Is remodeling labor on a nursing or assisted-living facility taxable in Kansas?

Plain-English summary

A contractor asked whether its labor to remodel a nursing/assisted-living facility is taxable. The Department said it depends on which part of the facility the labor is performed on:

• Residential portions — labor exempt. Remodeling labor on the residential (noncommercial) areas is exempt from Kansas sales tax.
• Commercial portions — labor taxable. Remodeling labor on the commercial areas is subject to Kansas sales tax.

To draw the line, the Department relied on Revenue Ruling 19-2003-1. The residential portion is limited to (1) residents' bedrooms and attached bathrooms and (2) residents' apartment units. Commercial areas include (but are not limited to) activity rooms, common showers and restrooms, day rooms, dining rooms, examination rooms, hallways, kitchens, lounges, nursing stations, parking lots, utility rooms, storage areas, swimming pools, and all other areas — including those open to visiting members of the public.

What this means for you

Contractors remodeling nursing and assisted-living facilities

Split your labor billing by area. Labor on residents' bedrooms, their attached bathrooms, and apartment units is exempt; labor on shared and service spaces (dining, kitchens, hallways, activity and nursing areas, etc.) is taxable. Keep records that tie labor to specific areas.

Facility owners and operators

Expect sales tax on remodeling labor for the commercial/shared areas of your facility, even though labor on the residents' own living spaces is exempt.

Common questions

Q: Is all remodeling labor at a nursing facility exempt because people live there?
A: No. Only labor on the residential areas (residents' bedrooms, attached bathrooms, and apartment units) is exempt; labor on commercial/shared areas is taxable.

Q: How do I tell residential from commercial?
A: Revenue Ruling 19-2003-1 lists them — residential is residents' bedrooms/attached baths and apartment units; commercial includes dining rooms, kitchens, hallways, activity rooms, nursing stations, and other shared or public areas.

Citations and references

• Revenue Ruling 19-2003-1 — the Department quoted its list distinguishing the residential portion (residents' bedrooms and attached bathrooms; residents' apartment units) from commercial areas (activity rooms, common showers and restrooms, day rooms, dining rooms, examination rooms, hallways, kitchens, lounges, nursing stations, parking lots, utility rooms, storage areas, swimming pools, and other areas open to the public). Remodeling labor is exempt on residential areas and taxable on commercial areas. The ruling cites no specific statute section.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2005-013

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

May 31, 2005

XXXXX
XXXXX
XXXXX
XXXXX

Dear XXXXX:

I have been asked to answer your letter dated December 13, 2004. In it, you inquired about the remodeling of a nursing/assisted living facility and whether or not the gross receipts received from specific sections of the remodeling process would be taxed on the labor provided by your business.

You are correct in your original conclusions that the labor is exempt from tax on the residential portion of the reconstruction. Conversely, the commercial portions would be subject to Kansas sales tax. Revenue Ruling 19-2003-1 elaborates as to which sections of a nursing/assisted living facility are to be regarded as residential and commercial. Below it follows in part:

“…The noncommercial or residential portion of a facility shall include: (1) the residents' bedroom and attached bathroom, if any; and (2) the residents' apartment units, if any. Commercial areas include, but are not limited to: activity rooms, common showers and restrooms, day rooms, dining rooms, examination rooms, hallways, kitchens, lounges, nursing stations, parking lots, utility rooms, storage areas, swimming pools, and all other areas of the facility other than the residents' bedrooms, attached bathrooms, and apartment units. As the list reflects, commercial areas include those areas that are open to members of the public who are visiting residents of the facility.”

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.

I trust this information is of assistance. If I can be of further service, please feel free to contact me.

Sincerely,

Thomas P. Browne, Jr.
Tax Specialist

DVL

Date Composed: 06/01/2005 Date Modified: 06/01/2005

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