How do Kansas project exemption certificates work, and who can get one?

Plain-English summary

The Department answered an emailed question about project exemption certificates (PECs) — how they work and how they apply. It pointed the requester to two information guides (the guide for Political Subdivisions covers PECs on pages 4-5; the guide for Contractors, Subcontractors and Repairmen covers them on pages 10-11) and summarized the mechanics.

Key points from the letter:

• Getting one is fast and simple. An entity that is entitled to a certificate can simply fax a completed project exemption certificate application to the Department, which "normally issues a project exemption certificate within hours of receipt of a fax application for a qualifying project."
• What it covers. A PEC exempts "both materials and services" used on the project.
• When it is needed. PECs "are required for both large and small jobs," and an entity must apply for a separate certificate "for each project."
• Agency status. An entity may also apply for "agency status" to issue project exemption certificates itself. This is "normally granted to political subdivisions, colleges, universities, and other qualifying entities that perform numerous construction projects." Because the regular fax application is so easy, many eligible entities choose it over becoming their own issuing agent.
• Who can and cannot get agency status. "[O]nly entities that may be issued a project exemption certificate may apply for agency status. This means that contractors may not secure such status."

The Department noted it was reviewing this area to further simplify the exemption process for exempt entities and would share any published changes.

What this means for you

Exempt entities doing construction

If your organization qualifies for a project exemption certificate, apply for one for each project before buying materials and services — a single certificate covers both the materials and the labor for that job, and the Department can turn it around quickly by fax.

Entities with many projects

If you regularly run construction projects (for example, a city, county, college, or university), you can apply for agency status and issue your own certificates. Many eligible entities skip this because the standard fax application is so quick, but it is available.

Contractors

You cannot obtain agency status to issue project exemption certificates. You rely on the qualifying entity (the project owner) to secure and provide the PEC, which then lets you buy that project's materials and services exempt.

Common questions

Q: What does a project exemption certificate exempt?
A: Both the materials and the services used on the specific project it is issued for.

Q: Do I need a separate certificate for each project?
A: Yes. A certificate must be applied for and issued for each project, whether the job is large or small.

Q: Can a contractor get agency status to issue its own certificates?
A: No. Only entities that could themselves be issued a project exemption certificate may apply for agency status; contractors may not.

Citations and references

• The letter is procedural guidance and does not cite a specific statute number. It references two Department information guides — the guide for Political Subdivisions (project exemption certificates discussed at pages 4-5) and the guide for Contractors, Subcontractors and Repairmen (pages 10-11) — and describes the fax-application process and the "agency status" option for high-volume exempt entities.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-1999-024

Original ruling text

Opinion Letter

Body:

Office of Policy & Research

October 15, 1999

XXXX
XXXX
XXXX

RE: Your e-mail of October 8, 1999

Dear XXXX:

I have been asked to answer your e-mail that we received earlier this month. In it, you ask about project exemption certificates and how they apply. I have enclosed two information guides that explain project exemption certificates in some depth. The guide for Political Subdivisions discusses project exemption certificates on pages 4-5. The guide for Contractors, Subcontractor and Repairmen discuss project exemption certificates on pages 10-11.

The department has streamlined the process for issuing project exemption certificates. Entities entitled to a certificate may simple fax in a completed copy of a project exemption certificate application form to the department. Normally the department issues a project exemption certificate within hours of receipt of a fax application for a qualifying project. Project exemption certificates exempt both materials and services and are required for both large and small jobs. Entities are required to apply for a project exemption certificate for each project.

An entity may also apply for “agency status” to issue project exemption certificates themselves. The agency status is normally granted to political subdivisions, colleges, universities, and other qualifying entities that perform numerous construction projects. Because the department’s application process is simple and easy to follow many entities choose to use that procedure rather than to apply for the agency status that would allow them to issue their own certificates. Please note that only entities that may be issued a project exemption certificate may apply for agency status. This means that contractors may not secure such status.

I believe that this answers your questions. If not, please call me and we can discuss this matter further. You should be aware that the department is reviewing this area in hopes of further simplifying the exemption process for exempt entities. If we make any changes this year, I will provide you with a copy of any information that we publish.

Sincerely,

Thomas E. Hatten
Attorney/Policy & Research

Enclosures

Date Composed: 03/28/2000 Date Modified: 10/10/2001

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