Session Law

Identifying Information:L. 2001 ch. 146
Other Identifying Information:2001 House Bill 2029
Tax Type:Kansas Retailers' Sales Tax
Brief Description:An Act relating to sales taxation; exempting certain sales to certain disease prevention support associations; amending K.S.A. 2000 Supp. 79-3606 and repealing the existing section.
Keywords:


Body:

CHAPTER 146

HOUSE BILL No. 2029


An Act relating to sales taxation; exempting certain sales to certain disease prevention

support associations; amending K.S.A. 2000 Supp. 79-3606 and repealing the existing section.




Be it enacted by the Legislature of the State of Kansas:

Section 1. K.S.A. 2000 Supp. 79-3606 is hereby amended to read as

follows: 79-3606. The following shall be exempt from the tax imposed by

this act:

(a) All sales of motor-vehicle fuel or other articles upon which a sales

or excise tax has been paid, not subject to refund, under the laws of this

state except cigarettes as defined by K.S.A. 79-3301 and amendments

thereto, cereal malt beverages and malt products as defined by K.S.A. 79-

3817 and amendments thereto, including wort, liquid malt, malt syrup

and malt extract, which is not subject to taxation under the provisions of

K.S.A. 79-41a02 and amendments thereto, motor vehicles taxed pursuant

to K.S.A. 79-5117, and amendments thereto, tires taxed pursuant to

K.S.A. 65-3424d, and amendments thereto, and drycleaning and laundry

services taxed pursuant to K.S.A. 2000 Supp. 65-34,150, and amendments

thereto;

(b) all sales of tangible personal property or service, including the

renting and leasing of tangible personal property, purchased directly by

the state of Kansas, a political subdivision thereof, other than a school or

educational institution, or purchased by a public or private nonprofit hos-

pital or public hospital authority or nonprofit blood, tissue or organ bank

and used exclusively for state, political subdivision, hospital or public hos-

pital authority or nonprofit blood, tissue or organ bank purposes, except

when: (1) Such state, hospital or public hospital authority is engaged or

proposes to engage in any business specifically taxable under the provi-

sions of this act and such items of tangible personal property or service

are used or proposed to be used in such business, or (2) such political

subdivision is engaged or proposes to engage in the business of furnishing

gas, water, electricity or heat to others and such items of personal prop-

erty or service are used or proposed to be used in such business;

(c) all sales of tangible personal property or services, including the

renting and leasing of tangible personal property, purchased directly by

a public or private elementary or secondary school or public or private

nonprofit educational institution and used primarily by such school or

institution for nonsectarian programs and activities provided or sponsored

by such school or institution or in the erection, repair or enlargement of

buildings to be used for such purposes. The exemption herein provided

shall not apply to erection, construction, repair, enlargement or equip-

ment of buildings used primarily for human habitation;

(d) all sales of tangible personal property or services purchased by a

contractor for the purpose of constructing, equipping, reconstructing,

maintaining, repairing, enlarging, furnishing or remodeling facilities for

any public or private nonprofit hospital or public hospital authority, public

or private elementary or secondary school or a public or private nonprofit

educational institution, which would be exempt from taxation under the

provisions of this act if purchased directly by such hospital or public hos-

pital authority, school or educational institution; and all sales of tangible

personal property or services purchased by a contractor for the purpose

of constructing, equipping, reconstructing, maintaining, repairing, en-

larging, furnishing or remodeling facilities for any political subdivision of

the state, the total cost of which is paid from funds of such political

subdivision and which would be exempt from taxation under the provi-

sions of this act if purchased directly by such political subdivision. Nothing

in this subsection or in the provisions of K.S.A. 12-3418 and amendments

thereto, shall be deemed to exempt the purchase of any construction

machinery, equipment or tools used in the constructing, equipping, re-

constructing, maintaining, repairing, enlarging, furnishing or remodeling

facilities for any political subdivision of the state. As used in this subsec-

tion, K.S.A. 12-3418 and 79-3640, and amendments thereto, ``funds of a

political subdivision'' shall mean general tax revenues, the proceeds of

any bonds and gifts or grants-in-aid. Gifts shall not mean funds used for

the purpose of constructing, equipping, reconstructing, repairing, enlarg-

ing, furnishing or remodeling facilities which are to be leased to the do-

nor. When any political subdivision of the state, public or private non-

profit hospital or public hospital authority, public or private elementary

or secondary school or public or private nonprofit educational institution

shall contract for the purpose of constructing, equipping, reconstructing,

maintaining, repairing, enlarging, furnishing or remodeling facilities, it

shall obtain from the state and furnish to the contractor an exemption

certificate for the project involved, and the contractor may purchase ma-

terials for incorporation in such project. The contractor shall furnish the

number of such certificate 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 con-

tractor shall furnish to the political subdivision, hospital or public hospital

authority, school or educational institution 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. As an alternative

