Kansas Sales Tax on Labor

Is labor subject to sales tax in Kansas? It seems like a simple question. Well the simple answer is it depends. It depends on what the labor is related too. The following excerpts are from the Kansas Department of Revenues Sales Tax Guidelines for Contractors and Contractor-Retailers Date Issued: 5/31/05 and explain the basics when discussing exempt and nonexempt labor related to contractors.

"Kansas jobs where labor services are taxed. A wide variety of construction services are taxed when done to existing, nonresidential buildings, structures, and other real property. This property is commonly referred to as "commercial property." These services include, but are not limited to:

• building repairs
• carpentry work
• carpeting and flooring installation
• work done on commercial and farm buildings
• electrical work
• elevator and escalator work
• fence installation, including farm fences
• foundation work
• heating, air conditioning, and ventilation (HVAC) work
• insulation work
• line building, including electric and telephone lines
• masonry and concrete work
• painting, plastering, and wallpapering
• parking lot work
• plumbing
• roofing
• sandblasting
• sidewalk installation and repair
• siding installation
• welding
• work done on existing oil wells and on gathering systems
• work done on pipelines
• work done on railroad tracks and right of ways
• service work done for telephone companies and public utilities including the installation or repair of poles, lines, substations, switching stations, pipelines, pumping stations, except for original construction labor services on distribution lines for municipal utilities and certain qualifying REC's, ; (See Revenue Ruling 19-2001-2), and all other similar work.
  

Kansas jobs where labor services are not taxed. When you work on a construction project where your labor services aren't taxed, your only sales tax responsibility is to pay or accrue sales or use tax on all of your purchases. This includes purchases of materials, supplies, tools, and equipment. Your labor services aren't taxed when you're working on: (1) a new residence that is being built or an existing residence that is undergoing reconstruction, restoration, remodeling, renovation, repair or replacement; (2) the first or initial construction of a nonresidential (commercial) building; (3) the addition of a new room or additional floor to the exterior of an existing building; or (4) the first or initial construction of a mill, plant, refinery, oil well, gas well, feedlot, or distribution line owned by a municipal utility or a qualifying rural electric cooperative. Improvements made to land that abuts a qualifying construction project are also exempt when the improvements are made as part of the work on the project.

There is no sales tax on your labor services when the project you're working on is a building or one of the structures identified in the preceding paragraph that is being repaired or replaced to fix damage caused by fire, tornado, lightning, explosion, earthquake, or a flood caused by a river or stream overflowing its banks (not a broken pipe). This exemption does not apply when the damage was caused by a windstorm, hailstorm, rainstorm, or snowstorm. As noted, you must pay sales tax when you buy materials and supplies for these projects even though you do not collect tax on your labor services.

Construction labor services performed on highways and bridges are exempt from sales tax. Such work is always exempt whether it is done to construct new highways or highway bridges or to reconstruct, restore, replace, or repair existing highways or highway bridges. Your purchases of materials for these projects are taxable unless the government entity has secured a project exemption certificate for the project. Project exemption certificates are not issued to the State of Kansas, its agencies, or to Kansas Indian tribes for work done on their reservations you are working on."

The information contained on this site should in no way be considered to be professional advice in the form of either tax, accounting, or legal service or consultation. You should always consult with a professional familiar with your individual circumstances before making any specific decisions related to accounting, tax, or legal matters.