Are out-of-state utility crews that come to Kansas for disaster work subject to Kansas taxes and registration?

Plain-English summary

Kansas Notice 15-12 explains the Kansas Disaster Utilities Response Act, created by Senate Bill 109 (2015) and effective upon publication in the Kansas Register on April 9, 2015.

Purpose. It lets an out-of-state business enter Kansas to prepare for or repair damage to critical utility infrastructure (telecommunications/cable, electric, natural gas, or water systems) during a declared state disaster or emergency without being treated as having a taxable Kansas presence.

Business exemptions during the disaster response period. The out-of-state business is not subject to:

• state or local business licensing or registration;
• state income and employer withholding taxes, unemployment insurance, occupational licensing fees, sales and use tax, or ad valorem tax on equipment used during the disaster response period; and
• Corporation Commission or Secretary of State licensing/regulatory requirements.

Its disaster work is disregarded for income tax filing and is not sourced to Kansas for apportionment.

Employee exemptions. An out-of-state employee doing disaster work is not required to file or pay Kansas income tax, and the employer need not withhold Kansas tax, during the period.

What still applies. Transaction taxes on purchases for use or consumption in Kansas still apply -- fuel taxes, sales or use taxes, hotel taxes, and car rental taxes or fees.

The disaster response period. It runs from 10 days before a declared disaster or emergency to 60 days after it ends, and may be extended by the Governor. Businesses or employees who remain afterward become subject to Kansas's normal residency and doing-business rules and all registration and filing requirements.

What this means for you

Out-of-state utility contractors and crews

• Disaster or emergency utility work during a declared event (and its response period) does not create Kansas registration, income/withholding, sales/use, or property tax obligations -- but you still pay fuel, sales/use, hotel, and rental taxes on what you buy or use here.
• If you stay past the response period, normal Kansas rules apply.

Common questions

Who qualifies? Out-of-state businesses and employees doing declared-disaster or emergency work on Kansas critical utility infrastructure.

What taxes are waived? State/local registration, income and withholding taxes, unemployment insurance, sales/use tax, and ad valorem tax on equipment during the disaster response period.

What taxes still apply? Transaction taxes -- fuel, sales/use, hotel, and car rental taxes on purchases for use in Kansas.

How long is the response period? From 10 days before the declared disaster to 60 days after it ends, unless the Governor extends it.

Citations and references

• Senate Bill 109 (2015) -- the Kansas Disaster Utilities Response Act, effective on publication in the Kansas Register April 9, 2015; exempts qualifying out-of-state disaster work from registration and most state and local taxes during the disaster response period (10 days before to 60 days after).

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 15-12

Original ruling text

Policy & Research Phone: 785-296-3081
915 SW Harrison St FAX: 785-296-7928
Topeka KS 66612-1588 www.ksrevenue.org
Nick Jordan, Secretary Department of Revenue Sam Brownback, Governor
Richard Cram, Director

                                       NOTICE 15-12

                      KANSAS DISASTER UTILITIES RESPONSE ACT
                                   (JULY 1, 2015)

  During the 2015 Legislative Session Senate Bill 109 was passed and signed into law. This

Bill creates the Kansas Disaster Utilities Response Act. The purpose of the Act is to allow an
out-of-state business to come into Kansas and work to prepare for, or make repairs after, a
disaster which affects Kansas utilities without being subject to certain requirements and taxes
normally imposed on a business operating in Kansas. Employees of these businesses are also
exempt from certain requirements and taxes.

  The Act defines "disaster or emergency-related work" to mean "work in preparation for a

disaster and repairing, renovating, installing, building or rendering services or other business
activities on or related to critical infrastructure that has been damaged, impaired or destroyed by
any declared state disaster or emergency." Critical infrastructure includes such things as
buildings, offices, line, poles, pipes, structures and equipment owned as used by operators of: (1)
telecommunications, cable or other communications networks; (2) electric generation,
transmission or distribution systems; (3) natural gas and natural gas liquids gathering,
processing, storage, transmission or distribution systems; or (4) water pipelines.

 The provisions of the Act become effective only after a state disaster or emergency has

been declared by the Governor, a state or local disaster emergency has been declared by a proper
county or city official, or after a Presidential declaration of a federal major disaster or
emergency.

  Under the terms of the Act, an out-of-state business conducting operations within Kansas

for disaster or emergency related work is not considered to have established a level of presence
requiring registration, licensing, or filing or remittance of state or local taxes. This means that an
out-of-state business conducting operations within Kansas for disaster or emergency related
work during a declared disaster or emergency period will not be subject to:

 •      Any and all state or local business licensing or registration requirements
 •      State or local taxes or fees including, but not limited to, state income and employer
        withholding taxes, unemployment insurance, state or local occupational licensing
        fees, sales and use tax or ad valorem tax on equipment used or consumed during any
        disaster response period; and
 •      Licensing and regulatory requirements of the state corporation commission or the
        secretary of state.

 The Act specifically addresses some aspects of Kansas income tax for business.              In

subsection (b)(2) it states:

 (2) For purposes of any state or local tax on or measured by, in whole or in part, net
 or gross income or receipts, all disaster or emergency-related work of the out-of-state
 business that is conducted in this state pursuant to this section shall be disregarded
 with respect to any filing requirements for such tax, including the filing required for a
 unitary or combined group of which the out-of-state business may be a part. For the
 purpose of apportioning income, revenue or receipts, the performance by an out-of-
 state business of any work in accordance with this section shall not be sourced to or
 shall not otherwise impact or increase the amount of income, revenue or receipts
 apportioned to this state.

 An out-of-state employee who performs disaster or emergency related work in Kansas is

not considered to have established residency or a presence in Kansas that would require the
employee to file and pay state income taxes, or their employer to withhold Kansas income tax.
Similarly, the employee would not be required to file and pay any other state or local tax or fee
during the disaster response period.

 Out-of-state businesses and employees are required to pay transaction taxes and fees on

purchases for use or consumption in Kansas during the disaster response period, unless otherwise
exempted. This includes, but is not limited to, fuel taxes, sales or use taxes on tangible personal
property, materials or services, hotel taxes, and car rental taxes or fees.

  The exemptions allowed by the Act last during the "disaster response period." This period

extends from 10 days prior to the first day of a declared disaster or emergency to 60 days after
the end of the declared disaster or emergency period. A longer period may be authorized by the
Governor.

  Out-of-state businesses and employees that remain in Kansas after the disaster response

period will become subject to Kansas' normal standards for residency or doing business in
Kansas, and are responsible for all tax requirements or obligations and registration, licensing, or
filing requirements.

 In order to administer the provisions of the Act, the Department of Revenue may require

the out-of-state business or its affiliate(s) to provide a written statement that the business is in
Kansas for disaster or emergency related purposes. The Department is required to maintain an
annual record of all declared disasters and emergencies in Kansas.

 Senate Bill 109 was effective upon publication in the Kansas Register on April 9, 2015.

                              TAXPAYER ASSISTANCE

Additional copies of this notice, forms or publications are available from our web site,
www.ksrevenue.org. If you have questions about this Notice, please contact:

                           Taxpayer Assistance Center
                          Kansas Department of Revenue
                          915 SW Harrison St., 1st Floor
                            Topeka, KS 66612-1588
                              Phone: 785-368-8222
                               Fax: 785-291-3614