to the foregoing procedure, any such contracting entity may apply to the

secretary of revenue for agent status for the sole purpose of issuing and

furnishing project exemption certificates to contractors pursuant to rules

and regulations adopted by the secretary establishing conditions and stan-

dards for the granting and maintaining of such status. 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. If any materials purchased under such

a certificate are found not to have been incorporated in the building or

other project or not to have been returned for credit or the sales or

compensating tax otherwise imposed upon such materials which will not

be so incorporated in the building or other project reported and paid by

such contractor to the director of taxation not later than the 20th day of

the month following the close of the month in which it shall be deter-

mined that such materials will not be used for the purpose for which such

certificate was issued, the political subdivision, hospital or public hospital

authority, school or educational institution concerned shall be liable for

tax on all materials purchased for the project, and upon payment thereof

it may recover the same from the contractor together with reasonable

attorney fees. 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 amendments thereto;

(e) 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 instru-

mentalities, 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 instrumen-

talities shall contract for the erection, repair, or enlargement of any build-

ing or other project, it shall obtain from the state and furnish to the

contractor an exemption certificate for the project involved, and the con-

tractor 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. As

an alternative to the foregoing procedure, any such contracting entity may

apply to the secretary of revenue for agent status for the sole purpose of

issuing and furnishing project exemption certificates to contractors pur-

suant to rules and regulations adopted by the secretary establishing con-

ditions and standards for the granting and maintaining of such status. 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 amendments thereto;

(f) tangible personal property purchased by a railroad or public utility

for consumption or movement directly and immediately in interstate

commerce;

(g) sales of aircraft including remanufactured and modified aircraft,

sales of aircraft repair, modification and replacement parts and sales of

services employed in the remanufacture, modification and repair of air-

craft sold to persons using directly or through an authorized agent such

aircraft and aircraft repair, modification and replacement parts as certified

or licensed carriers of persons or property in interstate or foreign com-

merce under authority of the laws of the United States or any foreign

government or sold to any foreign government or agency or instrumen-

tality of such foreign government and all sales of aircraft, aircraft parts,

replacement parts and services employed in the remanufacture, modifi-

cation and repair of aircraft for use outside of the United States;

(h) all rentals of nonsectarian textbooks by public or private elemen-

tary or secondary schools;

(i) the lease or rental of all films, records, tapes, or any type of sound

or picture transcriptions used by motion picture exhibitors;

(j) meals served without charge or food used in the preparation of

such meals to employees of any restaurant, eating house, dining car, hotel,

drugstore or other place where meals or drinks are regularly sold to the

public if such employees' duties are related to the furnishing or sale of

such meals or drinks;

(k) any motor vehicle, semitrailer or pole trailer, as such terms are

defined by K.S.A. 8-126 and amendments thereto, or aircraft sold and

delivered in this state to a bona fide resident of another state, which motor

vehicle, semitrailer, pole trailer or aircraft is not to be registered or based

in this state and which vehicle, semitrailer, pole trailer or aircraft will not

remain in this state more than 10 days;

(l) all isolated or occasional sales of tangible personal property, serv-

ices, substances or things, except isolated or occasional sale of motor

vehicles specifically taxed under the provisions of subsection (o) of K.S.A.

79-3603 and amendments thereto;

(m) all sales of tangible personal property which become an ingre-

dient or component part of tangible personal property or services pro-

duced, 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;

(n) all sales of tangible personal property which is consumed in the

production, manufacture, processing, mining, drilling, refining or com-

pounding of tangible personal property, the treating of by-products or

wastes derived from any such production process, the providing of serv-

ices or the irrigation of crops for ultimate sale at retail within or without

the state of Kansas; and any purchaser of such property may obtain from

the director of taxation and furnish to the supplier an exemption certifi-

cate number for tangible personal property for consumption in such pro-

duction, manufacture, processing, mining, drilling, refining, compound-

ing, treating, irrigation and in providing such services;

(o) all sales of animals, fowl and aquatic plants and animals, the pri-

mary purpose of which is use in agriculture or aquaculture, as defined in

K.S.A. 47-1901, and amendments thereto, the production of food for

human consumption, the production of animal, dairy, poultry or aquatic

plant and animal products, fiber or fur, or the production of offspring for

use for any such purpose or purposes;

(p) all sales of drugs, as defined by K.S.A. 65-1626 and amendments

thereto, dispensed pursuant to a prescription order, as defined by K.S.A.

