Can a linen and apparel rental/laundry business buy the consumables used to clean the rented items without paying Kansas sales tax?

Plain-English summary

A business that rents linens and apparel (to businesses and individuals) and launders and cleans those items asked whether it could buy the consumables used to clean the rented goods without paying Kansas sales tax. The Department said yes — because the rental and laundry services are taxable, the consumables used to provide them are exempt — but it drew a sharp line around coin-operated machines and equipment.

Consumables for the taxable service are exempt. In Kansas, renting property is a taxable service (K.S.A. 79-3603(h)), and dry cleaning, pressing, dyeing, and laundry services are taxable (K.S.A. 79-3603(i)). Because the business collects sales tax on its rental and laundry charges, the property it consumes to provide those taxable services is exempt. That includes electricity for washers, dryers, presses, ironing machines, and mangles; water; natural gas for water heaters; salt for water softeners; soap and cleaning solvents; and dry-cleaning chemicals.

Coin-operated machines flip the result. Coin-operated laundry devices are exempt — their receipts are not taxed (K.S.A. 79-3603(i)). Because consumables are only exempt when they support a taxable retail service, consumables used in coin-operated machines are taxable. That includes the electricity, natural gas, water, salt, and soap used to run coin-operated washers and dryers.

Equipment is always taxable. Sales of equipment to laundries and coin-operated laundromats are taxable. Both are primarily retail businesses and may not claim exemption on their purchases — so washers, dryers, extractors, presses, ironing machines, mangles, and office, communication, and delivery equipment are all taxable. Likewise, consumables used in in-house laundry (for example, a hotel cleaning its own linens and bedding) are taxable, because no taxable service is being sold.

Bottom line: consumables that go into a taxable linen-rental or laundry service are exempt; consumables that feed exempt coin-operated machines, and all equipment purchases, are taxable.

What this means for you

Linen-rental and commercial laundry operators

If you collect sales tax on your rental and laundry charges, the property you consume to provide the service — utilities, water, softener salt, soaps, solvents, dry-cleaning chemicals — is exempt. Give suppliers a resale/consumed-in-service exemption certificate for those items.

Coin-operated laundromats

Because coin-op receipts are not taxed, you get no consumables exemption. The electricity, gas, water, salt, and soap you use in coin-operated machines are taxable purchases. Businesses that run both taxable services and coin-op machines must split their consumables accordingly.

All operators: equipment is taxable

Washers, dryers, extractors, presses, mangles, and office/communication/delivery equipment are taxable when you buy them — a laundry or laundromat is a retail business and cannot exempt its equipment. And in-house laundering (like a hotel washing its own linens) is not a taxable service, so its consumables are taxable too.

Common questions

Q: Are the soaps, chemicals, and utilities used to launder rented linens taxable?
A: No, not when they support a taxable rental or laundry service. Because those services are taxable (79-3603(h) and (i)) and the business collects tax on them, the consumables used to provide them are exempt.

Q: What about consumables used in coin-operated machines?
A: Those are taxable. Coin-operated laundry receipts are exempt (79-3603(i)), so the consumables feeding those machines do not qualify for the exemption.

Q: Can the business buy its washers and dryers tax-free?
A: No. Equipment purchases are taxable; a laundry or laundromat is a retail business and cannot claim exemption on any of its equipment.

Citations and references

• K.S.A. 79-3603(i) — taxes dry cleaning, pressing, dyeing, and laundry services, but exempts coin-operated laundry devices; the basis for exempting consumables used in taxable laundry services while taxing those used in coin-operated machines.
• K.S.A. 79-3603(h) — makes the service of renting property (including linens and apparel) taxable, so consumables used to provide that taxable rental service are exempt.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2001-083

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

August 8, 2001

XXXX
XXXX
XXXX

RE: Your letter of July 11, 2001

Dear XXXX:

Thank you for your recent letter. You ask if you may claim exemption on purchases of consumables used in a linen and apparel business. Your business rents linen and apparel to consumers, including businesses and individuals. The consumables are used to clean and launder the linens and apparel. In Kansas, the rental of linens and apparel is a taxable service. Since your business is collecting sales tax on its rental charges, it may claim exemption on the consumables used to launder and clean the items being rented.

In Kansas, dry cleaning, pressing, dyeing, and laundry services are subject to sales tax. K.S.A. 79-3603(i). The service of renting property is also taxable. K.S.A. 79-3603(h). However, coin-operated laundry devices are exempt, whether automatic or manually operated. K.S.A. 79-3603(i). The fact that the receipts from coin-operated laundry machines are exempt and other laundry services are taxable sets up two schemes in Kansas for how items consumed in laundries and laundromats are taxed. One is for coin-operated laundromats. The other is for laundries and linen services that charge sales tax to their customers.

Consumables used in the operation of coin-operated machines. When coin operated laundry machines are used to provide laundry services, the receipts from the machine are not taxed. Since consumables are only exempt when a retail service is taxed, consumables used in coin-operated machines are taxable. Taxable consumables used in coin-operated machines include: electricity used to operate washing and drying machines; natural gas consumed in water heaters and dryers; water; salt used in water softeners; soap or cleaning solvents if provided as part of the charge; and so forth

Consumables used in taxable laundry and linen services. Laundry and dry cleaning service charges are subject to Kansas sales tax. Sales tax also applies to the rental of uniforms and linens. Since these services are both taxable, property consumed in providing the services is exempt. This includes: electricity used to operate washing and drying machines; electricity used to operate equipment used in cleaning, ironing, or pressing the garments, including presses, ironing machines, and mangles; water; natural gas consumed in water heaters; salt used in water softeners; soap or cleaning solvents; dry cleaning chemicals; electricity to operate dry cleaning machines; and so forth.

Sales of equipment to laundries and coin-operated laundromats are taxable. Both types of business are primarily retail businesses and, therefore, may not claim exemption on any of their purchases. Taxable equipment purchases includes purchases of washers, dryers, extractors, presses, ironing machines, mangles, office equipment, communication equipment, delivery equipment, and all other equipment used in the business. Similarly, consumables used in in-house laundry services, such as at hotels to clean the hotels linens and bedding, are taxable.

I hope that my letter answers all of your questions. If you need to discuss this matter further, please call me at (785) 296-3081.

Sincerely,

Thomas E. Hatten
Attorney/Policy & Research

Date Composed: 08/09/2001 Date Modified: 10/11/2001

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