Kansas Retailers’ Sales Tax
TO: Contractors, Subcontractors and Developers
FROM: Kansas Department of Revenue
RE: Taxation of Subdivision Improvements
A review has been conducted of the department's policy based on Attorney General Opinion No. 88-78 regarding the taxability of improvements that are installed in connection with the development of a subdivision. Specifically, are the services rendered to construct water, sewer and streets to be classified as original construction labor services.
Kansas law imposes retailers' sales tax at a rate of 2.5%, plus any applicable local tax, on the service of installing and applying tangible personal property in connection with the original construction of a building or facility or the construction of a highway.
K.S.A. 79-3603(p)(3) defines "facility," in part, as the ". . .transmission or distribution line . . . of any municipal or quasi-municipal corporation."
K.S.A. 8-126(s) defines "highway" as every way or place of whatever nature open to the use of the public as a matter of vehicle traffic. The term "highway" shall not include a roadway or driveway upon grounds owned by private owners, colleges, universities or other institutions.
K.S.A. 79-3602(o) defines "Municipal corporation" as any city incorporated under the laws of Kansas.
K.S.A. 79-3602(p) defines "Quasi-municipal corporation" as any county, township, school district, drainage district or any other governmental subdivision in the state of Kansas having authority to receive or hold moneys or funds.
Therefore, the service of installing improvements such as water lines, sanitary sewer lines and storm sewer lines that are installed on real property owned by or dedicated to a municipal or quasi-municipal corporation and in which ownership of improvements vest to a municipal or quasi-municipal corporation are considered original construction.
Labor services rendered to install street lights, sidewalks, fences and utility lines are considered original construction if rendered in connection with the original construction of a building, buildings, facility or facilities.
The service of installing tangible personal property in connection with the construction of a public street is original construction.
This notice supersedes all previous Department of Revenue notices, revenue rulings, private letter rulings or other advice regarding this matter.
If you have any questions regarding this notice, please write to the Taxpayer Assistance Bureau, Kansas Department of Revenue, Topeka, Kansas, 66625-0001 or call (913) 296-0222.
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