Is labor to build and paint a new water tower exempt from Kansas sales tax as original construction, and is later repainting taxable?

Plain-English summary

The question was whether building and painting a new water tower is exempt from Kansas sales tax as original construction, and how later work at the site is treated. The Department ruled that the new build is exempt original construction, but subsequent repair, maintenance, and repainting are taxable.

A new water tower is "original construction of a building." "The department has determined that the original construction of a new water tower qualifies as the original construction of [a] building since it is an enclosure that houses water." Because Kansas exempts installation and labor services performed in connection with the original construction of a building or facility, the labor to build the new tower is exempt.

Painting the new tower is also exempt. The Department added that "the payments for labor services to paint a new water tower would be exempt from Kansas sales tax(es)." As part of the original construction of the new tower, the painting labor shares the exemption.

But later repair and maintenance are taxable. The exemption stops at original construction. "You must collect the appropriate Kansas sales tax(es) on services for the repair and maintenance projects at water tower sites that do not involve original construction. This would include the repainting of existing work." So once the tower exists, work to repair, maintain, or repaint it is taxable installation/repair labor.

Bottom line: treat the labor to construct and paint a new water tower as exempt original construction, but charge sales tax on repair, maintenance, and repainting of an existing tower.

What this means for you

Contractors building new water towers

The labor to construct a new water tower - including painting it as part of that original construction - is exempt from Kansas sales tax, because a new water tower is the original construction of a building.

Repair, maintenance, and repainting are taxable

Once the tower is built, services that do not involve original construction are taxable. That expressly includes repainting existing work. Collect Kansas sales tax on those charges.

The line is "original construction" vs. everything after

The dividing line is whether the work is part of building the new structure or is later repair/maintenance. Classify each project accordingly and bill the tax correctly.

Common questions

Q: Is the labor to build a new water tower taxable in Kansas?
A: No. The Department treats a new water tower as the original construction of a building, so the construction labor - including painting the new tower - is exempt.

Q: Is repainting an existing water tower taxable?
A: Yes. Repainting existing work is repair/maintenance that does not involve original construction, so it is taxable.

Q: What makes a water tower a "building"?
A: The Department reasoned that a water tower is an enclosure that houses water, so building a new one qualifies as the original construction of a building.

Citations and references

• The Department applied the Kansas exemption for labor and installation services performed in connection with the original construction of a building or facility. It held that a new water tower is the original construction of a building (an enclosure that houses water), so the labor to build and paint the new tower is exempt, while repair, maintenance, and repainting of an existing tower are taxable. No specific K.S.A. section was cited in the ruling for the holding.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2000-063

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

November 20, 2000

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Dear Ms. TTTTTT:

We wish to acknowledge receipt of your letter dated November 15, 2000, regarding the application of Kansas Retailers’ Sales tax.

The department has determined that the original construction of a new water tower qualifies as the original construction of building since it is an enclosure that houses water. Similarly, the payments for labor services to paint a new water tower would be exempt from Kansas sales tax(es). Please note that you must collect the appropriate Kansas sales tax(es) on services for the repair and maintenance projects at water tower sites that do not involve original construction. This would include the repainting of existing work.

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: 11/21/2000 Date Modified: 10/11/2001

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