65-1626 and amendments thereto, by a licensed practitioner or a mid-

level practitioner as defined by K.S.A. 65-1626, and amendments thereto;

(q) all sales of insulin dispensed by a person licensed by the state

board of pharmacy to a person for treatment of diabetes at the direction

of a person licensed to practice medicine by the board of healing arts;

(r) all sales of prosthetic and orthopedic appliances prescribed in

writing by a person licensed to practice the healing arts, dentistry or

optometry. For the purposes of this subsection, the term prosthetic and

orthopedic appliances means any apparatus, instrument, device, or equip-

ment used to replace or substitute for any missing part of the body; used

to alleviate the malfunction of any part of the body; or used to assist any

disabled person in leading a normal life by facilitating such person's mo-

bility; such term shall include accessories attached or to be attached to

motor vehicles, but such term shall not include motor vehicles or personal

property which when installed becomes a fixture to real property;

(s) all sales of tangible personal property or services purchased di-

rectly by a groundwater management district organized or operating un-

der the authority of K.S.A. 82a-1020 et seq. and amendments thereto,

which property or services are used in the operation or maintenance of

the district;

(t) all sales of farm machinery and equipment or aquaculture ma-

chinery and equipment, repair and replacement parts therefor and serv-

ices performed in the repair and maintenance of such machinery and

equipment. For the purposes of this subsection the term ``farm machinery

and equipment or aquaculture machinery and equipment'' shall include

machinery and equipment used in the operation of Christmas tree farm-

ing but shall not include any passenger vehicle, truck, truck tractor, trailer,

semitrailer or pole trailer, other than a farm trailer, as such terms are

defined by K.S.A. 8-126 and amendments thereto. Each purchaser of

farm machinery and equipment or aquaculture machinery and equipment

exempted herein must certify in writing on the copy of the invoice or

sales ticket to be retained by the seller that the farm machinery and

equipment or aquaculture machinery and equipment purchased will be

used only in farming, ranching or aquaculture production. Farming or

ranching shall include the operation of a feedlot and farm and ranch work

for hire and the operation of a nursery;

(u) all leases or rentals of tangible personal property used as a dwell-

ing if such tangible personal property is leased or rented for a period of

more than 28 consecutive days;

(v) all sales of food products to any contractor for use in preparing

meals for delivery to homebound elderly persons over 60 years of age and

to homebound disabled persons or to be served at a group-sitting at a

location outside of the home to otherwise homebound elderly persons

over 60 years of age and to otherwise homebound disabled persons, as

all or part of any food service project funded in whole or in part by

government or as part of a private nonprofit food service project available

to all such elderly or disabled persons residing within an area of service

designated by the private nonprofit organization, and all sales of food

products for use in preparing meals for consumption by indigent or home-

less individuals whether or not such meals are consumed at a place des-

ignated for such purpose;

(w) all sales of natural gas, electricity, heat and water delivered

through mains, lines or pipes: (1) To residential premises for noncom-

mercial use by the occupant of such premises; (2) for agricultural use and

also, for such use, all sales of propane gas; (3) for use in the severing of

oil; and (4) to any property which is exempt from property taxation pur-

suant to K.S.A. 79-201b Second through Sixth. As used in this paragraph,

``severing'' shall have the meaning ascribed thereto by subsection (k) of

K.S.A. 79-4216, and amendments thereto;

(x) all sales of propane gas, LP-gas, coal, wood and other fuel sources

for the production of heat or lighting for noncommercial use of an oc-

cupant of residential premises;

(y) all sales of materials and services used in the repairing, servicing,

altering, maintaining, manufacturing, remanufacturing, or modification of

railroad rolling stock for use in interstate or foreign commerce under

authority of the laws of the United States;

(z) all sales of tangible personal property and services purchased di-

rectly by a port authority or by a contractor therefor as provided by the

provisions of K.S.A. 12-3418 and amendments thereto;

(aa) all sales of materials and services applied to equipment which is

transported into the state from without the state for repair, service, al-

teration, maintenance, remanufacture or modification and which is sub-

sequently transported outside the state for use in the transmission of

liquids or natural gas by means of pipeline in interstate or foreign com-

merce under authority of the laws of the United States;

(bb) all sales of used mobile homes or manufactured homes. As used

in this subsection: (1) ``Mobile homes'' and ``manufactured homes'' shall

have the meanings ascribed thereto by K.S.A. 58-4202 and amendments

thereto; and (2) ``sales of used mobile homes or manufactured homes''

means sales other than the original retail sale thereof;

(cc) all sales of tangible personal property or services purchased for

the purpose of and in conjunction with constructing, reconstructing, en-

larging or remodeling a business or retail business which meets the

requirements established in K.S.A. 74-50,115 and amendments thereto,

and the sale and installation of machinery and equipment purchased for

installation at any such business or retail business. When a person shall

contract for the construction, reconstruction, enlargement or remodeling

of any such business or retail business, such person shall obtain from the

state and furnish to the contractor an exemption certificate for the project

involved, and the contractor may purchase materials, machinery and

equipment 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 owner of the business or retail business

