Did Kansas's farm-machinery sales-tax exemption cover ATVs or work-site utility vehicles, and how were interstate sales treated?

Plain-English summary

Notice 07-01 distinguished all-terrain vehicles from work-site utility vehicles for Kansas sales tax.

ATVs did not qualify for the farm machinery and equipment exemption, even when bought by farmers, ranchers, or other agricultural businesses. ATV parts and repair labor also did not qualify.

A work-site utility vehicle could qualify when all of these conditions were met:

• it fit the K.S.A. 8-126(hh) vehicle definition and had a bed or cargo box for hauling materials;
• it was used only in farming, ranching, aquaculture, farm or ranch work for hire, a feedlot, nursery, or Christmas-tree farm; and
• the retailer kept a completed Agricultural Exemption Certificate, Form ST-28F, or the purchaser's allowed written certification on the retained invoice or sales ticket.

The exemption also covered qualifying repair or replacement parts and repair or maintenance services for that work-site utility vehicle.

For interstate sales, a nonresident who took delivery in Kansas owed Kansas sales tax. No Kansas sales tax was due when the Kansas dealer was obligated as part of the sale to deliver the vehicle outside Kansas. Conversely, a Kansas purchaser receiving an ATV or work-site utility vehicle from an out-of-state dealer owed Kansas compensating-use tax at the rate where the vehicle would be used, stored, or consumed, unless the out-of-state dealer collected it.

The notice also discussed when dealer deliveries could create nexus in another state or Kansas. The official source now warns that this underlying law may have changed and points to Revenue Notice 19-04, so do not rely on the 2007 nexus thresholds as current.

Finally, ATVs and work-site utility vehicles were treated as nonhighway vehicles for title purposes; the purchaser needed a nonhighway certificate of title, and the dealer had to provide a manufacturer's certificate of origin or title.

What this means for you

Farmers and ranchers

An ATV was taxable even when used in agriculture. A qualifying cargo-bed work-site utility vehicle could be exempt only with exclusive qualifying use and the required documentation.

Vehicle dealers

Where the customer took delivery controlled Kansas sales tax. Keep delivery records, exemption certificates, and title documents, and verify current nexus law separately.

Common questions

Q: Did an ATV qualify for the farm-machinery exemption?
A: No. The notice also denied the exemption for ATV parts and repair labor.

Q: Could a work-site utility vehicle qualify?
A: Yes, if it met the statutory definition, had a cargo bed, was used only for listed agricultural purposes, and was properly documented.

Q: Was a sale to a nonresident automatically exempt?
A: No. Kansas tax applied when the nonresident took possession in Kansas; dealer delivery outside Kansas avoided Kansas sales tax.

Q: Is the notice's nexus discussion current?
A: Do not assume so. The official source warns that the law may have changed and refers to Notice 19-04.

Citations and references

• K.S.A. 8-126(bb) and (hh) — ATV and work-site utility vehicle definitions.
• K.S.A. 79-3606(t) — farm machinery and equipment exemption.
• K.S.A. 8-197 and 8-198 — nonhighway vehicle classification and title.
• Form ST-28F — Agricultural Exemption Certificate.
• Revenue Notice 19-04 — later nexus guidance named in the official source.

Subject

ATV & Work-Site Utility Vehicle Update

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 07-01

Original ruling text

Notice
Notice Number: 07-01
Tax Type: Kansas Retailers' Sales Tax
Brief Description: ATV & Work-Site Utility Vehicle Update
Keywords:
Approval Date: 02/26/2007

    NOTE: Underlying law may have changed. See Revenue
             Notice 19-04 concerning nexus.

