What new Kansas sales tax exemptions took effect on January 1, 2005?

Plain-English summary

This notice collects the Kansas Retailers' Sales Tax (and Compensating Use Tax) exemptions that became effective for sales on or after January 1, 2005. For any exempt sale, the retailer must obtain a properly completed exemption certificate and keep it at least three years. The new exemptions are:

1. K.S.A. 79-3606(vv) -- purchases and sales by three named 501(c)(3) charities: the Heartstrings Community Foundation (adults with developmental disabilities), the Cystic Fibrosis Foundation, Heart of America Chapter, and the Spina Bifida Association of Kansas.
2. K.S.A. 79-3606(g) -- aircraft repair, modification, and replacement parts and related services (see Notice 04-06).
3. K.S.A. 79-3606(r) -- hearing aids, parts, and batteries sold by a licensed dispenser (see Notice 04-05).
4. K.S.A. 79-3606(v) -- property sold to contractors (such as Meals On Wheels) preparing meals for homebound elderly persons, and for meals for indigent or homeless individuals.
5. K.S.A. 79-3606(hhh) -- purchases by domestic violence shelters that are members of the Kansas coalition against sexual and domestic violence.
6. K.S.A. 79-3603(s) -- the sale of 'custom' computer software and services to modify, alter, update, or maintain it. Prewritten ("canned") software and its maintenance services remain taxable (prewritten software is defined in K.S.A. 79-3602(cc)).
7. 2004 House Bill 2647, Section 12 -- sales of property and services to the Kansas Bioscience Authority.

What this means for you

If you sell into one of these categories, you can stop charging Kansas sales tax on qualifying sales made on or after January 1, 2005 -- but you must collect and keep a valid exemption certificate for three years to support each exempt sale. Note the software line: custom software is exempt, but off-the-shelf ('canned'/prewritten) software and its maintenance stay taxable.

Common questions

Q: Which charities got a named exemption?
A: The Heartstrings Community Foundation, the Cystic Fibrosis Foundation (Heart of America Chapter), and the Spina Bifida Association of Kansas, under K.S.A. 79-3606(vv).

Q: Is computer software exempt?
A: Only 'custom' software and services to modify or maintain it (K.S.A. 79-3603(s)). Prewritten or 'canned' software and its maintenance remain taxable.

Q: What must a retailer keep for an exempt sale?
A: A properly completed exemption certificate from the purchaser, retained for at least three years from the purchase date.

Q: Are hearing aids and aircraft parts covered here too?
A: Yes. This notice lists them (items 2 and 3) and points to Notices 04-06 (aircraft) and 04-05 (hearing aids) for details.

Citations and references

• K.S.A. 79-3606(vv), (g), (r), (v), (hhh) -- the new exemptions effective January 1, 2005.
• K.S.A. 79-3603(s) -- custom computer software exemption; K.S.A. 79-3602(cc) -- definition of prewritten software.
• 2004 House Bill 2647, Section 12 -- sales to the Kansas Bioscience Authority.
• See also Notices 04-05 (hearing aids) and 04-06 (aircraft), and EDU-71 (computer products/services).

Subject

New Sales Tax Exemptions Effective January 1, 2005

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 04-07

Original ruling text

Notice
Notice Number: 04-07
Tax Type: Kansas Compensating Tax; Kansas Retailers' Sales Tax
Brief Description: New sales tax exemptions effective January 1, 2005.
Keywords:
Approval Date: 09/01/2004

Body:
Kansas Department of Revenue
Office of Policy & Research

                                       NOTICE 04-07
                                   SALES TAX EXEMPTIONS

The following Kansas Retailers’ Sales Tax (or Kansas Compensating Tax) exemptions become effective for
sales that are made on or after January 1, 2005. Retailers making sales qualifying within these new
exemptions need not collect Kansas sales tax on sales that are made on or after January 1, 2005. For any
exempt sale, retailers must obtain a properly completed exemption certificate from the purchaser and retain
the certificate in their files for a period of at least three (3) years from the date of purchase as authority not
to collect sales tax. Any new (or revised) exemption certificates will be available from the department’s web
site no later than December 2004.

