Does a city owe Kansas sales or use tax on a fuel truck it buys for its airport?

Plain-English summary

A city asked whether it must pay Kansas sales tax on a used fuel truck it was buying (from Texas) for its municipal airport. The city noted that it owns the truck but receives no revenue from the airport, which is managed by a private aviation company.

The exemption. As the ruling states, "Kansas sales tax law exempts all direct purchases by a city, except when such city engages in the business of furnishing gas, water, electricity or heat to others and such items of personal property or service are used or proposed to be used in such business. K.S.A. 79-3606(b)."

The holding. "It is the opinion of the Kansas Department of Revenue that the purchase of the fuel truck as described in this letter is exempt from Kansas retailers' sales and compensating tax."

Why the facts did not change the result. The exception in the statute is narrow — it applies only when a city is in the business of furnishing gas, water, electricity, or heat to others. Buying a fuel truck for airport operations is not that. And because the purchase is a direct purchase by the city that will own the truck, it is exempt regardless of the truck being used, coming from out of state, or the airport being run day-to-day by a private manager.

Bottom line: the city's direct purchase of the fuel truck is exempt from both Kansas sales tax and the complementary compensating (use) tax.

What this means for you

Direct purchases by a city are exempt

K.S.A. 79-3606(b) exempts a city's direct purchases of tangible personal property and services. A vehicle the city buys and owns for its own operations — like this airport fuel truck — is covered.

The exemption also covers use (compensating) tax

Because the truck was bought used and out of state, the relevant complement is Kansas compensating use tax. The Department confirmed the purchase is exempt from that too, so bringing the truck in from Texas does not create a use-tax bill.

The narrow utility-business exception

The only statutory carve-out is where a city is in the business of furnishing gas, water, electricity, or heat to others and buys property for that business. Ordinary municipal functions — including running an airport — are not within that exception.

A private manager does not defeat the city's exemption

The airport being managed by a private aviation company (and generating no revenue for the city) did not change the analysis. What mattered is that the city directly purchased and will own the truck.

Common questions

Q: Does a city pay Kansas sales tax on a vehicle it buys for its airport?
A: No. A direct purchase by a city is exempt under K.S.A. 79-3606(b); the Department ruled this fuel truck exempt.

Q: Does buying the truck used and out of state create a Kansas use-tax bill?
A: No. The Department held the purchase exempt from Kansas retailers' sales and compensating (use) tax, so importing the used truck from Texas did not trigger use tax.

Q: When would a city's purchase not be exempt?
A: When the city is in the business of furnishing gas, water, electricity, or heat to others and the property is used in that business — the statute's narrow exception. That did not apply to this airport fuel truck.

Citations and references

• K.S.A. 79-3606(b) — exempts direct purchases by the state and its political subdivisions, including cities, with a narrow exception for property used when a city is in the business of furnishing gas, water, electricity, or heat to others.
• 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-1999-125

Original ruling text

Private Letter Ruling

Body:

Office of Policy and Research

May 21, 1999

XXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXX

Dear XXXXXXXXXXXX:

I have been asked to respond to your letter dated April 30, 1999. In it, you ask for guidance in the application sales tax.

In your letter you stated:

We have a question regarding a fuel truck we are purchasing for our airport. This is a used truck coming from Texas. The City will own the truck, however we do not receive any revenue for the airport, it is managed by XXXXXXXX Aviation.

Our question is should we pay sales tax on this truck.

Kansas sales tax law exempts all direct purchases by a city, except when such city engages in the business of furnishing gas, water, electricity or heat to others and such items
of personal property or service are used or proposed to be used in such business. K.S.A. 79-3606(b).

It is the opinion of the Kansas Department of Revenue that the purchase of the fuel truck as described in this letter is exempt from Kansas retailers’ sales and compensating tax.

This is a private letter ruling pursuant to K.A.R. 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This ruling will be revoked in the future by the operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or published revenue ruling, that materially affects this private letter ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 05/27/1999 Date Modified: 10/11/2001

Table 1

Table 2