Are concrete cutting and coring services (core drilling, wall sawing, hydro-sawing) taxable in Kansas?

Plain-English summary

A concrete cutting and coring company asked whether its services are subject to Kansas sales tax. The Department ruled the services are taxable — except when performed as part of Kansas bridge or highway work.

Taxable as a service on real-property fixtures. "The imposition section on these labor services is found at K.S.A. 79-3603(q). This section imposes sales tax on the services of 'repairing, servicing, altering or maintaining tangible personal property.'" The Department stressed the subsection reaches property "which has been and is fastened to, connected with or built into real property." "Since concrete, rebars, and reinforcing wire was once tangible personal property that is built into real property, the services of cutting or coring concrete are subject to sales tax."

The bridge-and-highway exemption. "When cutting or coring is done in connection with 'the construction, reconstruction, restoration, replacement or repair of a bridge or highway,' the department presumes that the services are done in connection with installation or application of tangible property. Accordingly, when concrete cutting and coring are done as part of highway or bridge repair or replacement, these services are exempt from sale tax."

What this means for you

Concrete cutting, coring, and sawing contractors

Your core drilling, wall sawing, and hydro-sawing of concrete is generally a taxable service in Kansas, because you are altering material that is built into real property. Charge sales tax on those jobs unless a specific exemption applies.

Highway and bridge jobs are exempt

When the same work is done as part of constructing, reconstructing, restoring, replacing, or repairing a bridge or highway, it is exempt. Track which jobs are highway/bridge work so you can support the exemption.

Keep the paperwork to prove the exemption

Because taxability turns on what the job is part of, keep contracts and records showing the bridge or highway connection for any job you treat as exempt.

Common questions

Q: Is concrete core drilling taxable in Kansas?
A: Yes. The Department ruled that core drilling, wall sawing, and hydro-sawing of concrete are taxable services under K.S.A. 79-3603(q), because concrete built into real property was once tangible personal property.

Q: When is the work exempt?
A: When it is done in connection with the construction, reconstruction, restoration, replacement, or repair of a bridge or highway.

Q: Why is concrete treated as tangible personal property?
A: The statute taxes services on tangible personal property "fastened to, connected with or built into real property." Concrete, rebar, and reinforcing wire were tangible personal property before being built in, so servicing them is taxable.

Citations and references

• K.S.A. 79-3603(q) — imposes Kansas sales tax on repairing, servicing, altering, or maintaining tangible personal property, including property fastened to, connected with, or built into real property. The Department applied it to make concrete cutting and coring taxable, while treating the same work on bridges and highways as exempt.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-2000-040

Original ruling text

Opinion Letter

Body:

Office of Policy & Research

December 4, 2000

XXXX
XXXX
XXXX

RE: Your letter of November 17, 2000

Dear XXXX:

I have been asked to answer your letter that we received last month. You work for a company that cuts and cores concrete. This includes core drilling, wall sawing, and hydro-sawing, among other things. You ask if these services are subject to sales tax. The service are taxable. However, there is a broad exemption that exempts these services when done as part of the repair of Kansas bridges and highways.

The imposition section on these labor services is found at K.S.A. 79-3603(q). This section imposes sales tax on the services of “repairing, servicing , altering or maintaining tangible personal property.” This subsection makes clear that: “The tax imposed by this subsection shall be applicable to the services of repairing, servicing, altering or maintaining an item of tangible personal property which has been and is fastened to, connected with or built into real property.” Since concrete, rebars, and reinforcing wire was once tangible personal property that is built into real property, the services of cutting or coring concrete are subject to sales tax.

When cutting or coring is done in connection with “the construction, reconstruction, restoration, replacement or repair of a bridge or highway,” the department presumes that the services are done in connection with installation or application of tangible property. Accordingly, when concrete cutting and coring are done as part of highway or bridge repair or replacement, these services are exempt from sale tax.

I hope that my letter adequately answers all of your questions. If not, please call me at (785) 296-3081 and we can discuss your concerns. This is a private letter ruling and is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects the ruling.

Sincerely,

Thomas E. Hatten
Attorney/Policy & Research

Date Composed: 12/12/2000 Date Modified: 10/10/2001

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