Opinion Letter

Letter Number:O-2010-007
Tax Type:Kansas Retailers' Sales Tax
Brief Description:Installation or application services performed to repair damages to motor vehicles.
Keywords:
Approval Date:06/24/2010



Body:
Office of Policy & Research


June 24, 2010

XXXXX
XXXXX
XXXXX
Dear XXXXX:

Thank you for your recent e-mail. You suggest that the exceptions in K.S.A. 2009 Supp. 79-3603(p) for installation or application services performed to repair damages caused by "fire, flood, tornado, lightning, explosion, windstorm, ice loading and attendant winds, terrorism or earthquake" apply to motor vehicles. Please be advised that these exceptions do not apply to motor vehicles. Charges to repair a motor vehicle are taxable in Kansas regardless of how the vehicle was damaged. Such charges are not exempt under K.S.A. 2009 Supp. 79-3603(p) or under any other Kansas sales tax provision.

K.S.A. 2009 Supp. 79-3603(p) and K.S.A. 2009 Supp. 79-3603(q) impose sales tax on charges for labor services performed to repair or install replacement parts on a motor vehicle. These two statutes contain nothing that exempts any labor service charges for work done on an insured's motor vehicle. Charges by a Kansas body or repair shop to an insurance company for parts and labor are fully taxable. Your company is also responsible for paying sales or use tax on any replacement equipment that it pays for and has drop shipped to an insured who then selects an installer.

K.S.A. 2009 Supp. 79-3603(p) imposes sales tax on:
K.S.A. 2009 Supp. 79-3603(q) and K.S.A. 2009 Supp. 79-3603(p) impose tax on:

Motor vehicles are tangible personal property. Customer charges for the services of repairing, servicing, altering or maintaining a motor vehicle are taxed under K.S.A. 2009 Supp. 79-3603(q). Charges for installing repair and replacement part or for painting a vehicle are taxed under K.S.A. 2009 Supp. 79-3603(p).

K.S.A. 2009 Supp. 79-3603(p) taxes charges for installation and application services:

This exception does not apply to motor vehicles. A motor vehicle is not a building or a "facility" as defined at K.S.A. 2009 Supp. 79-3603(p)(3), cannot be considered a "residence" within which individuals customarily live, and is not a bridge or highway. There is nothing in K.S.A. 2009 Supp. 79-3603(p) that exempts the service of repairing a motor vehicle or the service of installing repair or replacement parts on it.

Similarly, there are no exceptions in K.S.A. 2009 Supp. 79-3603(q) to its imposition on the services of "repairing, servicing, altering or maintaining tangible personal property." All of the exceptions for repair services are contained in K.S.A. 2009 Supp. 79-3603(p) and those exceptions are limited to services performed to buildings, residences, bridges, highways, and "facilities."

There are no other exemptions or exceptions in the Kansas retailers' sales tax act that can be construed as exempting charges for motor vehicle repairs. This means that charges to repair a motor vehicle are fully taxable regardless of how a vehicle was damaged. The charges are taxable when a motor vehicle is damaged in a tornado, flood, or earthquake, is hit by lightning, or is damaged by any other "act of god" listed in K.S.A. 79-3603(p). Charges to repair a motor vehicle are taxable if it is damaged by an act of terrorism, in an accident, by vandalism, by smoke, or by any other means.

Please be advised that an insurance company may not claim a sales tax exemption when it contracts with a body or repair shop or pays the shop for parts or services. If such an exemption is claimed, the company will be subject to penalties and fines prescribed in K.S.A. 79-3615.

Date Composed: 06/24/2010 Date Modified: 06/24/2010