Are plumbing labor services taxable in Kansas, and does the residential construction-labor exemption apply?

Plain-English summary

A taxpayer asked how Kansas sales tax applies to plumbing labor services. The short answer turns on residential versus non-residential work.

The residential labor exemption. Under K.S.A. 2000 Supp. 79-3603(p) — enacted by 1998 Senate Bill No. 493, effective July 1, 1998 — services performed to install or apply tangible personal property are exempt from sales tax when they involve the original construction, reconstruction, restoration, remodeling, renovation, repair or replacement of a residence. The statute otherwise taxes installation/application labor "whether or not [the] property … remains tangible personal property or becomes a part of real estate," but carves out original construction of a building or facility, the listed residential work, and bridge/highway work. The Department will construe "residence" in 79-3603(p)(4) to include the land improvements that immediately surround the residence, so the residential repair-and-remodel exemption is generally coextensive with the exemption for the residence's original construction.

Materials are still taxable. The exemption is for labor only. Sales of materials and supplies used in residential or commercial plumbing remain subject to state and local sales tax — including the plumbing fixtures and materials, plus any shipping and handling charged by the supplier.

Non-residential labor is still taxable. Because the exemption extends only to residences, non-residential (commercial) labor services remain taxable, as do repair, maintenance, installation, and application services performed on tangible personal property.

Result here. The Department ruled that the plumbing labor services described are not subject to sales tax because they are for a residence, while all materials are subject to the appropriate Kansas sales/use tax at purchase, whether used at a residence or a commercial site.

What this means for you

Plumbers and residential contractors

Labor on a residence (new build or repair/remodel, plus the immediately surrounding land improvements) is exempt from Kansas sales tax. Don't charge sales tax on that residential labor — but do keep it clearly residential.

Materials always carry tax

You still pay sales/use tax on the fixtures, pipe, and materials you buy (including freight and handling), whether the job is residential or commercial. The residential exemption never reaches materials.

Commercial jobs are different

On non-residential work, the labor is taxable too. If you do both residential and commercial plumbing, track the labor by project type so you tax commercial labor and exempt residential labor correctly.

Common questions

Q: Is my plumbing labor at a house taxable?
A: No. Labor for the construction, repair, remodeling, or replacement of a residence (and its immediately surrounding land improvements) is exempt under K.S.A. 79-3603(p).

Q: Do I still pay tax on the fixtures and materials?
A: Yes. Materials and supplies — fixtures, materials, and any shipping and handling — remain subject to Kansas state and local sales/use tax, residential or commercial.

Q: What about plumbing labor on a commercial building?
A: That's taxable. The exemption reaches only residences, so non-residential labor services remain subject to sales tax.

Q: Does "residence" include the yard?
A: The Department construes "residence" to include the land improvements immediately surrounding the residence, making the repair/remodel exemption coextensive with the original-construction exemption.

Q: Does this ruling apply to my business?
A: A Kansas private letter ruling addresses only the requesting taxpayer's facts and cannot be relied on as precedent by others, though it reflects how the Department applies the residential labor exemption.

Citations and references

• K.S.A. 79-3603(p) (2000 Supp.; from 1998 Senate Bill No. 493, effective July 1, 1998) — taxes installation/application labor but exempts services for the original construction, reconstruction, restoration, remodeling, renovation, repair, or replacement of a residence (and building/facility original construction and bridge/highway work).
• K.S.A. 79-3603(p)(4) — the residential carve-out; the Department construes "residence" to include immediately surrounding land improvements.
• Materials remain taxable — sales of plumbing fixtures, materials, and shipping/handling stay subject to state and local sales/use tax, residential or commercial.
• Non-residential labor remains taxable — the exemption reaches only residences.
• 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-2003-001

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

January 8, 2003

TTTTTTTTTTT
TTTTTTTTTTT
TTTTTTTTTTT

Dear Mr. TTTTTT:

We wish to acknowledge receipt of your letter dated January 2, 2003, regarding the application of Kansas Retailers' Sales tax.

K.S.A. 2000 Supp. 79-3603(p) (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. This would include land improvements immediately surrounding the 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 will construe the term 'residence' in K.S.A. 79-3603(p)(4) to include the land improvements that immediately surround the 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 new law does not change the taxation of sales of materials and supplies that are purchased for use in residential or commercial plumbing. These sales continue to be subject to state and local sales tax. This would include, but not be limited to the plumbing fixtures and materials, plus any shipping and handling charges invoiced from the material supplier.. Similarly, sales tax continues to apply to non-residential labor services, since the new exemption extends only to residences. Repair, maintenance, installation and application services remain subject to sales tax when done to tangible personal property.

It is the opinion of the Kansas Department of Revenue that plumbing labor services that you have described in the above referenced letter would not be subject to sales tax, since the labor services rendered are for a residence. All materials would be subject to the appropriate Kansas sales/use tax at the time of purchase, whether the respective materials are used at a residence or a commercial site.

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.

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: 01/27/2003 Date Modified: 01/27/2003

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