Body:
KANSAS DEPARTMENT OF REVENUE

                                 NOTICE 07-01
                    ATV & WORK-SITE UTILITY VEHICLE UPDATE

Recently, the Kansas Department of Revenue met with members of the Kansas Automobile Dealers’
Association who are in the business of retailing All Terrain Vehicles (ATVs) and Work-site Utility Vehicles. In
response to concerns raised by said dealers it was decided to develop and distribute this NOTICE which
reviews the existing law regarding the sale of ATVs and Work-Site Utility Vehicles within the state of
Kansas:

1. SALE OF ALL-TERRAIN VEHICLES (ATVs) DO NOT qualify for the Kansas Sales Tax “Farm Machinery and
   Equipment Exemption”
   All-terrain vehicles do not qualify for the “farm machinery and equipment” sales tax exemption. Thus, all farmers,
   ranchers and others engaged in the business of agriculture may not purchase an ATV exempt from sales tax.
   Additionally all parts and labor for ATVs do not qualify for the “farm machinery and equipment” sales tax exemption. The
   definition of an “all-terrain vehicle” is:

‘‘All-terrain vehicle’’ means any motorized nonhighway vehicle 48 inches or less in width, having a dry weight of 1,000
pounds or less, traveling on three or more low-pressure tires, having a seat designed to be straddled by the
operator. As used in this subsection, low-pressure tire means any pneumatic tire six inches or more in width, designed
for use on wheels with rim diameter of 12 inches or less, and utilizing an operating pressure of 10 pounds per square
inch or less as recommended by the vehicle manufacturer. (Emphasis added). K.S.A.. 8-126(bb).

2. Work-site Utility Vehicles – MAY be exempt from Kansas Sales Tax. Effective July 1, 2006 the retail sale of a
   “work-site utility vehicle” that is equipped with a bed or cargo box for hauling materials may be purchased exempt from
   sales tax under the farm machinery and equipment sales tax exemption if used only in farming, ranching or aquaculture
   production. A “work-site utility vehicle” is defined as:

   ‘‘Work-site utility vehicle’’ means any motor vehicle which is not less than 48 inches in width, has an overall length,
   including the bumper, of not more than 135 inches, has an unladen weight, including fuel and fluids, of more than
   800 pounds and is equipped with four or more low pressure tires, a steering wheel and bench or bucket-
   type seating allowing at least two people to sit side-by-side, and may be equipped with a bed or cargo box for
   hauling materials. (Emphasis added). K.S.A. 8-126(hh).

To qualify for the farm machinery and equipment exemption from Kansas retailers’ sales tax the purchase must:

1) Be of a work-site utility vehicle, as defined above, that is equipped with a bed or cargo box for hauling materials, or for
repair or replacement parts therefor, or services performed in the repair or maintenance thereon, and
2) the work-site utility vehicle must be used only in farming, ranching, aquaculture production, farm and ranch work for
hire, operation of a feed lot, nursery or for a Christmas tree farm, and
3) the retailer must retain in its records an Agricultural Exemption Certificate, Form

Page 2

ST-28F completed by the purchaser. Said certificate is available on the Department’s web site: www.ksrevenue.org As
an alternative to the Agriculture Exemption Certificate, the purchaser may certify in writing on a copy of the invoice or
sales ticket to be retained by the seller that the work-site utility vehicle will be used only in farming, ranching or
aquaculture production. K.S.A. 79-3606(t).

3. Sales of ATVs and Work-site Utility Vehicles to nonresidents of Kansas. ATVs and Work-site Utility Vehicles sold
   by Kansas dealers to nonresidents of Kansas are subject to Kansas retailers’ sales tax when the purchaser takes
   delivery of the ATV or Work-site Utility Vehicle in Kansas. Only “motor vehicles”, “semitrailers”, “pole trailers” or “aircraft”
   may be purchased by nonresidents of Kansas without Kansas sales tax. ATVs and Work-site Utility Vehicles DO NOT fall
   within the definition of “motor vehicle”. Therefore, sales of ATVs and Work-site Utility Vehicles are subject to Kansas
   sales tax when sold to a nonresident of Kansas who takes possession of the ATV or Work-site Utility Vehicle within
   Kansas.

No Kansas sales tax is due when a Kansas dealer is obligated as part of the sale to deliver the ATV or Work-site Utility
Vehicle to a point outside of the state of Kansas. No Kansas sales tax is due on sales delivered to another state whether
the Kansas dealer makes the delivery himself or has someone else make the delivery for him.