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 subsec-

tion. 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 oth-

erwise dispose of any materials, machinery or equipment purchased un-

der 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 thereon, shall be guilty of a misdemeanor and, upon

conviction therefor, shall be subject to the penalties provided for in sub-

section (g) of K.S.A. 79-3615 and amendments thereto. As used in this

subsection, ``business'' and ``retail business'' have the meanings respec-

tively ascribed thereto by K.S.A. 74-50,114 and amendments thereto;

(dd) all sales of tangible personal property purchased with food

stamps issued by the United States department of agriculture;

(ee) all sales of lottery tickets and shares made as part of a lottery

operated by the state of Kansas;

(ff) on and after July 1, 1988, all sales of new mobile homes or man-

ufactured homes to the extent of 40% of the gross receipts, determined

without regard to any trade-in allowance, received from such sale. As used

in this subsection, ``mobile homes'' and ``manufactured homes'' shall have

the meanings ascribed thereto by K.S.A. 58-4202 and amendments

thereto;

(gg) all sales of tangible personal property purchased in accordance

with vouchers issued pursuant to the federal special supplemental food

program for women, infants and children;

(hh) all sales of medical supplies and equipment purchased directly

by a nonprofit skilled nursing home or nonprofit intermediate nursing

care home, as defined by K.S.A. 39-923, and amendments thereto, for

the purpose of providing medical services to residents thereof. This ex-

emption shall not apply to tangible personal property customarily used

for human habitation purposes;

(ii) all sales of tangible personal property purchased directly by a non-

profit organization for nonsectarian comprehensive multidiscipline youth

development programs and activities provided or sponsored by such or-

ganization, and all sales of tangible personal property by or on behalf of

any such organization. This exemption shall not apply to tangible personal

property customarily used for human habitation purposes;

(jj) all sales of tangible personal property or services, including the

renting and leasing of tangible personal property, purchased directly on

behalf of a community-based mental retardation facility or mental health

center organized pursuant to K.S.A. 19-4001 et seq., and amendments

thereto, and licensed in accordance with the provisions of K.S.A. 75-

3307b and amendments thereto. This exemption shall not apply to tan-

gible personal property customarily used for human habitation purposes;

(kk) (1) (A) all sales of machinery and equipment which are used

in this state as an integral or essential part of an integrated production

operation by a manufacturing or processing plant or facility;

(B) all sales of installation, repair and maintenance services per-

formed on such machinery and equipment; and

(C) all sales of repair and replacement parts and accessories pur-

chased for such machinery and equipment.

(2) For purposes of this subsection:

(A) ``Integrated production operation'' means an integrated series of

operations engaged in at a manufacturing or processing plant or facility

to process, transform or convert tangible personal property by physical,

chemical or other means into a different form, composition or character

from that in which it originally existed. Integrated production operations

shall include: (i) Production line operations, including packaging opera-

tions; (ii) preproduction operations to handle, store and treat raw mate-

rials; (iii) post production handling, storage, warehousing and distribution

operations; and (iv) waste, pollution and environmental control opera-

tions, if any;

(B) ``production line'' means the assemblage of machinery and equip-

ment at a manufacturing or processing plant or facility where the actual

transformation or processing of tangible personal property occurs;

(C) ``manufacturing or processing plant or facility'' means a single,

fixed location owned or controlled by a manufacturing or processing busi-

ness that consists of one or more structures or buildings in a contiguous

area where integrated production operations are conducted to manufac-

ture or process tangible personal property to be ultimately sold at retail.

Such term shall not include any facility primarily operated for the purpose

of conveying or assisting in the conveyance of natural gas, electricity, oil

or water. A business may operate one or more manufacturing or proc-

essing plants or facilities at different locations to manufacture or process

a single product of tangible personal property to be ultimately sold at

retail;

(D) ``manufacturing or processing business'' means a business that

utilizes an integrated production operation to manufacture, process, fab-

ricate, finish, or assemble items for wholesale and retail distribution as

part of what is commonly regarded by the general public as an industrial

manufacturing or processing operation or an agricultural commodity

processing operation. (i) Industrial manufacturing or processing opera-

tions include, by way of illustration but not of limitation, the fabrication

of automobiles, airplanes, machinery or transportation equipment, the

fabrication of metal, plastic, wood, or paper products, electricity power

generation, water treatment, petroleum refining, chemical production,

wholesale bottling, newspaper printing, ready mixed concrete production,

and the remanufacturing of used parts for wholesale or retail sale. Such

processing operations shall include operations at an oil well, gas well, mine

or other excavation site where the oil, gas, minerals, coal, clay, stone, sand

or gravel that has been extracted from the earth is cleaned, separated,

crushed, ground, milled, screened, washed, or otherwise treated or pre-

pared before its transmission to a refinery or before any other wholesale

or retail distribution. (ii) Agricultural commodity processing operations

include, by way of illustration but not of limitation, meat packing, poultry

slaughtering and dressing, processing and packaging farm and dairy prod-

ucts in sealed containers for wholesale and retail distribution, feed grind-

ing, grain milling, frozen food processing, and grain handling, cleaning,

blending, fumigation, drying and aeration operations engaged in by grain

elevators or other grain storage facilities. (iii) Manufacturing or processing

businesses do not include, by way of illustration but not of limitation,

nonindustrial businesses whose operations are primarily retail and that

produce or process tangible personal property as an incidental part of

conducting the retail business, such as retailers who bake, cook or prepare

food products in the regular course of their retail trade, grocery stores,

meat lockers and meat markets that butcher or dress livestock or poultry

in the regular course of their retail trade, contractors who alter, service,

repair or improve real property, and retail businesses that clean, service

or refurbish and repair tangible personal property for its owner;