The new exemptions, effective January 1, 2005 are shown below in the bolded-italicized language:

1. K.S.A. 79-3606(vv) – Purchases of tangible personal property by the following IRC Section 501(c)(3)
   charitable organizations and sales of tangible personal property by such organizations:

¨ the Heartstrings Community Foundation for the purpose of providing training, employment and
activities for adults with developmental disabilities;

¨ the Cystic Fibrosis Foundation, Heart of America Chapter, for the purposes of assuring the
development of the means to cure and control cystic fibrosis and improving the quality of life for
those with the disease; and

¨ the Spina Bifida Association of Kansas for the purpose of providing financial, educational and
practical aid to families and individuals with spina bifida. Such aid includes, but is not limited to,
funding for medical devices, counseling and medical educational opportunities;

2. K.S.A. 79-3606(g) – sales of aircraft repair, modification and replacement parts and sales of
   services employed in the remanufacture, modification and repair of aircraft;
   SEE ALSO - NOTICE 04-06 – FOR MORE INFORMATION REGARDING THIS AIRCRAFT EXEMPTION

3. K.S.A. 79-3606(r) sales of hearing aids, as defined by subsection (c) of K.S.A.
   74-5807, and amendments thereto, and replacement parts therefor, including batteries, by a person
   licensed in the practice of dispensing and fitting hearing aids pursuant to the provisions of K.S.A.
   74-5808, and amendments thereto.

   SEE ALSO - NOTICE 04-05 – FOR MORE INFORMATION REGARDING THIS HEARING AID EXEMPTION

Page 2

4. K.S.A. 79-3606(v) - all sales of tangible personal property to any contractor (such as Meals On
   Wheels) for use in preparing meals for delivery to homebound elderly persons and all sales of tangible
   personal property for use in preparing meals for consumption by indigent or homeless individuals whether
   or not such meals are consumed at a place designated for such purpose, and all sales of food products
   by or on behalf of any such contractor or organization for any such purpose;

5. K.S.A. 79-3606(hhh) - all sales of tangible personal property and services purchased by or on
   behalf of all domestic violence shelters that are member agencies of the Kansas coalition against
   sexual and domestic violence.

6. KSA 79-3603(s) – the sale of “custom” computer software, and the sale of the services of modifying,
   altering, updating or maintaining “custom” computer software.

*The sale of PREWRITTEN COMPUTER SOFTWARE or “CANNED” software and the services of
modifying, altering, updating or maintaining “CANNED” software continues to be subject to sales tax.
Definition of “prewritten computer software”:

KSA 79-3602(cc) "Prewritten computer software" means computer software, including prewritten upgrades, which is not
designed and developed by the author or other creator to the specifications of a specific purchaser. The combining of
two or more prewritten computer software programs or prewritten portions thereof does not cause the combination to be
other than prewritten computer software. Prewritten computer software includes software designed and developed by
the author or other creator to the specifications of a specific purchaser when it is sold to a person other than the
purchaser. Where a person modifies or enhances computer software of which the person is not the author or creator, the
person shall be deemed to be the author or creator only of such person's modifications or enhancements. Prewritten
computer software or a prewritten portion thereof that is modified or enhanced to any degree, where such modification or
enhancement is designed and developed to the specifications of a specific purchaser, remains prewritten computer
software, except that where there is a reasonable, separately stated charge or an invoice or other statement of the price
given to the purchaser for such modification or enhancement, such modification or enhancement shall not constitute
prewritten computer software.

SEE ALSO - EDU-71, Sales Tax Guidelines: Taxing Charges for Computer Products and Services and Internet Related
Sales and Services– FOR MORE INFORMATION REGARDING THE TAXATION OF COMPUTER SOFTWARE.

7. 2004 House Bill 2647, Section 12 exempts all sales of tangible personal property and services to the
   Kansas Bioscience Authority.

Taxpayer Assistance. If you have questions about this notice or its application, please contact the
department at (785) 368-8222. Additional copies of this notice and application are on our web site or may
be ordered through the department’s voice mail forms request line at (785) 296-4937.

Date Composed: 09/24/2004 Date Modified: 04/07/2006

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