Kansas Retailers’ Sales Tax
Severing of Oil - Utilities
TO: Utility Companies and Municipalities Furnishing Gas, Water, or Electric Service
FROM: Kansas Department of Revenue
RE: Sale of Utilities for the Severing of Oil
K.S.A. 79-3606(w) exempts from sales tax, "all sales of natural gas, electricity, heat and water delivered through mains, lines or pipes: (1) To residential premises for noncommercial use by the occupant of such premises; (2) for agricultural use; and (3) for use in the severing of oil. As used in this paragraph, 'severing' shall have the meaning ascribed thereto by subsection (k) of K.S.A. 79-4216, and amendments thereto".
K.S.A. 79-4216(k) provides, "'Severed' or 'severing' means: (1) The production of oil through extraction or withdrawal of the same from below the surface of the soil or water, whether such extraction or withdrawal shall be by natural flow, mechanical flow, forced flow, pumping or any other means employed to get the oil from below the surface of the soil or water and shall include the withdrawal by any means whatsoever of oil upon which the tax has not been paid, from any surface reservoir, natural or artificial, or from a water surface; (2) the production of gas through the extraction or withdrawal of the same by any means whatsoever, from below the surface of the earth or water; and (3) the physical removal of coal from the earth".
Effective July 1, 1994, the sale of gas, electricity, heat and water which is delivered through mains, lines or pipes for use in the severing of oil shall be exempt from the retailers' sales tax as well as any local sales tax. A retailer of these utilities must secure a completed Statement for Exemption from the Kansas Retailers' Sales Tax on Electricity, Gas or Water Furnished Through One Meter, form STD-28B from the purchaser in order for the exempt sale to be valid. Utilities not directly used in the "severing" of oil, such as electricity for lighting, shall remain taxable.
If you have questions regarding this notice, write to the Taxpayer Assistance Bureau, Kansas Department of Revenue, Topeka, Kansas, 66625-0001 or call (913) 296-0222.
Dated: June 1994
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