
certificate on file at the local office supply
store. While in the store to pick up school
Items purchased indirectly through the contractor,
such as materials, any leased or rented equipment, and
supplies, ABC’s school’s principal also purchases paper
and ink cartridges for his home computer. Since the
the materials and labor services of the subcontractors
do not meet the definition of a direct purchase. Their
paper and ink cartridges are subject to sales tax, the
principal should segregate these personal purchases
contract cost to you will include the sales tax paid or
and pay the sales tax on them.
accrued by the contractor(s), unless a PEC has been
issued for that project by KDOR or by you as it’s
Schools use exemption certificates not only as an
authorized agent.
exempt entity, but also in their role as a retailer. For
additional information about exemption certificates and
Materials are taxable because Kansas law considers
contractors, subcontractors, and repairmen to be the
their uses, see Reporting and Paying Sales Tax, herein.
final user or consumer of their materials. Contractors
must pay the sales tax on materials purchased from
their suppliers or removed from their inventory for a
CONSTRUCTION,
project. This rule applies even when the real property
REMODEL OR
project is for a sales tax exempt entity, such as a school
or educational institution.
REPAIR PROJECTS
When an electrician, plumber, or carpenter agrees
to furnish and install materials for a school, he must
pay or accrue sales tax on those materials and will pass
GENERAL RULES
this cost on to the school unless a PEC has been
obtained. The contractor remains responsible for the
There are two components to any construction,
sales tax on his materials even when the exempt entity
remodel or repair project – materials and labor. The
unlawfully refuses to pay this additional cost by striking
general sales tax rules for real property projects owned
the tax (or perceived tax) from the bill.
by a school or educational institution are as follows.
A junior college contracts with a plumber
M
:
ATERIALS
to furnish and install a new water heater
in its student union. The project’s cost to
• Exempt when directly purchased by the school,
the junior college will include the sales tax
unless purchased for human habitation.
paid or accrued by the plumber on the water heater
• Taxable when furnished by a contractor or sub-
unless the college has obtained and furnished a PEC
contractor unless a Project Exemption Certificate
to the plumber.
(PEC) has been obtained (see Project Exemption
Certificates (PECs), herein.
Schools can avoid the additional cost of paying sales
tax on materials without obtaining a PEC by buying the
L
:
ABOR
materials directly from a supplier.
• Exempt when directly purchased by the school.
In the previous example, had the college
Labor for human habitation is exempt from sales
purchased the water heater directly from
tax as “residential” labor. (See Taxable Projects,
a supplier (to be installed by its employees
herein).
or by a plumbing contractor), the water
• Taxable when furnished by a subcontractor unless:
heater would be exempt from sales tax as a direct
– a PEC has been obtained; or
purchase. The installation services of a plumbing
contractor would also be exempt as a direct purchase
– the project qualifies as “original construction”
of labor services. The college would furnish the each
(as defined herein).
vendor with its KDOR-issued tax exempt entity exemption
certificate.
The rules for building projects are complicated in part
because of the operation of two aspects of sales tax
Repair of Tangible Personal Property
law - the taxation of contractors, and the exemption for
schools and educational institutions. Schools are
When a Kansas school contracts for the repair,
exempt only on their direct purchases of tangible
maintenance, alteration or servicing of an item of
personal property or services. You may use the Tax-
tangible personal property, the entire repair service
Exempt Entity Exemption Certificate issued to you by
KDOR , to make a direct purchase without tax of either
(materials, parts and labor) is considered to be a direct
purchase by the school. Examples of tangible personal
the materials or the labor for a building project. However,
property owned and repaired by schools include:
when you enter into a contract with a contractor or
furniture, office equipment, maintenance equipment,
repairman to furnish the materials for a real property
project, only the labor is a direct purchase, and
sports equipment, and vehicles. Since the total repair
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