Questions and Answers
Federal Government Purchases
Kansas Retailers' Sales Tax
FEDERAL GOVERNMENT AND ITS AGENCIES #36 (8/91)
STATUS: EXEMPT ON DIRECT PURCHASE
, exempts from sales tax, "all sales of tangible personal property or services purchased by a contractor for the erection, repair or enlargement of buildings or other projects for the government of the United States, its agencies or instrumentalities, which would be exempt from taxation if purchased directly by the government of the United States, its agencies or instrumentalities. When the government of the United States, its agencies or instrumentalities shall contract for the erection, repair, or enlargement of any building or other project, it shall obtain from the state and furnish to the contractor an exemption certificate for the project involved, and the contractor may purchase materials for incorporation in such project. The contractor shall furnish the number of such certificates to all suppliers from whom such purchases are made, and such suppliers shall execute invoices covering the same bearing the number of such certificate. Upon completion of the project the contractor shall furnish to the government of the United States, its agencies or instrumentalities concerned a sworn statement, on a form to be provided by the director of taxation, that all purchases so made were entitled to exemption under this subsection. All invoices shall be held by the contractor for a period of five years and shall be subject to audit by the director of taxation. Any contractor or any agent, employee or subcontractor thereof, who shall use or otherwise dispose of any materials purchased under such a certificate for any purpose other than that for which such a certificate is issued without the payment of the sales or compensating tax otherwise imposed upon such materials, shall be guilty of a misdemeanor and, upon conviction therefor, shall be subject to the penalties provided for in subsection (g) of K.S.A. 79-3615 and amendment thereto."
K.A.R. 92-19-77. Sales to the United States, its agencies and instrumentalities.
(a) All direct purchases made by the United States, its agencies or instrumentalities for the use of the United States, its agencies or instrumentalities shall not be taxable except when the United States has provided by federal statute that a particular agency or instrumentality shall be subject to a state's tax laws.
(b) To qualify as a direct purchase, each bill, invoice, contract or other evidence of the transaction shall be made out in the name of the United States, its agency or instrumentality, and payment shall be made on a federal check, warrant or voucher.
(c) Sales of tangible personal property or taxable services made to and paid for by an agent, employee or other representative of the United States, its agencies or instrumentalities shall be taxable, even though the same purchase would have been exempt from sales tax had the United States, its agency or instrumentality directly purchased the tangible personal property or services. Contractual arrangements or understandings between an agent or employee and the United States, its agency or instrumentalities shall not be recognized by the department, and the retailer shall charge and collect the sales tax on the total selling price of tangible personal property or services, even though the agent or employee:
(1) is on official business on behalf of the United States, its agencies or instrumentalities;
(2) is on a per diem;
(3) is on an expense account, allowance or shall otherwise be reimbursed by the United States, its agencies or instrumentalities; or
(4) or has or shall receive monies, credits or other assets from the United States, its agencies or instrumentalities to pay for the transaction.
(d) All sales of tangible personal property and taxable services sold to national banks, federal savings and loans and federal credit unions shall be subject to Kansas sales tax."
MEMO, issued June 1989. RE: Revokes K.A.R. 92-19-77(d).
Federal Credit Unions are federal instrumentalities and 12 U.S.C.A. 1768 exempt federal credit unions from taxes imposed by state taxing authorities where the incidence of tax falls on the federal credit union rather than on the retailer making the sale. See
United States of America v. State of Michigan,
United States Court of Appeals, Sixth Circuit, , No. 87-1858, , , 851 F.2d 803 , July 8, 1988.
Note that only federal credit unions are exempt from Kansas sales and use taxes. The above regulation is correct with regard to national banks and federal savings and loans (they are subject to Kansas sales and use taxes).
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