Are concrete cutting and coring labor services on sidewalks, steps, and walls subject to Kansas sales tax?

Plain-English summary

A company that performs concrete cutting and coring — using diamond-tipped saws, from hand-held to trailer-hauled — on sidewalks, steps, retaining walls, and similar structures asked whether that labor is taxable. The Department ruled it generally is.

The taxable-service statute. K.S.A. 79-3603(q) taxes "the gross receipts received for the service of repairing, servicing, altering or maintaining tangible personal property . . . whether or not any tangible personal property is transferred," and the tax "shall be applicable to the services of repairing, servicing, altering or maintaining an item of tangible personal property which has been and is fastened to, connected with or built into real property."

Why concrete work is covered. "Concrete structures, such as sidewalks, steps, and retaining walls, consist of tangible personal property (concrete) that has been built into, and has become part of[,] real property. As such, any 'servicing' and 'altering' that is done to these structures, including cutting and coring them, is subject to sales tax." The Department tied this to the 1977 legislative fix (Senate Bill 47) that extended the labor-services tax to work on personal property that has become part of the real estate, "not only to work on fixtures but to work on any items of personal property that has become part of the real estate."

A useful contrast — soil. The Department noted that "soil excavation work is exempt under this construction since soil being excavated has never been tangible personal property." Concrete, by contrast, was tangible personal property before it was built in, so servicing it is taxable.

The construction/residential exemptions still apply. "These taxable services are exempted by the same sales tax exemptions that are in place for other taxable labor services. For example, the cutting and coring services would be exempt when they are done as part of original construction, or as part of the remodel, repair, or restoration work done to a residence. See Notice 98-02."

Bottom line: concrete cutting and coring is taxable labor on real-property improvements, unless it qualifies for the standard labor-service exemptions — original construction, or residential remodel/repair/restoration.

What this means for you

Concrete cutting, coring, and sawing contractors

Your labor is generally taxable under K.S.A. 79-3603(q) because you are servicing or altering concrete that has become part of real property. Charge Kansas sales tax on those services unless a labor-service exemption applies.

Know your exemptions

The same exemptions available for other taxable labor apply: work done as part of the original construction of a building or facility, and remodel, repair, or restoration work on a residence, is exempt. Document the qualifying project (and get any required exemption certificate) before treating a job as exempt.

Material matters — concrete vs. soil

The Department drew a clean line: cutting concrete (once tangible personal property, now part of the realty) is taxable, while excavating soil (never tangible personal property) is not. The nature of what you are working on drives taxability.

Common questions

Q: Is concrete cutting and coring taxable in Kansas?
A: Yes, as a general rule. Under K.S.A. 79-3603(q) it is taxable servicing/altering of concrete that has become part of real property — unless a labor-service exemption applies.

Q: When is the work exempt?
A: When it is part of the original construction of a building or facility, or part of remodel, repair, or restoration of a residence — the same exemptions that apply to other taxable labor services (see Notice 98-02).

Q: Why is excavating soil treated differently?
A: Because soil has never been tangible personal property, servicing it is not taxable under this provision. Concrete was tangible personal property before it became part of the realty, so cutting it is taxable.

Citations and references

• K.S.A. 79-3603(q) — imposes Kansas sales tax on services of repairing, servicing, altering, or maintaining tangible personal property, including such property that has been fastened to, connected with, or built into real property. The Department applied it to concrete cutting and coring, subject to the standard labor-service exemptions (original construction; residential remodel/repair/restoration, per Notice 98-02).

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2000-010

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

March 23, 2000

XXXX
XXXX
XXXX

RE: You letter dated February 24, 2000

Dear Mr. XXXX:

Thank you for your letter that we received late last month. You request a private letter ruling for BBB Company, Inc. You ask whether the concrete cutting and coring labor services done by the company are subject to the Kansas retailers’ sales tax. The services are performed using diamond-tipped blades mounted on saws that range in size from hand-held saws to ones that must be transported by trailer. The services are done to concrete sidewalks, steps, retaining walls, and other concrete structures. Please be advised that these services are subject to Kansas retailers’ sales tax.

The Kansas retailers’ sales tax act imposes tax on:

the gross receipts received for the service of repairing, servicing, altering or maintaining tangible personal property, except computer software described in subsection (s), which when such services are rendered is not being held for sale in the regular course of business, and whether or not any tangible personal property is transferred in connection therewith. The tax imposed by this subsection shall be applicable to the services of repairing, servicing, altering or maintaining an item of tangible personal property which has been and is fastened to, connected with or built into real property. . . . (K.S.A. 79-3603(q)).

Concrete structures, such as sidewalks, steps, and retaining walls, consist of tangible personal property (concrete) that has been built into, and has become part of real property. As such, any “servicing” and “altering” that is done to these structures, including cutting and coring them, is subject to sales tax.

This interpretation of K.S.A. 79-3603(q) is consistent with the department’s implementation of the law when it was enacted in 1977. In 1977, the Kansas legislature was faced with remedying a predecessor statute that the Kansas supreme court had struck down as unconstitutional. To remedy the uncertainties of the earlier law, the legislature added new provisions to make clear that the tax on labor services was intended to apply whenever services are done to tangible personal property “whether or not such personal property remains personal property or becomes a part of real estate,” or whether the property is “fastened to, connected with or built into real property.” The legislative history for 1977 Senate Bill 47 explains: “These revisions remove the basis for the earlier interpretation of legislative intent as being not to tax maintenance, servicing or repairing real estate, since under them [the new law] the tax on labor services would apply not only to work on fixtures but to work on any items of personal property that has become part of the real estate.” As you will note, soil excavation work is exempt under this construction since soil being excavated has never been tangible personal property. Concrete has been, and cutting services performed on such concrete structures is “altering” or “servicing” property that has become part of the real estate.

Accordingly, the services of cutting or coring concrete structures, such as sidewalks and walls, are subject to Kansas sales tax. These taxable services are exempted by the same sales tax exemptions that are in place for other taxable labor services. For example, the cutting and coring services would be exempt when they are done as part of original construction, or as part of the remodel, repair, or restoration work done to a residence. See Notice 98-02.

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 by operation of law without further department action if there is a change in the controlling statutes, administrative regulations, revenue rulings or case law that materially effects this determination. Please call me if you have any additional questions. My number is (785) 296-3081.

Sincerely,

Thomas E. Hatten
Attorney/Policy & Research

Date Composed: 04/11/2000 Date Modified: 10/11/2001

Table 1

Table 2