Does the Kansas tire excise tax apply to racing tires sold for off-highway race cars?

Plain-English summary

An Illinois company that wholesales and retails automobile racing tires — and sells them at race tracks in Kansas under contracts with race promoters — asked whether its retail sales of racing tires are subject to the Kansas Tire Excise Tax. The tires it sells are usable only for oval-track or drag racing, are marked "Not Intended for Highway Use," and are not street legal.

The Department said the tire excise tax does not apply to these racing-tire sales. It relied on its June 12, 1991 Notice on Tire Excise Tax, which explains that the tax uses the broad definition of "vehicle" in K.S.A. 8-1485 — "every device on, upon or by which any person or property is or may be transported or drawn upon a highway," except human-powered devices and things running on rails. That broad definition brought many tires within the tax, but the Notice also states the tax "does not apply to the sale of new tires for use on vehicles not authorized or allowed to operate on public streets and highway."

A race car used exclusively on oval tracks and drag strips is not authorized or allowed on public roads, so its tires fall outside the tax. The Department therefore determined the tire excise tax does not apply to the racing-tire sales described.

Note the scope: this ruling is only about the tire excise tax. The company stated that it already collects and remits ordinary Kansas retailers' sales tax on its retail sales at the track, and the ruling doesn't disturb that.

What this means for you

Sellers of specialty or off-road tires

The tire excise tax follows the use of the vehicle, not the mere fact that you're selling a tire. Tires for vehicles that can't legally operate on public roads — dedicated race cars here — are outside the excise tax. Keep evidence that the tires are off-highway only (markings like "Not Intended for Highway Use," non-street-legal construction). This is separate from sales tax, which still applies to your retail sales.

Racers and race teams buying tires

Purpose-built racing tires for track-only cars shouldn't carry the Kansas tire excise tax, though ordinary sales tax on the purchase still applies.

Common questions

Q: Are racing tires subject to the Kansas tire excise tax?
A: Not when they're for cars used exclusively off public roads (oval track, drag strip) and not street legal. The Department ruled the excise tax doesn't apply to those sales.

Q: Why not — aren't they still tires?
A: The tax reaches tires for "vehicles" that may be operated on a highway (K.S.A. 8-1485). A race car that isn't authorized on public streets isn't such a vehicle for this purpose, per the Department's 1991 tire-tax notice.

Q: Does this mean no tax at all on racing-tire sales?
A: No. This ruling is only about the tire excise tax. Ordinary Kansas retailers' sales tax still applies to the retail sale — the seller here already collected it.

Citations and references

• K.S.A. 8-1485 — defines "vehicle" as a device by which a person or property may be transported or drawn upon a highway (excluding human-powered and rail devices); the tire excise tax uses this definition.
• Kansas Notice on Tire Excise Tax, dated June 12, 1991 — states that the tire tax applies to tires for highway vehicles but "does not apply to the sale of new tires for use on vehicles not authorized or allowed to operate on public streets and highway"; the basis for exempting dedicated race-car tires.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2010-008

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

November 9, 2010

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Dear XXXXXXXX:

We wish to acknowledge receipt of your recent inquiry regarding the application of Kansas Retailers’ Sales tax. You inquired whether the retail sale of racing tires taking place in Kansas as described in you r inquiry is exempt from the Kansas Tire Excise tax.
You stated the facts as follows:

1) The taxpayer is an Illinois corporation having no Kansas physical location. The taxpayer is primarily a wholesaler of automobile racing tires. In addition to their wholesale business, they sell some racing tires directly to the end user. Many of their retail sales occur at tracks located across the Midwest and are made under contractual arrangements with race promoters who require participating drivers to use the taxpayer’s brand of race tire. It is in fulfilling these contracts that the taxpayer comes into Kansas to make sales. The taxpayer brings a truck with racing tires specially eligible for the scheduled race(s) to participating race tracks located in Kansas for the purpose of selling and mounting tires for race teams.

2) When at a Kansas track, the taxpayer collects Kansas sales tax on sales made at retail. The taxpayer files Kansas sales tax return and remits payment for Kansas sales taxes collected.

3) The tires sold by the taxpayer are tires suitable only for either oval track racing or drag racing. The tires are all designated as “Not Intended for Highway Use” and are not street legal due to their size, lack of tread or both.

Kansas notice on Tire Excise Tax, dated 6/12/1991 contains the following statement.

“By adopting the definition of "vehicle" set forth in K.S.A. 8-1485, the legislature significantly broadened the category of tire sales that are subject to the tire excise tax. K.S.A. 8-1485 defines "vehicle" to mean "every device on, upon or by which any person or property is or may be transported or drawn upon a highway, except devices moved by human power or used exclusively upon stationary rails or tracks." Because of the new definition, the tire tax now applies to the sale of new tires for use on automobiles, buses, trucks, truck tractors, trailers, farm machinery, construction equipment and motorcycles. The tax does not apply to the sale of new tires for use on vehicles not authorized or allowed to operate on public streets and highway.”

The last sentence in this statement indicates that the tire tax would not apply to those vehicles not authorized or allowed on public roadway. A race car used exclusively on the oval tracks and drag raceway that you described would meet this provision. Therefore it is the Department of Revenue’s determination that the tire tax would not apply to the tire sales defined in your inquiry.

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

Sincerely,

Jack Smith
Policy and Research

Date Composed: 11/16/2010 Date Modified: 11/16/2010

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