(E) ``repair and replacement parts and accessories'' means all parts

and accessories for exempt machinery and equipment, including, but not

limited to, dies, jigs, molds, patterns and safety devices that are attached

to exempt machinery or that are otherwise used in production, and parts

and accessories that require periodic replacement such as belts, drill bits,

grinding wheels, grinding balls, cutting bars, saws, refractory brick and

other refractory items for exempt kiln equipment used in production op-

erations;

(F) ``primary'' or ``primarily'' mean more than 50% of the time.

(3) For purposes of this subsection, machinery and equipment shall

be deemed to be used as an integral or essential part of an integrated

production operation when used:

(A) To receive, transport, convey, handle, treat or store raw materials

in preparation of its placement on the production line;

(B) to transport, convey, handle or store the property undergoing

manufacturing or processing at any point from the beginning of the pro-

duction line through any warehousing or distribution operation of the

final product that occurs at the plant or facility;

(C) to act upon, effect, promote or otherwise facilitate a physical

change to the property undergoing manufacturing or processing;

(D) to guide, control or direct the movement of property undergoing

manufacturing or processing;

(E) to test or measure raw materials, the property undergoing man-

ufacturing or processing or the finished product, as a necessary part of

the manufacturer's integrated production operations;

(F) to plan, manage, control or record the receipt and flow of inven-

tories of raw materials, consumables and component parts, the flow of

the property undergoing manufacturing or processing and the manage-

ment of inventories of the finished product;

(G) to produce energy for, lubricate, control the operating of or oth-

erwise enable the functioning of other production machinery and equip-

ment and the continuation of production operations;

(H) to package the property being manufactured or processed in a

container or wrapping in which such property is normally sold or trans-

ported;

(I) to transmit or transport electricity, coke, gas, water, steam or sim-

ilar substances used in production operations from the point of genera-

tion, if produced by the manufacturer or processor at the plant site, to

that manufacturer's production operation; or, if purchased or delivered

from offsite, from the point where the substance enters the site of the

plant or facility to that manufacturer's production operations;

(J) to cool, heat, filter, refine or otherwise treat water, steam, acid,

oil, solvents or other substances that are used in production operations;

(K) to provide and control an environment required to maintain cer-

tain levels of air quality, humidity or temperature in special and limited

areas of the plant or facility, where such regulation of temperature or

humidity is part of and essential to the production process;

(L) to treat, transport or store waste or other byproducts of produc-

tion operations at the plant or facility; or

(M) to control pollution at the plant or facility where the pollution is

produced by the manufacturing or processing operation.

(4) The following machinery, equipment and materials shall be

deemed to be exempt even though it may not otherwise qualify as ma-

chinery and equipment used as an integral or essential part of an inte-

grated production operation: (A) Computers and related peripheral

equipment that are utilized by a manufacturing or processing business

for engineering of the finished product or for research and development

or product design; (B) machinery and equipment that is utilized by a

manufacturing or processing business to manufacture or rebuild tangible

personal property that is used in manufacturing or processing operations,

including tools, dies, molds, forms and other parts of qualifying machinery

and equipment; (C) portable plants for aggregate concrete, bulk cement

and asphalt including cement mixing drums to be attached to a motor

vehicle; (D) industrial fixtures, devices, support facilities and special foun-

dations necessary for manufacturing and production operations, and ma-

terials and other tangible personal property sold for the purpose of fab-

ricating such fixtures, devices, facilities and foundations. An exemption

certificate for such purchases shall be signed by the manufacturer or

processor. If the fabricator purchases such material, the fabricator shall

also sign the exemption certificate; and (E) a manufacturing or processing

business' laboratory equipment that is not located at the plant or facility,

but that would otherwise qualify for exemption under subsection (3)(E).

