Does fabricating and installing a roof curb for a manufacturer's oven flue qualify for the Kansas manufacturing machinery and equipment exemption?

Plain-English summary

A roofing company performed roof repairs for a manufacturer that involved fabricating, installing, and flashing a curb for a flue installed on the company's roof. It asked whether this work qualifies for the exemption in K.S.A. 79-3606(kk) (the manufacturing machinery and equipment exemption). The Department's answer: the work is taxable — it does not qualify.

Why. The statute expressly excludes buildings from the exemption. K.S.A. 79-3606(kk)(5)(F) says "machinery and equipment used as an integral or essential part of an integrated production operation" does not include "buildings, other than exempt machinery and equipment that is permanently affixed to or becomes a physical part of the building, and any other part of real estate that is not otherwise exempt." Work by a roofing company to fabricate and install a curb on a roof to accommodate a flue is work done to the building — even though it's needed because a hole was cut in the roof for the flue. Installing curbing to divert water around the flue is not part of installing the flue itself.

The Department noted that when new industrial machinery is installed, building modifications are often needed and are typically taxable. The statute does contain a narrow, exclusive list of exempt building work — subsection (D)(4)'s "industrial fixtures, devices, support facilities and special foundations necessary for manufacturing and production operations" (and materials to fabricate them, with a signed exemption certificate). Because roof-curb work to divert water around a flue is part of the building and is not among those listed items, the fabrication and installation services are taxable.

(This ruling is the companion to Kansas P-2003-019, in which the Department pointed a manufacturer's representative to this roofing ruling as resolving the same flue-installation question.)

What this means for you

Roofing and construction contractors

Work to modify a building for new equipment — fabricating, installing, and flashing a roof curb for a flue or chimney — is taxable building work, not exempt machinery installation, even when it serves exempt production equipment.

Manufacturers installing new machinery

Expect the building-modification labor (roof penetrations, curbs, flashing) to be taxable. Only the narrow statutory categories — industrial fixtures, devices, support facilities, and special foundations necessary for production — fall within the building-work exemption, and that list is exclusive.

Drawing the line

The test is whether the work is on the building/real estate versus the production machinery. Diverting water around a flue is building work; it's separate from installing the flue that vents the exempt oven.

Common questions

Q: We fabricated and flashed a roof curb for an oven flue. Is that exempt under 79-3606(kk)?
A: No. The Department ruled it taxable building work that doesn't qualify for the manufacturing machinery and equipment exemption.

Q: Why isn't it part of installing the exempt oven/flue?
A: Installing curbing to divert water around the flue is work on the building, not part of installing the flue itself; 79-3606(kk)(5)(F) excludes buildings from the exemption.

Q: Is any building work exempt?
A: Only the exclusive list in subsection (D)(4) — industrial fixtures, devices, support facilities, and special foundations necessary for production. Roof-curb work isn't among them.

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 shows how the Department treats roof work tied to equipment installation.

Citations and references

• K.S.A. 79-3606(kk) — the manufacturing machinery and equipment exemption. The Department held roof-curb work does not qualify.
• K.S.A. 79-3606(kk)(5)(F) — excludes "buildings ... and any other part of real estate that is not otherwise exempt" from the exemption; roof-curb work is building work.
• Subsection (D)(4) — the exclusive list of exempt building work (industrial fixtures, devices, support facilities, and special foundations necessary for manufacturing/production, plus materials to fabricate them with a signed exemption certificate). Roof-curb work is not listed, so it is taxable.
• Companion ruling (Kansas P-2003-019) — points a manufacturer's representative to this roofing ruling as resolving the same flue-installation question.
• 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-2003-017

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

April 14, 2003

XXXX
XXXX
XXXX

RE: Your letter dated April 3, 2003

Dear XXXX:

Thank you for your letter. Recently, your company performed roof repairs for XXXX. The repairs involved fabricating , installing, and flashing a curb for a flue that was installed on the company's roof. You ask if this work qualifies for exemption under K.S.A. 79-3606(kk). Please be advised that the work is taxable. It does not qualify for the exemption.

K.S.A. 79-3606(kk)(5)(F) provides:

(5) "Machinery and equipment used as an integral or essential part of an integrated production operation" shall not include: . . .

(F) buildings, other than exempt machinery and equipment that is permanently affixed to or becomes a physical part of the building, and any other part of real estate that is not otherwise exempt;

Work done by a roofing company to fabricate and install a curb on a roof to accommodate a new flue or a new chimney is work done to the company's building. Although the work is needed because the business cut a hole in the roof to accommodate a new flue or chimney, the work is still roofing work done on the building. Installing curbing on a roof to divert water around a flue is not part of the installation of the flue itself.

Please note that when new industrial machinery is installed in a factory, modifications may be needed the building. Typically these modifications are subject to sales tax. While most of the work on a building is taxable, subsection (4) of K.S.A. 79-3606(kk) contains a list of building work that is exempt even though it does not otherwise qualify for exemption under K.S.A. 79-3606(kk). Subsection (D)(4) extends exemption to:

(D) industrial fixtures, devices, support facilities and special foundations necessary for manufacturing and production operations, and materials and other tangible personal property sold for the purpose of fabricating such fixtures, devices, facilities and foundations. An exemption certificate for such purchases shall be signed by the manufacturer or processor. If the fabricator purchases such material, the fabricator shall also sign the exemption certificate;

The things listed in K.S.A. 79-3606(D)(4) should be considered to be an exclusive list of services done to a manufacturer's building that qualify for exemption. Since installing curbing on a roof to diverts water around a flue is part of a building and is not something described in K.S.A. 79-3606(D), the services to fabricate and install the curbing are taxable.

I hope that I have answered all of your questions. Please call me if you have any additional questions and we can discuss them. My number is 785-296-3081. 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,

Thomas E. Hatten
Attorney/Policy & Research

Date Composed: 04/16/2003 Date Modified: 04/16/2003

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