Do a radiant heating system and an overhead crane qualify as exempt manufacturing machinery and equipment for a Kansas sales tax refund?

Plain-English summary

The taxpayer sought a Kansas sales tax refund on two items — a radiant heating system and an overhead crane — arguing that each was exempt manufacturing machinery and equipment.

The radiant heating system does not qualify. The Department had already addressed the heating system in an earlier letter dated April 12, 1998, and the new information "does not alter our opinion." It reaffirmed that "the radiant heating system does not qualify as manufacturing machinery." No refund is available for it.

The overhead crane likely qualifies, but the record is incomplete. The Department stated that "[t]he overhead crane would likely qualify as manufacturing machinery and equipment," but "[i]nsufficient information was supplied" for it to make a determination. To decide the question and process a refund, the Department asked the taxpayer to submit "[a] description of your business and items you manufacture; a description of the overhead crane and how the crane is used in the manufacturing process; and, a copy of original purchase invoice."

Bottom line: the heating system is not exempt manufacturing machinery, so that part of the refund is denied; the crane may well be exempt, but the taxpayer must provide the requested documentation before the Department will rule and refund.

What this means for you

Not everything installed at a plant is "manufacturing machinery"

A radiant heating system, even in a manufacturing facility, did not qualify as manufacturing machinery. The exemption turns on the item's direct role in the manufacturing process, not merely its presence in a plant.

An overhead crane can qualify — if its manufacturing use is shown

The Department signaled that an overhead crane would likely be exempt manufacturing machinery and equipment, but only after seeing how the crane is actually used in the manufacturing process.

Refund claims live or die on documentation

The Department could not act on the crane without a description of the business and products, a description of the crane and its use in manufacturing, and the original purchase invoice. A refund claim for manufacturing equipment should include that proof up front.

A prior ruling on the same item usually stands absent new facts

Because the taxpayer's added information did not change the analysis, the Department held to its April 1998 position on the heating system. Revisiting a determination generally requires genuinely new, material facts.

Common questions

Q: Was the radiant heating system exempt as manufacturing machinery?
A: No. The Department maintained its earlier position that the radiant heating system does not qualify as manufacturing machinery, so no refund was due on it.

Q: Was the overhead crane exempt?
A: The Department said the crane would likely qualify as manufacturing machinery and equipment, but it could not decide without more information.

Q: What did the Department need to rule on the crane and issue a refund?
A: A description of the business and the items manufactured, a description of the crane and how it is used in the manufacturing process, and a copy of the original purchase invoice.

Q: Why didn't the new information change the heating-system answer?
A: The Department found the additional information did not alter its opinion from the earlier April 12, 1998 letter.

Citations and references

• Kansas manufacturing machinery and equipment exemption — Kansas exempts qualifying machinery and equipment used directly in manufacturing, but the ruling did not cite a specific statutory subsection; it turned on whether each item met that standard and on the documentation needed to prove the crane's manufacturing use.
• K.A.R. 92-19-59 — the regulation authorizing private letter rulings; this ruling was issued under it and binds the Department only as to the requesting taxpayer.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1998-218

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

December 18, 1998

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Dear XXXXXXXXXXXXXXX:

The purpose of this letter is to respond to your letter dated December 10, 1998. You are requesting a sales tax refund for a radiant heating system and overhead crane.

I addressed the issue of exemption for the radiant heating system in a letter to you dated April 12, 1998. The additional information contained in latest letter does not alter our opinion. Therefore, the Department continues to maintain that the radiant heating system does not qualify as manufacturing machinery.

Insufficient information was supplied by you for the Department to make a determination as to the status of the overhead crane. The overhead crane would likely qualify as manufacturing machinery and equipment.

For the Department to make a determination and process your refund claim for the purchase of the overhead crane, please submit the following documentation containing: A description of your business and items you manufacture; a description of the overhead crane and how the crane is used in the manufacturing process; and, a copy of original purchase invoice.

This private letter ruling 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 this private letter ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 12/18/1998 Date Modified: 10/10/2001

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