How does Kansas sales tax apply to leasing propane tanks and equipment and to delivering oil and miscellaneous items?

Plain-English summary

A propane dealer asked how Kansas sales tax applies to leasing propane tanks and equipment and to delivering oil and miscellaneous items. The Department ruled both are taxable, and pointed the dealer to an enclosed question-and-answer sheet for the rest.

Leasing the tanks and equipment is taxable — on every payment. "K.S.A. 79-3603(h) imposes a sales tax upon: 'the gross receipts from the service of renting or leasing of tangible personal property. . . .'" Applying it, the Department advised that "sales tax is imposed on the total amount of each lease payment which the lessee is obligated under the contract to pay to the lessor for continued use of the propane tanks and equipment." Each periodic lease payment carries tax, not just the first.

Selling oil and miscellaneous items is taxable too. The letter cited the retail-sales imposition — quoted in the ruling as "K.S.A. 79-3606(a)" — that a "sales tax [applies] 'upon the gross receipts received from the sale of tangible personal property at retail within this state.'" (That quoted language is the general Kansas retail-sales imposition, codified at K.S.A. 79-3603(a); the ruling's own text prints the section number as 79-3606(a), which we reproduce as written.) On that basis, "[t]he delivery of oil and miscellaneous items would be subject to sales tax in the state of Kansas."

Local rate follows the retailer's situs. For these sales, "the local tax due[] would be the rate imposed at the situs of the retailer" — that is, the city/county local sales tax is sourced to the retailer's own location.

Bottom line: propane-tank and equipment leases are taxable on each lease payment; oil and miscellaneous item sales are taxable with the local rate determined by the retailer's location.

What this means for you

Propane, fuel, and equipment-leasing businesses

When you lease tanks or equipment to customers, charge Kansas sales tax on each lease payment they owe for continued use — the tax applies to the full stream of payments, not just the initial one. Your sales of oil and other items are taxable as well.

Know where the local rate comes from

For these transactions the Department sourced the local tax to the retailer's situs — your business location's city/county rate. Make sure you are collecting the correct combined state-plus-local rate for where the sale is sourced.

The cited section number vs. the quoted law

The ruling quotes the standard retail-sales imposition but prints the section as "79-3606(a)"; the imposition on retail sales of tangible personal property is codified at K.S.A. 79-3603(a). The taxable result — sales of oil and miscellaneous items are subject to Kansas sales tax — is unaffected by the citation slip.

Common questions

Q: Is leasing propane tanks taxable in Kansas?
A: Yes. Under K.S.A. 79-3603(h), renting or leasing tangible personal property is taxable, and the Department applied it to the full amount of each lease payment for the tanks and equipment.

Q: Are sales of oil and miscellaneous items taxable?
A: Yes. The Department ruled the delivery of oil and miscellaneous items is subject to Kansas sales tax as a retail sale of tangible personal property.

Q: Which local rate applies?
A: The local sales tax at the rate imposed at the retailer's situs — the seller's own location — applies to these sales.

Citations and references

• K.S.A. 79-3603(h) — imposes Kansas sales tax on the gross receipts from renting or leasing tangible personal property; the Department applied it to tax each propane-tank and equipment lease payment.
• K.S.A. 79-3606(a) — cited in the ruling for the imposition of sales tax "upon the gross receipts received from the sale of tangible personal property at retail within this state." That quoted retail-sales imposition is codified at K.S.A. 79-3603(a); the ruling prints the section number as 79-3606(a), reproduced here as written.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2000-015

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

April 6, 2000

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Dear Ms. TTTTTTT:

We wish to acknowledge receipt of your letter dated October 25, 1999, regarding the application of Kansas Retailers’ Sales tax.

K.S.A. 79-3603(h) imposes a sales tax upon: “the gross receipts from the service of renting or leasing of tangible personal property. . .”

Please be advised that sales tax is imposed on the total amount of each lease payment which the lessee is obligated under the contract to pay to the lessor for continued use of the propane tanks and equipment.

K.S.A. 79-3606(a) imposes a sales tax: "upon the gross receipts received from the sale of tangible personal property at retail within this state."

The delivery of oil and miscellaneous items would be subject to sales tax in the state of Kansas. In this instance, the local tax due, would be the rate imposed at the situs of the retailer.

I have enclosed a Question and Answer format that I trust will answer the rest of your questions.

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: 04/19/2000 Date Modified: 10/11/2001

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