(5) ``Machinery and equipment used as an integral or essential part

of an integrated production operation'' shall not include:

(A) Machinery and equipment used for nonproduction purposes, in-

cluding, but not limited to, machinery and equipment used for plant se-

curity, fire prevention, first aid, accounting, administration, record keep-

ing, advertising, marketing, sales or other related activities, plant cleaning,

plant communications, and employee work scheduling;

(B) machinery, equipment and tools used primarily in maintaining

and repairing any type of machinery and equipment or the building and

plant;

(C) transportation, transmission and distribution equipment not pri-

marily used in a production, warehousing or material handling operation

at the plant or facility, including the means of conveyance of natural gas,

electricity, oil or water, and equipment related thereto, located outside

the plant or facility;

(D) office machines and equipment including computers and related

peripheral equipment not used directly and primarily to control or mea-

sure the manufacturing process;

(E) furniture and other furnishings;

(F) buildings, other than exempt machinery and equipment that is

permanently affixed to or becomes a physical part of the building, and

any other part of real estate that is not otherwise exempt;

(G) building fixtures that are not integral to the manufacturing op-

eration, such as utility systems for heating, ventilation, air conditioning,

communications, plumbing or electrical;

(H) machinery and equipment used for general plant heating, cooling

and lighting;

(I) motor vehicles that are registered for operation on public high-

ways; or

(J) employee apparel, except safety and protective apparel that is pur-

chased by an employer and furnished gratuitously to employees who are

involved in production or research activities.

(6) Subsections (3) and (5) shall not be construed as exclusive listings

of the machinery and equipment that qualify or do not qualify as an

integral or essential part of an integrated production operation. When

machinery or equipment is used as an integral or essential part of pro-

duction operations part of the time and for nonproduction purpose at

other times, the primary use of the machinery or equipment shall deter-

mine whether or not such machinery or equipment qualifies for exemp-

tion.

(7) The secretary of revenue shall adopt rules and regulations nec-

essary to administer the provisions of this subsection;

(ll) all sales of educational materials purchased for distribution to the

public at no charge by a nonprofit corporation organized for the purpose

of encouraging, fostering and conducting programs for the improvement

of public health;

(mm) all sales of seeds and tree seedlings; fertilizers, insecticides,

herbicides, germicides, pesticides and fungicides; and services, purchased

and used for the purpose of producing plants in order to prevent soil

erosion on land devoted to agricultural use;

(nn) except as otherwise provided in this act, all sales of services ren-

dered by an advertising agency or licensed broadcast station or any mem-

ber, agent or employee thereof;

(oo) all sales of tangible personal property purchased by a community

action group or agency for the exclusive purpose of repairing or weath-

erizing housing occupied by low income individuals;

(pp) all sales of drill bits and explosives actually utilized in the explo-

ration and production of oil or gas;

(qq) all sales of tangible personal property and services purchased by

a nonprofit museum or historical society or any combination thereof, in-

cluding a nonprofit organization which is organized for the purpose of

stimulating public interest in the exploration of space by providing edu-

cational information, exhibits and experiences, which is exempt from fed-

eral income taxation pursuant to section 501(c)(3) of the federal internal

revenue code of 1986;

(rr) all sales of tangible personal property which will admit the pur-

chaser thereof to any annual event sponsored by a nonprofit organization

which is exempt from federal income taxation pursuant to section

501(c)(3) of the federal internal revenue code of 1986;

(ss) all sales of tangible personal property and services purchased by

a public broadcasting station licensed by the federal communications

commission as a noncommercial educational television or radio station;

(tt) all sales of tangible personal property and services purchased by

or on behalf of a not-for-profit corporation which is exempt from federal

income taxation pursuant to section 501(c)(3) of the federal internal rev-

enue code of 1986, for the sole purpose of constructing a Kansas Korean

War memorial;

(uu) all sales of tangible personal property and services purchased by

or on behalf of any rural volunteer fire-fighting organization for use ex-

clusively in the performance of its duties and functions;

(vv) all sales of tangible personal property purchased by any of the

following organizations which are exempt from federal income taxation

pursuant to section 501 (c)(3) of the federal internal revenue code of

1986, for the following purposes, and all sales of any such property by or

on behalf of any such organization for any such purpose:

(1) The American Heart Association, Kansas Affiliate, Inc. for the

purposes of providing education, training, certification in emergency car-

diac care, research and other related services to reduce disability and

death from cardiovascular diseases and stroke;

(2) the Kansas Alliance for the Mentally Ill, Inc. for the purpose of

advocacy for persons with mental illness and to education, research and

support for their families;

(3) the Kansas Mental Illness Awareness Council for the purposes of

advocacy for persons who are mentally ill and to education, research and

support for them and their families;

(4) the American Diabetes Association Kansas Affiliate, Inc. for the

purpose of eliminating diabetes through medical research, public edu-

cation focusing on disease prevention and education, patient education

including information on coping with diabetes, and professional education

and training;

(5) the American Lung Association of Kansas, Inc. for the purpose of

eliminating all lung diseases through medical research, public education

including information on coping with lung diseases, professional educa-

tion and training related to lung disease and other related services to

reduce the incidence of disability and death due to lung disease; and

(6) the Kansas chapters of the Alzheimer's Disease and Related Dis-

orders Association, Inc. for the purpose of providing assistance and sup-

port to persons in Kansas with Alzheimer's disease, and their families and

caregivers;

