Which services purchased by a hotel — maintenance, landscaping, security, extermination, employment placement — are taxable in Kansas?

Plain-English summary

A company that "own[s] and operate[s] a chain of hotels throughout the United States" asked whether a list of services it buys for its Kansas hotels are taxable: "building maintenance, landscape, security, exterminating, employment and employment placement services."

The statute the Department cited. The letter quotes K.S.A. 79-3603(p), which taxes "the gross receipts received for the service of installing or applying tangible personal property . . . except that no tax shall be imposed upon the service of installing or applying tangible personal property in connection with the original construction of a building," together with the "original construction" definition in K.S.A. 79-3603(p)(1).

The holding — service by service. The Department concluded that "the gross receipts from the following services, performed at a hotel are subject to Kansas retailers' sales tax: building maintenance, landscape maintenance and extermination services." By contrast, "Kansas does not impose sales tax on the gross receipts from the services of furnishing security personnel or employment placement services."

Bottom line: for a Kansas hotel, expect sales tax on building maintenance, landscape maintenance, and extermination, but not on security-guard staffing or employment-placement services. Because these are services the hotel purchases and consumes, the tax falls on the hotel as the customer.

What this means for you

Hotel and hospitality operators

Budget for Kansas sales tax on your recurring building maintenance, grounds/landscape maintenance, and pest-control (extermination) contracts. You should not be charged Kansas sales tax on security-personnel staffing or on employment-placement/recruiting services.

Facility-service and staffing vendors

If you provide building maintenance, landscaping, or extermination in Kansas, charge and remit sales tax on those services. If you furnish security personnel or placement services, those charges are not subject to Kansas sales tax under this ruling.

Check the specific service, not the vendor

The taxable/nontaxable line runs by type of service, not by who provides it. A single vendor may perform both taxable (maintenance) and nontaxable (security staffing) work — treat each service according to its own character, and keep charges separated on the invoice.

Common questions

Q: Is hotel building maintenance taxable in Kansas?
A: Yes. The Department ruled that building maintenance, landscape maintenance, and extermination services performed at a hotel "are subject to Kansas retailers' sales tax."

Q: Are security and employment-placement services taxable?
A: No. "Kansas does not impose sales tax on the gross receipts from the services of furnishing security personnel or employment placement services."

Q: Who bears the tax on these services?
A: The hotel, as the purchaser and consumer of the services. The taxable maintenance, landscaping, and extermination charges are taxed to the hotel that buys them.

Citations and references

• K.S.A. 79-3603(p) — imposes Kansas sales tax on the service of installing or applying tangible personal property (with an original-construction exception); the provision the Department cited in analyzing the hotel's purchased services.
• K.S.A. 79-3603(p)(1) — defines "original construction," quoted by the Department alongside 79-3603(p).

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-189

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

September 7, 1999

XXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXXX

Dear XXXXXXX:

I have been asked to respond to your letter dated August 3, 1999. In it, you ask for guidance pertaining to Kansas retailers’ sales tax on services purchased and consumed by hotels.

In your letter you stated:

XXXXXXX own and operate a chain of hotels throughout the United States. We are asking if building maintenance, landscape, security, exterminating, employment and employment placement services are subject to or exempt from Kansas retailers’ sales tax to the hotel industry.

Kansas law imposes tax on “the gross receipts received for the service of installing or applying tangible personal property. . .except that no tax shall be imposed upon the service of installing or applying tangible personal property in connection with the original construction of a building . . .” K.S.A. 79-3603(p).

“Original construction” means “the first or initial construction of a new building. . .and includes the addition of an entire room or floor to any existing building or facility, the completion of any unfinished portion of any existing building or facility and the restoration, reconstruction or replacement of a building or facility damaged or destroyed by fire, flood, tornado, lightning, explosion or earthquake, but such term, except with regard to a residence, shall not include replacement, remodeling, restoration, renovation or reconstruction under any other circumstances;” K.S.A 79-3603(p)(1).

It is the opinion of the Kansas Department of Revenue the gross receipts from the following services, performed at a hotel are subject to Kansas retailers’ sales tax: building maintenance, landscape maintenance and extermination services. Kansas does not impose sales tax on the gross receipts from the services of furnishing security personnel or employment placement services.

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: mdc

Date Composed: 09/13/1999 Date Modified: 10/11/2001

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