Where is Kansas sales tax collected on repair services, and when is an out-of-state delivery exempt?

Plain-English summary

A business asked how Kansas sales tax applies to the gross receipts from repair services performed in Kansas, given recent changes to the sales tax act (the move to destination-based sourcing).

The Department explained the sourcing rules for repairs:

• Delivery point in Kansas controls. Kansas repair shops collect the state and local sales tax for the place where the repaired property is delivered to the customer in Kansas — most often at the shop or at the customer's home or place of business. This applies even when the shop picks up the property at the customer's location, repairs it at the shop, and returns it to the customer.
• Out-of-state delivery is not taxed. When the ship-to or deliver-to address is outside Kansas, Kansas tax is not collected on the repair services or the parts, provided the shop ships or delivers the property to the out-of-state address on its own vehicles, by common carrier, or by the U.S. Postal Service.
• Sub-repairs don't change the result. These rules control even when the shop (1) does the repair at another of its facilities (in Kansas or out of state), or (2) contracts with another business (in or out of state) to do some or all of the repair. When a shop subcontracts the repair, it must give that business a resale exemption certificate for services.

What this means for you

Repair shops

Charge tax based on where you hand the repaired item back to the customer in Kansas — usually your shop or the customer's location. Keep the local rate for that delivery point in mind, not where the work was done.

Shipping repaired goods out of state

If you deliver the finished repair to an address outside Kansas by your own truck, common carrier, or USPS, don't collect Kansas tax on the service or parts.

Subcontracting repairs

You can give the business doing the actual repair a resale exemption certificate for the services, then handle tax with your customer based on the delivery point.

Common questions

Q: Which local sales tax rate applies to a repair?
A: The rate for the place in Kansas where the repaired property is delivered to the customer — usually the shop or the customer's home or business.

Q: Do I charge Kansas tax if I ship the repaired item out of state?
A: No. When the deliver-to address is outside Kansas and you ship by your own vehicle, common carrier, or USPS, Kansas tax is not collected on the repair services or parts.

Q: What if I send the work to another repair business?
A: The sourcing result is the same. When you subcontract the repair, give that business a resale exemption certificate for the services.

Citations and references

• This ruling was issued under K.A.R. 92-19-59 (the Kansas private letter ruling regulation). It applies Kansas's destination-based sourcing to repair services — tax is collected for the Kansas delivery point, out-of-state deliveries are not taxed, and subcontracted repairs are purchased for resale — without citing a specific K.S.A. section.

Source

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2004-013

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

April 29, 2004

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Dear Sirs:

The purpose of this letter is to respond to your request dated January 16, 2004. In it you asked if the gross receipts from the sale of services performed in Kansas are subject to sales tax in light of recent changes in the sales tax act.

Kansas repair shops are required to collect the state and local sales tax in place where the repaired property is delivered to the customer in Kansas. Most often, customer delivery occurs either at the repair shop or at the customer's home or place of business. This rule applies when a shop picks up the property at the customer's location, repairs the property at their shop, and then returns the property to the customer at the customer's location.

When the ship-to or deliver-to address of repaired property is outside Kansas, Kansas tax should not be collected on either repair services or parts when the service provider ships or delivers the property to an out-of-state address on the service provider's own vehicles, by common carrier, or by the United States Postal Service.

These rules shall control even when a repair shop: (1) repairs the customer's property at another one of its repair facilities, in Kansas or outside the state; or (2) contracts with another business, in Kansas or outside-the-state, to do some or all of the actual repairs for the customer. When a repair shop contracts with another business to service or repair a customer's property, the repair shop is required to give the business a resale exemption certificate for services.

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

MDC

Date Composed: 05/06/2004 Date Modified: 05/06/2004

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