Are charges for rehabilitative therapy, X-rays, respiratory therapy, and nurse staffing subject to Kansas sales tax?

Plain-English summary

A taxpayer asked whether the gross receipts from four services — rehabilitative therapy, taking X-rays, respiratory therapy, and nurse staffing — are subject to Kansas retailers' sales tax. The Department's answer is no.

The two-step analysis. The Department explained the framework it uses for any transaction:

1. Does the sales tax act generally impose tax on this type of transaction?
2. If so, does the act provide an exemption for it?

The rule for services. As a rule, sales tax is imposed on all transactions involving the transfer of tangible personal property. But for services, tax is imposed only on those transactions specifically enumerated in the sales tax act. (Exemptions, likewise, apply only as specifically enumerated.)

Applied here. Rehabilitative therapy, X-rays, respiratory therapy, and nurse staffing are services, and they are not among the services the Kansas sales tax act enumerates as taxable. Because the act does not reach them at step one, their gross receipts are not subject to sales tax. (This is a common pattern in Kansas: a service escapes sales tax not through an exemption, but because the legislature never enumerated it as taxable in the first place.)

What this means for you

Health-care and staffing providers

Charges for therapy services (rehabilitative, respiratory), diagnostic X-rays, and nurse staffing are not subject to Kansas sales tax, because Kansas taxes only enumerated services and these are not on that list. You generally do not collect sales tax on those service charges.

Don't confuse services with tangible goods

The non-taxability applies to the service itself. If you separately sell tangible personal property (equipment, supplies, retail products), those sales can still be taxable — the transfer of tangible property is generally taxed unless exempt. Keep service charges and any product sales distinct.

The "enumerated service" rule is the key

When evaluating any Kansas service charge, ask first whether the service is specifically enumerated as taxable. If it isn't, it isn't taxed — no exemption is needed. If it is, then look for an applicable exemption.

Common questions

Q: Are rehabilitative therapy, X-rays, respiratory therapy, and nurse staffing taxable in Kansas?
A: No. The Department advised that gross receipts from these services are not subject to Kansas retailers' sales tax.

Q: Why aren't they taxable?
A: Kansas taxes services only when they are specifically enumerated in the sales tax act, and these services are not enumerated, so the act does not reach them.

Q: What is the two-step analysis?
A: First, determine whether the act generally imposes tax on the type of transaction; second, determine whether an exemption applies. These services fail step one for taxability, so no tax is due.

Q: Could related sales still be taxable?
A: Yes. While these services are not taxed, a separate sale of tangible personal property is generally taxable unless a specific exemption applies.

Citations and references

• The determination rests on the Kansas rule that services are taxable only if specifically enumerated in the sales tax act; rehabilitative therapy, X-rays, respiratory therapy, and nurse staffing are not enumerated, so they are not taxed. The letter cites no specific taxing subsection.
• K.A.R. 92-19-59 — the regulation authorizing Kansas private letter rulings.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2002-067

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

July 25, 2002

XXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXX

Dear XXXXXXXXX:

I have been asked to respond to your letter dated July 9, 2002. In it, you ask if the gross receipts from the service of providing rehabilitative therapy, taking X-rays, respiratory therapy and nurse staffing are subject to Kansas retailers’ sales tax.

The answer to your question is no. Allow me to explain the Department’s rationale.

In deciding whether a particular transaction is subject to sales tax, a two step analysis is generally necessary. The first step is to determine whether the sales tax act generally imposes tax on the type of transaction in question. The second step is to determine whether the act provides an exemption for the particular type of transaction.

As a rule, sales tax is imposed on all transactions involving the transfer of tangible personal property. With services, however, tax is imposed only on those transactions that are specifically enumerated in the sales tax act. Exemptions for transactions involving either tangible personal property or services are allowed as specifically enumerated.

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 07/29/2002 Date Modified: 07/29/2002

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