Are credit reporting, employment verification, title insurance, escrow closing fees, and appraisal services subject to Kansas sales tax?

Plain-English summary

A provider of financial/real-estate services asked whether Kansas sales tax applies to credit reporting, employment verification, the sale of title insurance, escrow closing fees, and appraisal services.

The statute quoted. The ruling quotes the tax on "the gross receipts received for the service of repairing, servicing, altering or maintaining tangible personal property," citing "K.S.A. 79-3606(q)." (In current Kansas law that repair/service imposition appears at K.S.A. 79-3603(q); the ruling's "79-3606(q)" citation appears to be a typographical error, but the operative point — the service must be servicing or maintaining tangible personal property to be taxable — is unaffected.)

The ruling — not taxable. "[S]ervices such as, credit reporting, employment verification, the sale of title insurance, escrow closing fees and appraisal services would not be subject to sales tax in the state of Kansas due to the fact that these tasks do not constitute either 'servicing' or 'maintaining'." These are professional/informational services, not services performed on tangible personal property, so they fall outside the tax.

The catch — you pay tax on your own supplies. "Since, you are providing a nontaxable service, you would need to pay sales tax on all articles of tangible personal property, such as equipment and supplies, purchased to provide the nontaxable service." Because the provider does not resell tangible goods, it is the final consumer of the things it buys to do the work and owes sales tax on those purchases.

Bottom line: these services are not taxable to the customer, but the provider is the taxable consumer of the equipment and supplies it uses to deliver them.

What this means for you

Providers of these professional services

Do not charge Kansas sales tax on credit reporting, employment verification, title insurance, escrow closing, or appraisal services. They are not taxable because they are not performed on tangible personal property.

You are the consumer of your supplies

Because your service is nontaxable, you cannot buy your equipment and supplies for resale. Pay Kansas sales tax on the tangible personal property you purchase to run the business, and accrue use tax on anything you bring in untaxed.

The test is whether the work is on tangible property

The line the Department drew is "servicing" or "maintaining" tangible personal property. Informational and professional services fall outside it. If part of your business does involve repairing or maintaining tangible goods, analyze that piece separately.

Common questions

Q: Are credit reporting, escrow, title insurance, and appraisal services taxable in Kansas?
A: No. The Department ruled they are not subject to Kansas sales tax because they do not constitute servicing or maintaining tangible personal property.

Q: Then do I owe any Kansas tax?
A: Yes — on your inputs. As a provider of a nontaxable service, you must pay sales tax on the equipment and supplies you buy to provide the service.

Q: The ruling cites "K.S.A. 79-3606(q)" — is that the right statute?
A: The quoted repair/service language is the imposition that appears at K.S.A. 79-3603(q) in current law; the ruling's "79-3606(q)" looks like a typo. Either way, the conclusion (these services aren't taxable) stands.

Citations and references

• K.S.A. 79-3606(q) — cited in the ruling for the tax on "repairing, servicing, altering or maintaining tangible personal property"; the Department used it to explain that credit reporting, employment verification, title insurance, escrow, and appraisal services are not taxable because they are not servicing or maintaining tangible personal property. (The quoted repair/service imposition appears at K.S.A. 79-3603(q) in current law; the ruling's subsection citation appears to be a typographical error.)

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-249

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

November 12, 1999

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Dear Ms. TTTTT:

We wish to acknowledge receipt of your letter dated October 28, 1999, regarding the application of Kansas Retailers’ Sales tax.

K.S.A. 79-3606(q) imposes a sales tax upon: “the gross receipts received for the service of repairing, servicing, altering or maintaining tangible personal property. . .”

Please be advised that services such as, credit reporting, employment verification, the sale of title insurance, escrow closing fees and appraisal services would not be subject to sales tax in the state of Kansas due to the fact that these tasks do not constitute either “servicing” or “maintaining”.

Since, you are providing a nontaxable service, you would need to pay sales tax on all articles of tangible personal property, such as equipment and supplies, purchased to provide the nontaxable service.

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 effects this private letter ruling. If I may be of further assistance, please contact me at your earliest convenience at (785) 296-7776.

Sincerely yours,

Thomas P. Browne, Jr.
Tax Specialist

TPB

Date Composed: 11/29/1999 Date Modified: 10/11/2001

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