Were towing-service charges subject to Kansas retailers' sales tax, and did the towing company owe tax on its equipment and taxable inputs?

Plain-English summary

The towing service itself was not subject to Kansas retailers' sales tax, but the towing company had to pay tax on the property and taxable services used to provide it.

Kansas taxed only services specifically enumerated by law. The Department said the described towing services were not then one of those taxable services.

That did not make the towing business exempt from tax generally. Because it used tangible personal property and taxable services to perform a nontaxable service, it had to pay sales tax when purchasing those inputs.

What this means for you

Towing companies

Do not collect Kansas sales tax on the towing charge under this historical ruling, but pay tax on taxable equipment, supplies, and services used in the business unless a separate exemption applies.

Service businesses

A nontaxable service provider is usually the consumer of its inputs. Distinguish the tax treatment of the customer charge from the business's own purchases.

Common questions

Q: Was towing a taxable Kansas service in this ruling?
A: No.

Q: Did the business get to buy all equipment and supplies tax-free?
A: No. It had to pay tax on tangible personal property and taxable services used to provide towing.

Q: Why was the towing charge not taxed?
A: Kansas taxed only enumerated services, and the Department said towing was not then enumerated.

Citations and references

• K.A.R. 92-19-59 — Kansas Private Letter Ruling procedure

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2004-051

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

September 13, 2004

TTTTTTTTTTT
TTTTTTTTTTT
TTTTTTTTTTT
TTTTTTTTTTT

Dear Mr. TTTTTTT:

We wish to acknowledge receipt of your letter dated August 30, 2004, regarding the application of Kansas Retailers’ Sales tax.

The state of Kansas taxes only enumerated services. The towing services that you are providing are not currently subject to sales tax in the state of Kansas. However, you must pay sales tax on all articles of tangible personal property and all taxable services to provide the nontaxable services.

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: 10/05/2004 Date Modified: 10/05/2004

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