Are labor services to repair or remodel a residence exempt from Kansas sales tax, and what about the materials?

Plain-English summary

The Department explained a then-new exemption for residential repair and remodeling labor created by the 1998 Kansas Legislature.

Labor to work on a residence is exempt. "1998 Senate Bill No. 493 exempts certain construction services that were formerly subject to Kansas sales tax." Specifically, "[e]ffective July 1, 1998, services performed to install or apply tangible personal property are exempt from sales tax when the services involve the original construction, reconstruction, restoration, remodeling, renovation, repair or replacement of a residence."

The exemption reaches the land right around the home. The Department stated it "will construe and administer K.S.A. 79-3603(p)(4) as exempting the land improvements that immediately surround a residence." As a result, "the exemption for residential repair and remodeling services generally will be coextensive with the exemption for the original construction of a residence."

It applies broadly to residential property. "This exemption applies to services to repair of all residential property. It is immaterial if the residential property is owned by a landlord or that the work is performed for [a] home warranty company." So rental housing and warranty-company jobs are covered too.

Materials are still taxable. The Department was explicit: "Materials continue to be subject to Kansas sales or compensating taxes." The exemption is for the labor/service, not for the tangible property that goes into the job.

What this means for you

Residential contractors and repair/remodeling businesses

Your labor to install or apply property in the original construction, reconstruction, restoration, remodeling, renovation, repair, or replacement of a residence is exempt from Kansas sales tax (for work on or after July 1, 1998). You do not charge sales tax on that labor.

You still pay tax on the materials

Materials remain subject to Kansas sales or compensating (use) tax. The residential labor exemption does not turn the materials into exempt purchases — plan to pay tax on what you buy and consume on the job.

Rental and warranty work counts

The Department made clear the exemption applies to all residential property. It does not matter that a landlord owns the property or that a home warranty company is paying for the work.

Common questions

Q: Is labor to remodel or repair a house taxable in Kansas?
A: No. Effective July 1, 1998, services to install or apply property in the original construction, reconstruction, restoration, remodeling, renovation, repair, or replacement of a residence are exempt from Kansas sales tax.

Q: Are the materials exempt too?
A: No. The Department stated that materials continue to be subject to Kansas sales or compensating taxes; only the labor/service is exempt.

Q: Does it matter that the home is a rental or that a warranty company is paying?
A: No. The Department said the exemption applies to all residential property, and it is immaterial that a landlord owns it or that a home warranty company is having the work performed.

Citations and references

• 1998 Senate Bill No. 493 — the legislation that, effective July 1, 1998, exempted services to install or apply tangible personal property in the original construction, reconstruction, restoration, remodeling, renovation, repair, or replacement of a residence.
• K.S.A. 79-3603(p)(4) — the Department construes and administers this provision as exempting the land improvements that immediately surround a residence, making the residential repair/remodel exemption coextensive with the original-construction exemption. Materials remain subject to Kansas sales or compensating tax.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-14

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

February 5, 1999

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Dear XXXXXXXXXXXX:

The purpose of this letter is to respond to your letter received December 18, 1998.

1998 Senate Bill No. 493 exempts certain construction services that were formerly subject to Kansas sales tax. Effective July 1, 1998, services performed to install or apply tangible personal property are exempt from sales tax when the services involve the original construction, reconstruction, restoration, remodeling, renovation, repair or replacement of a residence.

The department has determined that it will construe and administer K.S.A. 79-3603(p)(4) as exempting the land improvements that immediately surround a residence. This means the exemption for residential repair and remodeling services generally will be coextensive with the exemption for the original construction of a residence.

This exemption applies to services to repair of all residential property. It is immaterial if the residential property is owned by a landlord or that the work is performed for home warranty company.

Materials continue to be subject to Kansas sales or compensating taxes.

This is a private letter ruling pursuant to Kansas Administrative Regulation 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 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 ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 02/16/1999 Date Modified: 10/11/2001

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