Questions and Answers
Kansas Retailers' Sales Tax
Services Performed to Water Wells
WATER WELL #114 (12/93)
STATUS: MATERIALS TAXABLE
SERVICE OF INSTALLING OR APPLYING TANGIBLE
PERSONAL PROPERTY IN CONNECTION WITH THE
ORIGINAL CONSTRUCTION OF WELL EXEMPT
SERVICE OF REPAIRING, SERVICING, ALTERING,
MAINTAINING, ENLARGING OR REDRILLING TAXABLE
K.A.R. 92-19-79. Oil, gas and water wells.
"(a) Sales of drilling materials or other property incorporated into an oil, gas or water well to contractors, subcontractors or repairmen for use by them in original construction projects including drilling, equipping, furnishing, repairing, servicing, altering, maintaining, enlarging or redrilling shall be subject to sales tax. Each contractor shall be considered the final user or consumer of materials used by them in the construction projects. A contractor, subcontractor or repairman shall not give, and retailers shall not accept, a resale exemption certificate to purchase the materials without sales tax.
(b) Each contractor, subcontractor or repairman shall be responsible for the payment of sales tax on all materials and supplies which are purchased for use by them in drilling, redrilling, or otherwise improving, altering or repairing oil, gas or water wells for others.
(c) Each contractor, subcontractor or repairman shall be responsible for collecting sales tax on taxable services performed for others, including taxable services performed for other contractors. A contractor, subcontractor or repairman shall not purchase or sell services exempt from sales tax under a resale exemption certificate.
(d) The taxable base for all contracts involving the application or installation of tangible personal property shall be the difference between the contract price and the cost of material, supplies and payments to subcontractors, including sales or compensating tax paid by the contractor on the materials, supplies and subcontractor charges purchased by the contractor to complete the contract.
(e) Contractors, subcontractors or repairmen who do not separately state the amount of sales tax for their services in the contract, bid estimate or customer billing shall include a statement in the document in substantially the following form: "All applicable sales taxes are included in the selling price." If the statement does not appear in the contract, bid estimate, billing or other evidence of the transaction, it shall be presumed that the sales tax was not charged to the consumer. If a statement does not appear on the document, the retailer shall carry the burden of proving that the sales tax was charged to the consumer and properly remitted to the state.
(f) The service of installing or applying tangible personal property in connection with original construction that is the first or initial construction of a new oil, gas or water well shall not be subject to sales tax. "Original construction" of an oil, gas or water well means all service performed by a contractor through the date of completion of the well. Any service performed in or on oil, gas or water wells other than as set forth herein shall be subject to sales tax."
The 1992 legislature imposed sales tax at a reduced rate on certain services that were formerly exempt from tax. Those services include installing and applying tangible personal property in connection with the original construction of a building or facility and the construction, reconstruction, restoration, replacement or repair of a bridge or highway. Such labor services are subject to sales tax at the reduced rate of 2.5%, plus any applicable city and county sales tax. "Original construction" means the first or initial construction of a building or facility and includes improvements immediately surrounding such building or facility including items such as landscaping, driveways, sidewalks and decks. This legislation became effective June 1, 1992, and was repealed April 15, 1995.
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