Is the retail sale of propane in 20-lb barbecue-grill tanks taxable in Kansas, and are the tank charges taxable too?

Plain-English summary

A propane distributor asked how Kansas sales tax applies to its new tank-exchange program. The program "is a tank exchange program, exclusively using the 20lb tanks which are commonly found in outdoor barbecue grills," available at the company's stores and at third-party retailers who "purchase [the] propane for resale, and make retail sales of propane to consumers."

The ruling. "The sale of propane in 20lb tanks for residential use would be subject to Kansas retailers' sales tax. The entire transaction including the tank charges whether separately stated or included in the selling price of the propane would be subject to sales tax."

Bottom line: selling propane in 20-lb grill tanks to consumers for residential use is a taxable retail sale, and the tax applies to the whole charge — the propane and the tank — regardless of how the retailer breaks out the tank charge on the bill.

What this means for you

Residential-use grill propane is taxable at retail

The retail sale of propane in 20-lb tanks for residential use is subject to Kansas retailers' sales tax when sold to the consumer.

The tank charge is part of the taxable price

Whether the tank charge is separately stated or folded into the selling price of the propane, it is part of the taxable transaction. Splitting it out on the invoice does not make it exempt.

The retail sale is the taxable event

Retailers in the program buy the propane for resale and then make taxable retail sales to consumers. The tax is collected on that final retail sale.

Tank-exchange format does not change the result

Structuring the sale as a tank exchange does not alter the outcome — the consumer's purchase of propane in the 20-lb tank for residential use is taxed on the entire transaction.

Common questions

Is propane sold in barbecue-grill tanks taxable in Kansas?
Yes. The retail sale of propane in 20-lb tanks for residential use is subject to Kansas retailers' sales tax.

Are the tank charges taxable too?
Yes. The entire transaction, including tank charges, is taxable whether the charge is separately stated or included in the propane's selling price.

Can the retailer buy the propane tax-free?
Yes, for resale — the participating retailers purchase the propane for resale and then collect tax on the retail sale to the consumer.

Does a tank-exchange program change the tax treatment?
No. The retail sale of the propane for residential use is taxed on the full transaction regardless of the exchange format.

Citations and references

• The ruling states in prose that the retail sale of propane in 20-lb tanks for residential use is subject to Kansas retailers' sales tax, and that the entire transaction — including tank charges, whether separately stated or included in the price — is taxable. No numbered statute is cited.
• K.A.R. 92-19-59 — authorizes Kansas private letter rulings; this ruling binds the Department only as to the requesting taxpayer and the facts presented.
• Issued August 21, 1998 by Mark D. Ciardullo, Tax Specialist, Kansas Department of Revenue.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1998-87

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

August 21, 1998

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Dear XXXXXXXXXXXXX:

The purpose of this letter is to respond to your letter dated July 13, 1998.

In your letter you stated that XXXXXXXXXX is a leading distributor of propane and other related accessories, parts and service. Your company has implemented a new sales program named XXXXXXXX The XXXXXXXXXXX is a tank exchange program, exclusively using the 20lb tanks which are commonly found in outdoor barbecue grills. This program is available at your stores and at third party retailers. The retailers purchase your propane for resale, and make retail sales of propane to consumers.

The sale of propane in 20lb tanks for residential use would be subject to Kansas retailers’ sales tax. The entire transaction including the tank charges whether separately stated or included in the selling price of the propane would be subject to sales tax.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 08/31/1998 Date Modified: 10/10/2001

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