(7) the Kansas chapters of the Parkinson's disease association for the

purpose of eliminating Parkinson's disease through medical research and

public and professional education related to such disease; and

(8) the National Kidney Foundation of Kansas and Western Missouri

for the purpose of eliminating kidney disease through medical research

and public and private education related to such disease;

(ww) all sales of tangible personal property purchased by the Habitat

for Humanity for the exclusive use of being incorporated within a housing

project constructed by such organization;

(xx) all sales of tangible personal property and services purchased by

a nonprofit zoo which is exempt from federal income taxation pursuant

to section 501(c)(3) of the federal internal revenue code of 1986, or on

behalf of such zoo by an entity itself exempt from federal income taxation

pursuant to section 501(c)(3) of the federal internal revenue code of 1986

contracted with to operate such zoo and all sales of tangible personal

property or services purchased by a contractor for the purpose of con-

structing, equipping, reconstructing, maintaining, repairing, enlarging,

furnishing or remodeling facilities for any nonprofit zoo which would be

exempt from taxation under the provisions of this section if purchased

directly by such nonprofit zoo or the entity operating such zoo. Nothing

in this subsection shall be deemed to exempt the purchase of any con-

struction machinery, equipment or tools used in the constructing, equip-

ping, reconstructing, maintaining, repairing, enlarging, furnishing or re-

modeling facilities for any nonprofit zoo. When any nonprofit zoo shall

contract for the purpose of constructing, equipping, reconstructing, main-

taining, repairing, enlarging, furnishing or remodeling facilities, it shall

obtain from the state and furnish to the contractor an exemption certifi-

cate for the project involved, and the contractor may purchase materials

for incorporation in such project. The contractor shall furnish the number

of such certificate 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 nonprofit zoo 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. If any materials purchased under such a certifi-

cate are found not to have been incorporated in the building or other

project or not to have been returned for credit or the sales or compen-

sating tax otherwise imposed upon such materials which will not be so

incorporated in the building or other project reported and paid by such

contractor to the director of taxation not later than the 20th day of the

month following the close of the month in which it shall be determined

that such materials will not be used for the purpose for which such cer-

tificate was issued, the nonprofit zoo concerned shall be liable for tax on

all materials purchased for the project, and upon payment thereof it may

recover the same from the contractor together with reasonable attorney

fees. 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 sub-

section (g) of K.S.A. 79-3615, and amendments thereto;

(yy) all sales of tangible personal property and services purchased by

a parent-teacher association or organization, and all sales of tangible per-

sonal property by or on behalf of such association or organization;

(zz) all sales of machinery and equipment purchased by over-the-air,

free access radio or television station which is used directly and primarily

for the purpose of producing a broadcast signal or is such that the failure

of the machinery or equipment to operate would cause broadcasting to

cease. For purposes of this subsection, machinery and equipment shall

include, but not be limited to, that required by rules and regulations of

the federal communications commission, and all sales of electricity which

are essential or necessary for the purpose of producing a broadcast signal

or is such that the failure of the electricity would cause broadcasting to

cease;

(aaa) all sales of tangible personal property and services purchased

by a religious organization which is exempt from federal income taxation

pursuant to section 501(c)(3) of the federal internal revenue code, and

used exclusively for religious purposes, and all sales of tangible personal

property or services purchased by a contractor for the purpose of con-

structing, equipping, reconstructing, maintaining, repairing, enlarging,

furnishing or remodeling facilities for any such organization which would

be exempt from taxation under the provisions of this section if purchased

directly by such organization. Nothing in this subsection shall be deemed

to exempt the purchase of any construction machinery, equipment or

tools used in the constructing, equipping, reconstructing, maintaining,

repairing, enlarging, furnishing or remodeling facilities for any such or-

ganization. When any such organization shall contract for the purpose of

constructing, equipping, reconstructing, maintaining, repairing, enlarg-

ing, furnishing or remodeling facilities, 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 pro-

ject. The contractor shall furnish the number of such certificate to all

suppliers from whom such purchases are made, and such suppliers shall

execute invoices covering the same bearing the number of such certifi-

cate. Upon completion of the project the contractor shall furnish to such

organization concerned a sworn statement, on a form to be provided by

the director of taxation, that all purchases so made were entitled to ex-

emption 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. If any materials purchased under such a certificate are found

not to have been incorporated in the building or other project or not to

have been returned for credit or the sales or compensating tax otherwise

imposed upon such materials which will not be so incorporated in the

building or other project reported and paid by such contractor to the

director of taxation not later than the 20th day of the month following

the close of the month in which it shall be determined that such materials

will not be used for the purpose for which such certificate was issued,

such organization concerned shall be liable for tax on all materials pur-

chased for the project, and upon payment thereof it may recover the same

from the contractor together with reasonable attorney fees. Any contrac-

tor 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 amendments thereto. Sales tax paid on and after

