Are receipts from coin-operated air compressors at convenience stores subject to Kansas sales tax?

Plain-English summary

A representative whose client was considering installing coin-operated air compressors at Kansas convenience stores asked whether the money collected is subject to Kansas sales tax. The Department ruled the receipts are taxable — state and local. This is the Department's original letter on the question; a follow-up (O-2000-034) later expanded the analysis.

The tax. "The imposition is found at K.S.A. 79-3603(f)," which taxes "the gross receipts from the operation of any coin-operated device dispensing or providing tangible personal property, amusement or other services except laundry services, whether automatic or manually operated."

Why it applies. "The device in question dispenses compressed air, which is tangible personal property. Accordingly, the receipts from the machine are subject to both state and local sales tax." Local sales tax "is imposed based on the location of the machine."

Backing the tax out. Because the coins already include the tax, "you must factor the tax from the tax included receipts.... This is done by dividing the receipts in the machine by one plus the state and local tax rate stated as a decimal. The result is the amount to report to Kansas as gross receipt (the tax base)."

What this means for you

Coin-operated machine operators

Receipts from a coin-operated air compressor are taxable in Kansas because the machine is a coin-operated device dispensing tangible personal property (compressed air). Collect and remit state and local sales tax on those receipts.

The coins already include the tax

Divide the total collected by (1 + the combined state-and-local rate expressed as a decimal) to find your reportable gross receipts; the remainder is the tax due.

Local rate follows the machine's location

Because local tax is based on where the machine sits, use the combined state-and-local rate for that location. (The Department cited a 4.9% state rate in 2000; confirm the current rate.)

Common questions

Q: Are coin-operated air compressor receipts taxable in Kansas?
A: Yes. The Department ruled they are subject to state and local sales tax under K.S.A. 79-3603(f), because compressed air is tangible personal property dispensed by a coin-operated device.

Q: How do I figure the tax when the machine only takes coins?
A: Divide the total collected by one plus the combined state-and-local rate (as a decimal) to get the tax base; the difference is the tax.

Q: Is there a related ruling?
A: Yes. The Department issued a follow-up letter, O-2000-034, that expanded this analysis — adding that operating the compressor also services the customer's tires and citing additional provisions.

Citations and references

• K.S.A. 79-3603(f) — imposes Kansas sales tax on the gross receipts from any coin-operated device dispensing or providing tangible personal property, amusement, or other services (except laundry). The Department applied it because the air compressor dispenses compressed air, which is tangible personal property, making the receipts taxable (state and local).

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-2000-033

Original ruling text

Opinion Letter

Body:

Office of Policy & Research

October 31, 2000

XXXX
XXXX
XXXX

RE: Your letter of October 18, 2000

Dear XXXX:

I have been asked to answer your letter that the department received earlier this month. You have a client who may install coin-operated air compressors at convenience stores in Kansas. You ask if the money collected in these machines is subject to Kansas sales tax. The answer is yes. The imposition is found at K.S.A. 79-3603(f). It taxes:

the gross receipts from the operation of any coin-operated device dispensing or providing tangible personal property, amusement or other services except laundry services, whether automatic or manually operated;

The device in question dispenses compressed air, which is tangible personal property. Accordingly, the receipts from the machine are subject to both state and local sales tax. The Kansas state rate is 4.9%. Local sales tax is imposed based on the location of the machine.

To determine the tax to report to the State of Kansas, you must factor the tax from the tax included receipts that are in the machine. This is done by dividing the receipts in the machine by one plus the state and local tax rate stated as a decimal. The result is the amount to report to Kansas as gross receipt (the tax base). The tax due is figured by subtracting this amount from the receipts in the machine or by multiplying this amount by the tax rate in effect.

I hope that this adequately answers your questions. If not, please call me at (785) 296-3081.

Sincerely,

Thomas E. Hatten

Attorney/Policy & Research

Date Composed: 11/02/2000 Date Modified: 10/10/2001

Table 1

Table 2