Form Pub. Ks-1560 - Kansas Business Taxes For Schools & Educational Institutions Page 8
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37bill is a direct purchase by the school, use your KDOR-
subcontractors to reconstruct the building are exempt
issued tax exempt entity exemption certificate.
from sales tax as original construction, since the damage
was caused by fire. In order for the materials to be
A school is having its lawn mower serviced.
exempt from sales tax, the university must either
Parts are $25 and labor is $75. The
purchase the materials directly, or furnish a PEC to its
repairman will accept the KDOR-issued
contractors who are buying them.
tax exempt entity exemption certificate in
lieu of charging sales tax on the total bill of $100.
A university is remodeling its basketball
arena by expanding its size and updating
CAUTION: The repair or maintenance of
the interior of the entire structure. The
tangible personal property owned by another
labor services on some parts of the job
but used by a school or educational institution
are exempt as original construction, such as the addition
is not exempt, unless the repair is a direct purchase of
of a new wing for athletic department offices and locker
the school.
rooms. The remainder of the labor services for this
project, such as the resurfacing of the basketball court,
installation of new seating and painting and remodeling
ORIGINAL CONSTRUCTION
of the arena’s public rest rooms, are taxable as
commercial remodel work.
The labor services of installing or applying tangible
personal property in connection with the original
Therefore, unless the university has presented its
construction of a building or facility are not subject to
contractors with a PEC, these components of the arena
sales tax. Original construction is defined as the:
remodel are subject to sales tax:
• first or original construction of a new building or
• All project materials furnished by the contractors
facility;
and subcontractors.
• addition of an entire room or floor to an existing
• Rental of any construction equipment by the
building or facility;
contractors and subcontractors.
• restoration, reconstruction, or replacement of a
• Subcontractor labor on the commercial
building, facility or utility structure damaged or
remodel portion of the project).
destroyed by fire, flood, tornado, lightning,
Without a PEC, the only components of a project
explosion, windstorm (80 mph or more), ice
that are exempt are the direct purchases by the school
loading and attendant winds, terrorism, or
earthquake. Utility structure means transmission
of materials or of the general contractor’s labor services.
and distribution lines owned by an independent
transmission company or cooperative, the Kansas
PROJECT EXEMPTION CERTIFICATES (PECs)
electric transmission authority or natural gas or
electric public utility;
As illustrated in the previous examples, schools and
• completion of any unfinished portion of an
educational institutions should obtain a PEC in order to
existing building or facility;
extend their sales tax exemption to all parts of a real
• construction, reconstruction, restoration,
property project. Kansas sales tax law provides the
replacement or repair of a bridge or highway; and
mechanism that is to be followed to do this at K.S.A.
• remodel, restoration or repair of a residence.
79-3606(d):
The labor to remodel, restore, or repair commercial
“...When any... public or private elementary or secondary
real property is subject to Kansas retailers’ sales tax at
school or public or private nonprofit educational institution
the rate of tax in effect where the work is performed.
shall contract for the purpose of constructing, equipping,
reconstructing, maintaining, repairing, enlarging,
furnishing or remodeling facilities, it shall obtain from the
A building is only those enclosures within which
state and furnish to the contractor an exemption certificate
individuals customarily are employed, or which are
for the project involved, and the contractor may purchase
customarily used to house machinery, equipment or
materials for incorporation in such project.”
other property, including the land improvements
immediately surrounding the building. A facility is a mill;
A PEC is a numbered document issued only by KDOR
plant; refinery; gas, oil or water well; feedlot, and
or its authorized agent. A PEC exempts the entire project
transmission and distribution lines owned by REAs and
— materials and labor — from sales tax.
municipalities. A residence is an enclosure where
individuals customarily live, including homes, apartments
A project exemption cannot be used as a blanket
and dormitories. Special rules apply to dormitory and
exemption. It applies ONLY to a specific project and
other school housing.
EXPIRES upon completion of that project. To avoid the
additional cost of sales tax on project materials and on
A university is rebuilding one of its
the materials and labor services furnished by
subcontractors, you should obtain a PEC for each
buildings damaged by fire. The labor
building project that qualifies to receive one.
services performed by the contractors and
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