Can sandblast sand consumed on an exempt construction project be purchased free of Kansas sales tax with a project exemption certificate?

Plain-English summary

The question was whether sandblast sand used on a construction project could be bought free of Kansas sales tax. The Department said yes — with a valid project exemption certificate — because the sand is consumed on an exempt project.

The governing exemption is K.S.A. 79-3606(d). It exempts tangible personal property and services a contractor buys to construct, equip, reconstruct, maintain, repair, enlarge, furnish, or remodel facilities for a qualifying entity — a public or private nonprofit hospital or public hospital authority, a public or private elementary/secondary school, a public or private nonprofit educational institution, or a political subdivision — where those purchases would be exempt if the entity bought them directly (and, for a political subdivision, the cost is paid from its funds).

The mechanics: the qualifying entity obtains a project exemption certificate (PEC) from the state and furnishes it to the contractor. The contractor then buys materials for the project without tax, gives the certificate number to each supplier, and the suppliers put that number on their invoices.

The Department explained the PEC provisions apply to materials, services, and supplies that become a physical part of a building erection, repair, or enlargement project — and confirmed that sandblast sand, being consumed on the exempt project, can be purchased tax-exempt under a valid PEC.

What this means for you

Contractors on exempt projects

Consumable jobsite materials like sandblast sand — not just the materials that remain in the finished structure — can be purchased tax-free when you hold a valid project exemption certificate for a qualifying project. Give the PEC number to your suppliers and have them show it on the invoice.

Suppliers selling to contractors

Sell exempt only when the contractor provides a valid PEC number, and record that number on the invoice. Without a PEC, the sale is taxable.

Qualifying owners (schools, hospitals, nonprofits, political subdivisions)

It's the owner that obtains the PEC from the state and passes it to the contractor. For a political subdivision, the project cost must be paid from its own funds for the purchases to qualify.

Common questions

Q: Can I buy sandblast sand tax-free for a project?
A: Yes, if you have a valid project exemption certificate for a qualifying exempt project — the sand is treated as consumed on the exempt project.

Q: Which projects qualify under K.S.A. 79-3606(d)?
A: Projects for qualifying nonprofit hospitals/hospital authorities, public or private schools, nonprofit educational institutions, and political subdivisions (paid from the subdivision's funds).

Q: How does the exemption actually work?
A: The owner obtains a project exemption certificate from the state and gives it to the contractor, who furnishes the certificate number to suppliers; the suppliers put the number on their invoices.

Q: Does the material have to end up in the building?
A: The PEC covers materials, services, and supplies that become a physical part of the project; here the Department treated consumable sandblast sand used on the exempt project as covered.

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 applies the project exemption to consumables like sandblast sand.

Citations and references

• K.S.A. 79-3606(d) — exempts a contractor's purchases of tangible personal property and services for constructing/repairing/enlarging (etc.) facilities for qualifying nonprofit hospitals, schools, nonprofit educational institutions, and political subdivisions, using a project exemption certificate obtained by the owner and furnished to the contractor. The Department applied it so sandblast sand consumed on the exempt project can be bought tax-free.
• Project exemption certificate (PEC) — obtained from the state by the qualifying owner, furnished to the contractor, whose number is given to suppliers and shown on invoices.
• 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-2003-028

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

May 14, 2003

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Dear Ms. TTTT:

We wish to acknowledge receipt of your letter dated May 14, 2003, regarding the application of Kansas Retailers' Sales tax.

K.S.A. 79-3606(d) exempts from sales tax: "all sales of tangible personal property or services purchased by a contractor for the purpose of constructing, equipping, reconstructing, maintaining, repairing, enlarging, furnishing or remodeling facilities for any public or private nonprofit hospital or public hospital authority, public or private elementary or secondary school or a public or private nonprofit educational institution, which would be exempt from taxation under the provisions of this act if purchased directly by such hospital or public hospital authority, school or educational institution; and all sales of tangible personal property or services purchased by a contractor for the purpose of constructing, equipping, reconstructing, maintaining, repairing, enlarging, furnishing or remodeling facilities for any political subdivision of the state, the total cost of which is paid from funds of such political subdivision and which would be exempt from taxation under the provisions of this act if purchased directly by such political subdivision. . . When any political subdivision of the state, public or private nonprofit hospital or public hospital authority, public or private elementary or secondary school or public or private nonprofit educational institution shall contract for the purpose of constructing, equipping, reconstructing, maintaining, repairing, enlarging, furnishing or remodeling facilities, it shall obtain from the state and furnish to the contractor an exemption certificate for the project involved, and the contractor may purchase materials for incorporation in such project. The contractor shall furnish the number of such certificate to all suppliers from whom such purchases are made, and such suppliers shall execute invoices covering the same bearing the number of such certificate. . .

The project exemption certificate provisions provided in K.S.A. 79-3606(d) would apply to purchases of materials, services and supplies which become a physical part of a building erection, repair or enlargement project.

Please be advised that the sandblast sand could be purchased exempt from Kansas sales/use tax(es) with a valid project exemption certificate, since said sand is consumed on an exempt project.

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: 05/19/2003 Date Modified: 05/19/2003

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