July 1, 1998, but prior to the effective date of this act upon the gross

receipts received from any sale exempted by the amendatory provisions

of this subsection shall be refunded. Each claim for a sales tax refund

shall be verified and submitted to the director of taxation upon forms

furnished by the director and shall be accompanied by any additional

documentation required by the director. The director shall review each

claim and shall refund that amount of sales tax paid as determined under

the provisions of this subsection. All refunds shall be paid from the sales

tax refund fund upon warrants of the director of accounts and reports

pursuant to vouchers approved by the director or the director's designee;

(bbb) all sales of food for human consumption by an organization

which is exempt from federal income taxation pursuant to section 501

(c)(3) of the federal internal revenue code of 1986, pursuant to a food

distribution program which offers such food at a price below cost in

exchange for the performance of community service by the purchaser

thereof;

(ccc) on and after July 1, 1999, all sales of tangible personal property

and services purchased by a primary care clinic or health center the pri-

mary purpose of which is to provide services to medically underserved

individuals and families, and which is exempt from federal income taxa-

tion pursuant to section 501 (c)(3) of the federal internal revenue code,

and all sales of tangible personal property or services purchased by a

contractor for the purpose of constructing, equipping, reconstructing,

maintaining, repairing, enlarging, furnishing or remodeling facilities for

any such clinic or center which would be exempt from taxation under the

provisions of this section if purchased directly by such clinic or center.

Nothing in this subsection shall be deemed to exempt the purchase of

any construction machinery, equipment or tools used in the constructing,

equipping, reconstructing, maintaining, repairing, enlarging, furnishing

or remodeling facilities for any such clinic or center. When any such clinic

or center shall contract for the purpose of constructing, equipping, re-

constructing, maintaining, repairing, enlarging, furnishing or remodeling

facilities, 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 certificate 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 such clinic or center 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 subsec-

tion. 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. If any materials

purchased under such a certificate are found not to have been incorpo-

rated in the building or other project or not to have been returned for

credit or the sales or compensating tax otherwise imposed upon such

materials which will not be so incorporated in the building or other pro-

ject reported and paid by such contractor to the director of taxation not

later than the 20th day of the month following the close of the month in

which it shall be determined that such materials will not be used for the

purpose for which such certificate was issued, such clinic or center con-

cerned shall be liable for tax on all materials purchased for the project,

and upon payment thereof it may recover the same from the contractor

together with reasonable attorney fees. Any contractor or any agent, em-

ployee 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 amendments thereto;

(ddd) on and after January 1, 1999, and before January 1, 2000, all

sales of materials and services purchased by any class II or III railroad as

classified by the federal surface transportation board for the construction,

renovation, repair or replacement of class II or III railroad track and

facilities used directly in interstate commerce. In the event any such track

or facility for which materials and services were purchased sales tax ex-

empt is not operational for five years succeeding the allowance of such

exemption, the total amount of sales tax which would have been payable

except for the operation of this subsection shall be recouped in accord-

ance with rules and regulations adopted for such purpose by the secretary

of revenue;

(eee) on and after January 1, 1999, and before January 1, 2001, all

sales of materials and services purchased for the original construction,

reconstruction, repair or replacement of grain storage facilities, including

railroad sidings providing access thereto;

(fff) all sales of material handling equipment, racking systems and

other related machinery and equipment that is used for the handling,

movement or storage of tangible personal property in a warehouse or

distribution facility in this state; all sales of installation, repair and main-

tenance services performed on such machinery and equipment; and all

sales of repair and replacement parts for such machinery and equipment.

For purposes of this subsection, a warehouse or distribution facility means

a single, fixed location that consists of buildings or structures in a contig-

uous area where storage or distribution operations are conducted that are

separate and apart from the business' retail operations, if any, and which

do not otherwise qualify for exemption as occurring at a manufacturing

or processing plant or facility. Material handling and storage equipment

shall include aeration, dust control, cleaning, handling and other such

equipment that is used in a public grain warehouse or other commercial

grain storage facility, whether used for grain handling, grain storage, grain

refining or processing, or other grain treatment operation; and

(ggg) all sales of tangible personal property and services purchased

by or on behalf of the Kansas Academy of Science which is exempt from

federal income taxation pursuant to section 501(c)(3) of the federal in-

ternal revenue code of 1986, and used solely by such academy for the

preparation, publication and dissemination of education materials.

Sec. 2. K.S.A. 2000 Supp. 79-3606 is hereby repealed.

Sec. 3. This act shall take effect and be in force from and after its

publication in the statute book.

Approved May 4, 2000.


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Date Composed: 09/25/2001 Date Modified: 09/25/2001