Kansas dealers must exercise caution when making deliveries with their own vehicles into other states. Delivery of
goods sold into another state may create a “NEXUS” – a substantial presence in another state – for tax purposes. In
terms of taxation, a nexus means that the seller has a connection or presence within that other state sufficient to require
the seller to collect, report and remit tax for that other state. A Nexus with another state is usually created when the
Kansas retailer (dealer):

· owns or rents real estate in that other state or,

· has employees or agents in that other state or,

· makes deliveries with his own vehicles into that other state.

Establishing NEXUS with another state obligates a Kansas dealer to collect that other state’s sales tax.

EXAMPLE: A Kansas ATV dealer sells an ATV to a Nebraska resident and as part of the sale, the Kansas dealer agrees
to deliver the ATV into Nebraska. No Kansas sales tax is due because the dealer delivered the ATV across a state line.
However, because the Kansas dealer delivered the ATV into Nebraska with his own vehicle, the Kansas dealer may be
required to collect the Nebraska Compensating Use Tax*.

*One (1) delivery into another state by itself does not create a nexus – the presence in the other state must be
“substantial”. While no specific minimum number of deliveries creates a nexus – a Kansas dealer who makes several
deliveries with his own vehicles run the risk that the other state would require the Kansas dealer to collect that state’s
tax. To avoid creating a nexus, deliveries into another state must be made by a licensed Interstate Common Carrier.

4. Sales of ATVs or Work-site Utility Vehicles by Out-of-State dealers delivering into Kansas. ATVs and Work-site
   Utility Vehicles sold by Out-of-state dealers to residents of Kansas are subject to Kansas Compensating Use Tax. The
   rate of the Kansas Compensating Use Tax is the same rate of tax as the Kansas Sales Tax in effect where the ATV or
   Work-site Utility Vehicle will be used, stored or consumed. The Kansas purchaser is required to remit the Kansas
   Consumers’ Compensating Use tax to KDOR on Form ST-10U, which is available from the KDOR web site:
   www.ksrevenue.org. Kansas purchasers are required by law to pay the Kansas Consumers’ Compensating Use Tax
   unless; the out-of-state dealer has collected the Kansas Retailers’ Compensating Use Tax on the sale.

Pursuant to the NEXUS principles discussed in paragraph #3 above, out-of-state dealers delivering ATVs and Work-
site Utility Vehicles into Kansas with their own vehicles may be required to collect the Kansas Retailers’
Compensating Use Tax for the state of Kansas. Out-of-state dealers who have a nexus with Kansas are required to
collect, report and remit Kansas Retailer’s Compensating Use Tax on goods sold into Kansas. The nexus principals set
out above are based on federal law. Thus, they apply in reverse. In other words, out-of-state retailers who own or rent
real estate in Kansas, or have employees or agents in Kansas or, who make deliveries with their own trucks into Kansas
have created a nexus with Kansas and are required to collect, report and remit Kansas Retailers’ Compensating Use
Tax. Out-of-state retailers (dealers) should contact the Taxpayer Assistance Center, KDOR, 915 SW Harrison, Topeka,
KS 66612, or call 785-368-8222 for additional information.

Likewise, citizens desiring to report out-of-state retailers who have a nexus with Kansas but, who are not collecting,
reporting and remitting the Kansas tax may contact the Taxpayer Assistance Center as well.

5. Titling of ATVs and Work-Site Utility Vehicles: Kansas law (K.S.A. 8-198) requires that with the sale or transfer of

Page 3

any nonhighway vehicle, the purchaser shall obtain a nonhghway certificate of title. ATVs and Work-Site Utility Vehicles
are defined by K.S.A. 8-197 as “nonhighway” vehicles. Thus, Kansas dealers making sales of ATVs or Work-Site Utility
Vehicles are required to provide a Manufacturer’s Certificate of Origination or a Certificate of Title to the purchaser.

Date Composed: 02/26/2007 Date Modified: 02/26/2007

                                              Return to KSA Listing