Are oil and grease used in a commercial printer's presses exempt from Kansas sales tax as consumed in production?

Plain-English summary

A representative asked whether the oil and grease a commercial printer client uses in its printing presses are exempt from Kansas sales tax as "consumed in production." The Department's answer was direct: "they are exempt."

The Department explained that "[l]ubricants used in manufacturing equipment has been exempt since 1970 as consumed in production," and it walked through the legislative history to show why:

• Before 1970, the Kansas sales tax law listed specific products that were exempt when used in processing and manufacturing, and that list already "included 'oil and petroleum products.'"
• The 1970 amendment. The Hodge Committee, which recommended numerous changes to Kansas tax laws in 1970, reported that the intent was to move "from a list of exempt consumables to providing a general conceptual description of items that are consumed in production." The committee wrote that the change "would establish a 'consumables' exemption rule comparable to the component part rule, in place of the present listing of items exempt," making the exemption "more responsive to technological changes in production" and eliminating "the need for repeated legislative revision of the list of items exempt." An explanatory provision said the "[e]ffect would be to exempt items now listed, except catalysts, and to exempt other consumable[s] not now listed."

Because the prior list already covered "fuel oil or other petroleum products," and the 1970 change was meant to preserve (and generalize) those exemptions, the Department concluded that "when [the] 1970 Kansas legislature enacted the current version of the laws for consumed in production, it intended to continue exempting sales of oil, grease, other lubricants, and similar products that are used in manufacturing and processing machinery. These sales have been exempt ever since."

What this means for you

Commercial printers and manufacturers

Oil, grease, and other lubricants you use to run your production machinery — such as printing presses — qualify for the consumed-in-production exemption. They are treated as items consumed in the manufacturing or processing process rather than taxable supplies.

Why the general rule matters

The 1970 shift from an itemized list to a general "consumables" concept means the exemption is meant to reach items "conceptually entitled to exemption" even if no statute names them specifically. That is why a product like press lubricant is covered without appearing on any list.

One noted exception

The legislative history flags that catalysts were treated differently ("except catalysts"). If your process consumables include catalysts, don't assume the same result — the general rule was described as exempting listed items except catalysts.

Common questions

Q: Are printing-press lubricants taxable in Kansas?
A: No. Oil and grease used in a commercial printer's presses are exempt as consumed in production.

Q: How long have manufacturing lubricants been exempt?
A: Since 1970, when Kansas replaced its itemized consumables list with a general consumed-in-production exemption.

Q: Does the exemption only cover items named in a statute?
A: No. The 1970 change was designed to exempt items "conceptually entitled to exemption," not just those on a fixed list — which is how lubricants qualify.

Citations and references

• The letter grounds its conclusion in legislative history rather than a cited statute number. It relies on the Hodge Committee Report (Vol. 1, p. 21 and Vol. II, p. 48), which describes the 1970 shift from an itemized list of exempt consumables (including "oil and petroleum products" and "fuel oil or other petroleum products") to a general "consumables" exemption rule comparable to the component-part rule — showing the Legislature's intent to continue exempting oil, grease, and other lubricants used in manufacturing and processing machinery.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-1998-16

Original ruling text

Opinion Letter

Body:

Office of Policy & Research

October 12, 1998

XXXXX
XXXXX
XXXXX

RE: Your letter of September 21, 1998

Dear Mr. XXXX:

This is in response to your letter of September 21, 1998. You have a client that is a commercial printer. You ask whether oil and grease used in the client’s printing presses are exempt from Kansas sales tax as consumed in production. The answer is that they are exempt.

Lubricants used in manufacturing equipment has been exempt since 1970 as consumed in production. Before that, the Kansas sales tax law listed products that were exempt when used in processing and manufacturing. Exempt items included "oil and petroleum products." The Hodge Committee, which recommended numerous changes to the Kansas tax laws in 1970, issued a report which indicates that the legislative intent underlying the 1970 amendment was to move from a list of exempt consumables to providing a general conceptual description of items that are consumed in production. The Commission’s report states:

This recommendation would establish a 'consumables' exemption rule comparable to the component part rule, in place of the present listing of items exempt. Such a rule would be more responsive to technological changes in production, and eliminate the need for repeated legislative revision of the list of items exempt, and eliminate possible discrimination resulting from failure to list some items conceptually entitled to exemption." Hodge Committee Report, Vol 1, p. 21.

The explanatory provision that followed the exemption states: "Effect would be to exempt items now listed, except catalysts, and to exempt other consumable not now listed." Hodge Committee Report, Vol II, p. 48. The consumables listed in the prior law were:

Sales and purchases of electricity, steam, catalysts, coal, gas, explosives, water, fuel oil or other petroleum products or feed for animals for use in farming, processing, manufacturing, mining, drilling, refining, irrigation, telegraph and telephone and other taxable services or for use in movement in interstate commerce by railroad or public utility; and sale of insecticides, herbicides, germicides, pesticides and fungicides for use in the commercial production of fruit, vegetables, feeds, seeds, and animal products. (emphasis provided).

This legislative history shows that, when 1970 Kansas legislature enacted the current version of the laws for consumed in production, it intended to continue exempting sales of oil, grease, other lubricants, and similar products that are used in manufacturing and processing machinery. These sales have been exempt ever since.

I hope that this letter addresses all your concerns. If not, please give me a call at (785) 296-4008.

Sincerely,

Thomas E. Hatten
Attorney/Policy & Research

Date Composed: 10/29/1998 Date Modified: 10/10/2001

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