Private Letter Ruling

Ruling Number:P-2002-001
Tax Type:Kansas Retailers' Sales Tax
Brief Description:Ingredient or component parts.
Approval Date:01/07/2002

Office of Policy & Research

January 7, 2002


Dear Ms. TTTTTT:

We wish to acknowledge receipt of your letter dated December 3, 2001, regarding the application of Kansas Retailers’ Sales tax.

K.S.A. 79-3606(m) exempts from sales tax: "all sales of tangible personal property which become an ingredient or component part of tangible personal property of services produced, manufactured or compounded for ultimate sale at retail within or without the state of Kansas; and any such producer, manufacturer or compounder may obtain from the director of taxation and furnish to the supplier an exemption certificate number for tangible personal property for use as an ingredient or component part of the property or services produced, manufactured or compounded". Ingredient or component parts are items that become a part of a larger whole or finished product which will be sold to the final consumer. To be considered an ingredient or component part, the item must be: necessary and essential to the finished product
 be used in or on the finished product
 become a physical part of the finished product, and
 become an ingredient or compound part of property or service for retail sale. For example, fabric, thread, buttons and zippers are component parts of an item of clothing (finished product) which will be sold at retail.

Other items considered to be ingredient or component parts are not as obvious. Containers, labels and shipping cases, twine and wrapping paper may be ingredient parts. When these items are used to distribute property for sale, and are not reusable or returned to the producer or manufacturer, they qualify as ingredient parts.

(K.S.A.) 79-3602(l) provides:
The statute is interpreted by Kansas Administrative Regulation (K.A.R. 92-19-54). The regulation provides, in subsections (d), (e) and (f):
Based on the statute and the regulation, it is the opinion of this department that the pallets, labels, stretch wrap, tape and in some cases ice would be exempt from Kansas sales/use tax(es) when purchased by your company, if said property is not to be returned to the producer, manufacturer or compounder for reuse. This is a private letter ruling pursuant to K.A.R. 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This ruling will be revoked in the future by the operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or published revenue ruling, that materially effects this private letter ruling. If I may be of further assistance, please contact me at your earliest convenience at (785) 296-7776.

Sincerely yours,

Thomas P. Browne, Jr.
Tax Specialist


Date Composed: 01/09/2002 Date Modified: 01/10/2002