Is the service of moving dirt for a developer between the developer's properties subject to Kansas sales tax?

Plain-English summary

A company asked whether the service of moving dirt for a developer — hauling it from one of the developer's properties to another — is subject to Kansas retailers' sales tax.

The Department said no. As a rule, Kansas sales tax applies to transfers of tangible personal property, but services are taxed only when they are specifically enumerated in the sales tax act. Dirt-moving is not one of the enumerated taxable services, so the charge for it is not taxable.

There is an important flip side. Because the dirt-moving service is nontaxable, the company providing it is the final consumer of what it uses to perform the work. So the company must pay sales or compensating (use) tax on all purchases of tangible personal property and taxable services that it uses or consumes in producing this nontaxable service.

What this means for you

Excavation and dirt-hauling businesses

Your charge to move dirt for a customer is generally not a taxable service in Kansas (it is not enumerated). Do not collect sales tax on that charge.

But you owe tax on your inputs

Since the service is nontaxable, you cannot buy your equipment, fuel, or supplies for resale. You pay sales or use tax on the tangible personal property and taxable services you consume doing the job.

Common questions

Q: Why isn't a dirt-moving charge taxable?
A: Kansas taxes services only if they are specifically listed in the sales tax act. Dirt-moving is not enumerated, so it is not a taxable service.

Q: Do I still pay tax on anything?
A: Yes. As the provider of a nontaxable service, you are the consumer of the tangible personal property and taxable services you buy to perform it, so you owe sales or compensating (use) tax on those purchases.

Citations and references

• This ruling was issued under K.A.R. 92-19-59 (the Kansas private letter ruling regulation). It applies the general Kansas rule that services are taxable only when specifically enumerated in the sales tax act — dirt-moving is not enumerated — without citing a specific K.S.A. section, and reminds the provider that it owes tax on the property and taxable services it consumes.

Source

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2004-008

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

April 26, 2004

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Dear Sirs:

The purpose of this letter is to respond to your request dated March 24, 2004. In it you asked if the service of moving dirt for a developer from one of his properties to another of his properties is subject to Kansas retailers’ sales tax. The answer to question is no.

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.

Your company would be required to pay sale or compensating taxes on all purchases of tangible personal property and taxable services used or consumed in the production of this nontaxable service.

This is a private letter ruling pursuant to K.A.R. 92-19-59, based on the representations you have made. To the extent those representations are incomplete or inaccurate, this ruling is void. This ruling will be revoked by operation of law without further department action if there is a change in the controlling statutes, administrative regulations, revenue rulings or case law that materially effects this determination.

Sincerely,

Mark D. Ciardullo
Tax Specialist

Date Composed: 04/30/2004 Date Modified: 04/30/2004

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