Are labor services to install or repair land improvements that surround a residence subject to Kansas sales tax?

Plain-English summary

The question was whether labor services performed on land improvements that immediately surround a residence - things like driveways, fences, and patios - are subject to Kansas sales tax. The Department ruled that this labor is exempt, but the materials are taxable.

The starting point is the residential-construction exemption. 1998 Senate Bill No. 493 exempted certain construction services that had been taxable. Effective July 1, 1998, "services performed to install or apply tangible personal property are exempt from sales tax when the services involve the original construction, reconstruction, restoration, remodeling, renovation, repair or replacement of a residence." The imposition statute, K.S.A. 79-3603(p), taxes the service of installing or applying tangible personal property "except that no tax shall be imposed" on that service in connection with the original construction of a building or facility or the reconstruction, remodeling, renovation, repair, or replacement of a residence.

The Department extends the residential exemption to the surrounding land. It said it will construe and administer K.S.A. 79-3603(p)(4) "as exempting the land improvements that immediately surround a residence," so that "the exemption for residential repair and remodeling services generally will be coextensive with the exemption for the original construction of the residence."

How to tell whether something is an exempt "land improvement." The test is "whether tangible personal property has been erected upon or affixed to the land." To count as residential, "the land improvement must be immediately near and must principally serve the residence." So repairs to a yard fence are exempt, but repairs to a fence built to corral pleasure horses are not; barns and machine sheds for farm equipment do not qualify. The Department listed qualifying land improvements "including, but not limited to, sidewalks, driveways, patios, fences, sodding, tree planting, utility pipes and wires, septic tanks, swimming pools, and tool sheds," and said repair services to steps, stairs, access ramps, porches, and decks are exempt "whether they are considered to be part of the residence . . . or a land improvement."

Materials are still taxable. The Department closed by confirming that services at a residence (including things like private street reconstruction) are not taxable, but "any materials purchased to perform said services would be subject to the appropriate Kansas sales tax(es)."

What this means for you

Contractors doing residential yard and site work

Your labor to install or repair land improvements that immediately surround and principally serve a home - driveways, patios, fences, sidewalks, sodding, septic tanks, pools, tool sheds - is exempt from Kansas sales tax, the same as work on the house itself. You do not charge sales tax on that labor.

The materials you buy are taxable

The exemption is for the labor only. You still pay Kansas sales or use tax on the tangible personal property (concrete, fencing, pipe, sod, etc.) you buy to do the job, and that cost is passed along as part of your price.

"Immediately near and principally serves the residence" is the line

A yard fence qualifies; a fence to corral pleasure horses does not. Barns and machine sheds for farm equipment do not qualify. If the improvement chiefly serves something other than the home, the residential labor exemption does not reach it.

Common questions

Q: Is labor to build a residential driveway or patio taxable in Kansas?
A: No. The Department treats land improvements that immediately surround and principally serve a residence the same as the residence itself, so the installation and repair labor is exempt under K.S.A. 79-3603(p)(4).

Q: Do I still pay tax on the materials?
A: Yes. Only the labor is exempt. The materials purchased to do the work remain subject to Kansas sales tax.

Q: What kinds of improvements qualify?
A: Sidewalks, driveways, patios, fences, sodding, tree planting, utility pipes and wires, septic tanks, swimming pools, and tool sheds, among others - anything erected upon or affixed to the land that is immediately near and principally serves the residence. Steps, stairs, ramps, porches, and decks are also exempt.

Q: What does NOT qualify?
A: Improvements that principally serve something other than the home - such as a fence to corral pleasure horses, or barns and machine sheds for farm equipment.

Citations and references

• K.S.A. 79-3603(p) - imposes Kansas sales tax on the service of installing or applying tangible personal property, but exempts that service when done in connection with the original construction of a building or facility or the reconstruction, remodeling, renovation, repair, or replacement of a residence (as amended by 1998 Senate Bill No. 493, effective July 1, 1998).
• K.S.A. 79-3603(p)(4) - the Department construes and administers this provision as exempting land improvements that immediately surround and principally serve a residence, making the residential repair/remodel labor exemption coextensive with the exemption for original construction of the residence; materials used in the work remain taxable.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2001-012

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

February 14, 2001

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Dear Ms. TTTTTTTTT:

We wish to acknowledge receipt of your letter dated February 13, 2001, regarding the application of Kansas Retailers’ Sales tax.

1998 Senate Bill No. 493 exempts certain construction services that were formerly subject to Kansas sales tax. Effective July 1, 1998, services performed to install or apply tangible personal property are exempt from sales tax when the services involve the original construction, reconstruction, restoration, remodeling, renovation, repair or replacement of a residence.

K.S.A. 79-3603(p) imposes a sales tax upon: “the gross receipts received for the service of installing or applying tangible personal property which when installed or applied is not being held for sale in the regular course of business, and whether or not such tangible personal property when installed or applied remains tangible personal property or becomes a part of real estate, 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 or facility, the original construction, reconstruction, restoration, remodeling, renovation, repair or replacement of a residence or the construction, reconstruction, restoration, replacement, remodeling, restoration, renovation or reconstruction, restoration, replacement or repair of a bridge or highway. . .”

The department has determined that it will construe and administer K.S.A. 79-3603(p)(4) as exempting the land improvements that immediately surround a residence. This means the exemption for residential repair and remodeling services generally will be coextensive with the exemption for the original construction of the residence.

The test for whether something is a “land improvement” shall be whether tangible personal property has been erected upon or affixed to the land. To qualify as residential, the land improvement must be immediately near and must principally serve the residence. This means that repairs to a yard fence are exempt but that repairs to a fence designed to corral pleasure horses are not. Barns and machine sheds for farm equipment shall not be considered to be land improvement that principally serve the residence.

Land improvements shall include, but not be limited to, sidewalks, driveways, patios, fences, sodding, tree planting, utility pipes and wires, septic tanks, swimming pools, and tool sheds. Repair services to structures such as steps, stairs, access ramps, porches, and decks shall be exempt whether they are considered to be part of the residence because they are attached to it, or a land improvement because they are immediately nearby.

Please be advised that services performed at a residence, which include, but are not limited to, private street reconstruction would not be subject to sales tax in the state of Kansas. Any materials purchased to perform said services would be subject to the appropriate Kansas sales tax(es).

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: 02/16/2001 Date Modified: 10/11/2001

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