Kansas Retailers' Sales Tax
Sales Taxation of Grain Storage Bins for Kansas Farms and Ranches on and After January 1, 2001.
Office of Policy & Research
Sales Taxation of Grain Storage Bins for Kansas Farms and Ranches
On and After January 1, 2001
This notice explains how Kansas sales tax applies to grain storage bins and storage bin accessories that are sold to Kansas farmers and ranchers on and after January 1, 2001. Understanding how sales tax applies to storage bins and storage bin accessories requires an understanding of how sales tax applies to sales of personal property used in Kansas farm and ranch operations.
I. Construction of new grain storage bins.
Sales of farm machinery and equipment to farmers and ranchers for exclusive use in production operations are exempt from Kansas sales tax. Sales of construction materials to a farmer or rancher for use in improving real property are taxable sales. Accordingly, farmers and ranchers may claim exemption on qualifying production machinery and equipment but are required to pay sales tax on purchases of construction materials. This includes materials used to build fences, barns, roads, grain storage bins, corn cribs, silos, drainage-tile systems, confinement buildings, storage buildings, and other buildings and structures. While materials sold to farmers and ranchers to construct grain storage facilities were exempt during calendar years 1999 and 2000, sales of these materials are now taxable and have been since January 1, 2001.
Rather than building a fence, grain storage bin, drainage-tile line, building, or other structure by themselves, farmers and ranchers often contract with a dealer for a completed structure. When this is done, the farmer or rancher has bargained for a improvement to real property. In such cases, the dealer is responsible for accounting for the sales tax that is due to the state. Sales tax that the dealer accrues or pays on construction materials becomes part of the dealer’s overhead costs. These costs, including the sales tax, are passed on to the farmer or rancher as an element of the contract price that may or may not be listed on the billing. When jobs are fully taxed, such as for fence installation or most real property repair services, dealers who maintain a resale inventory may properly bill the transaction under a time and materials contract or as a sale with installation. When this is done, the farmer or rancher owes sales tax on the total amount that is billed.
Kansas sales tax law treats grain storage bins as farm buildings. Two rules apply to construction and repair of commercial buildings and farm buildings. First, labor services expended in the first or initial construction of a building are exempt, while labor services performed on an existing building are taxable. Second, the materials that make up a building are taxable. However,
Kansas sales tax law recognizes that grain storage bins often house exempt farm machinery and equipment.
These two rules means that, in order to pay the correct amount of tax, farmers, ranchers, and dealers need to know what materials are considered to be part of a storage bin enclosure, and what equipment housed in the bin is considered to be production farm equipment. The two lists that follow identify the items that are considered to be taxable construction materials and the items that are considered to be exempt equipment.
The following is a partial list of parts and accessories that make up a grain storage bin and whose sale is subject to sales tax:
(1) Access doors
(2) Anchor bolts
(3) Concrete foundations, including discharge pits
(4) Flooring, including drying floors or false floors and related supports
(6) Roof and vents
(7) Structural materials that make up a bin, such as corrugated siding, nuts and bolts, and ring materials
The following is a partial list of grain storage bin accessories considered to be farm production machinery or equipment, the sale of which is exempt from sales tax:
(2) Electric control panels
(3) Fans and associated motors
(4) Humidity and temperature sensors
(5) Stirring devices
To be entitled to exemption, dealers must bill the sale of the exempt storage bin accessories in the second list as a separate line-item charge on the billing to the farmer or rancher. Storage bin accessories that are included as part of a lump-sum charge for a completed storage bin are presumed to be part of the bin rather than to be the separate, exempt sale of farm machinery or equipment to a farmer or rancher.
II. Repair of existing grain storage bins.
Repair services and repair parts for storage bins and storage bin accessories are taxed or exempted in the same way as their sale, which is identified in the two lists in Section I. This means sales of replacement parts and repair services for items in the first list are taxable. Sales of replacement parts and repair services for items in the second list are exempt.
While materials to construct and repair building and other structures are always taxable, repair services done to existing structures and buildings are exempt under certain exceptional circumstances. These exceptions are when the labor services are performed to existing buildings, water wells, and feedlots that have been damaged or destroyed by a “fire, flood, tornado, lightning, explosion or earthquake.”
III. Portable grain bins.
For purposes of this notice, the term "grain storage bin" does not include bins mounted on wheels, or small work bins, with capacities of from ¼ to 2 tons, that are intended to be frequently moved along with wheel-mounted grain augers, wheel-mounted grain dryers, and other portable grain handling equipment.
IV. Contacting Taxpayer Assistance.
To obtain additional copies of this or any other notice please call the Kansas Department of Revenue’s voice mail forms request line at (785) 296-4937 or download them from our web site:
. Our Taxpayer Assistance Center can help you with questions about this notice. The number to use to call the Taxpayer Assistance Center from Topeka is 368-8222. For calls placed from outside Topeka, please use our toll free number: 1-877-526-7738. Our fax number is 1-785-291-3614. The number for the department’s hearing impaired TTY is 1-877-526-7738.
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