Session Law

Identifying Information:L. 2003 ch. 147
Other Identifying Information:2003 House Bill 2005
Tax Type:Corporate Income Tax
Brief Description:An Act concerning taxation; amending K.S.A. 12-188, 12-189a, 12-191, 12-192, 12-198, 72- 6431, 74-2433, 75-5151, 79-3607, 79-3608 and 79-3651 and K.S.A. 2002 Supp. 12-187, 12-189, 79-201x, 79-15,101, 79-15,102, 79-15,103, 79-15,109 79-3295, 79-3298, 79-3299, 79-32,100, 79-32,100a, 79-32,100b, 79-32,100c, 79-32,206, 79-3602, 79-3603, 79-3606 and 79-3650 and repealing the existing sections; also repealing K.S.A. 12-191a, 79- 15,106, 79-15,107, 79-15,108, 79-15,114, 79-15,115 and 79-15,127.
Keywords:


Body:

CHAPTER 147

HOUSE BILL No. 2005


An Act concerning taxation; amending K.S.A. 12-188, 12-189a, 12-191, 12-192, 12-198, 72-

6431, 74-2433, 75-5151, 79-3607, 79-3608 and 79-3651 and K.S.A. 2002 Supp. 12-187,

12-189, 79-201x, 79-15,101, 79-15,102, 79-15,103, 79-15,109 79-3295, 79-3298, 79-3299,

79-32,100, 79-32,100a, 79-32,100b, 79-32,100c, 79-32,206, 79-3602, 79-3603, 79-3606

and 79-3650 and repealing the existing sections; also repealing K.S.A. 12-191a, 79-


15,106, 79-15,107, 79-15,108, 79-15,114, 79-15,115 and 79-15,127.


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

Section 1. On and after July 1, 2003, K.S.A. 12-191 is hereby

amended to read as follows: 12-191. All retail transactions consummated

within a county or city having a retail sales tax, which transactions are

subject to the Kansas retailers' sales tax, shall also be subject to such

county or city retail sales tax. Except as hereinafter provided, all retail

sales, for the purpose of this act, shall be considered to have been con-

summated at the place of business of the retailer location determined by

the sourcing rules as provided in section 16, and amendments thereto.

The retail sales or transfer of watercraft, modular homes, manufactured

homes or mobile homes, shall be considered consummated at the place of

business of the retailer and sourced to such location. The retail sale, ex-

cluding the lease or rental, of motor vehicles, trailers, semi-trailers or

aircraft that do not qualify as transportation equipment, as defined in

subsection (d) of section 16, and amendments thereto, shall be considered

consummated at the place of business of the retailer and sourced to such

location. The isolated or occasional sale of any motor vehicle or trailer

shall be considered consummated at the taxing jurisdiction where the sale

is made. If the sale negotiations occurred in different cities or counties,

the situs of the sale for local sales tax purposes shall be the place where

the motor vehicle or trailer was kept at the time negotiations were first

entered into. In the event the place of business of a retailer is doubtful

the place or places at which the retail sales are consummated for the

purposes of this act shall be determined under rules and regulations

adopted by the secretary of revenue which rules and regulations shall be

considered with state and federal law insofar as applicable. Retail sales

involving the use, consumption, or furnishing of gas, water, electricity and

heat, for the purposes of this act, shall be considered to have been con-

summated at the situs of the user or recipient thereof, and retail sales

involving the use or furnishing of telephone service or services taxed un-

der subsection (k) of K.S.A. 79-3603, and amendments thereto, shall be

considered to have been consummated at the situs of the subscriber billed

therefor. Retail sales involving the leasing of telecommunication or data

processing equipment commonly used in connection with telephone serv-

ices shall be considered to have been consummated at the situs of the

lessee. Retail sales involving the furnishing of services taxable under sub-

sections (p), (q) and (r) of K.S.A. 79-3603, and amendments thereto,

pursuant to a contract under which the sale of such services and the

furnishing of tangible personal property exceeds $10,000 per contract per

contractor shall be considered to have been consummated at the situs

where such services are performed. The director of taxation is hereby

authorized to request and receive from any retailer or from any city or

county levying the tax such information as may be reasonably necessary

to determine the liability of retailers for any county or city sales tax. The

collection of any sales tax of a county or city approved at any election

shall commence on the first day of the calendar quarter next following

the 90th day after the date that the city or county has provided written

notice to the director of taxation of the election authorizing the levy of

such tax. The collection of any such sales tax applicable to printed catalog

purchases wherein the purchaser computed the tax based upon local tax

rates published in the catalog, shall not commence until the first day of

the calendar quarter next following the 150th day after the date that the

city or county has provided written notice to the director of taxation of

the election authorizing the levy of such tax. The director of taxation shall

provide notice to sellers of such taxes within 30 days after receiving such

notice from the city or county.

A city retailers' sales tax shall not become effective within any area

annexed by a city levying such tax until the first day of the calendar quarter

next following the 90th day after the date that the governing body of such

city provided the state department of revenue with a certified copy of the

annexation ordinance and a map of the city detailing the annexed area.

The director of taxation shall provide notice to sellers of such tax within

30 days after receiving such notice from the city or county.

Whenever any sales tax, imposed by any city or county under the

provisions of this act, shall become effective, at any time prior to the time

that revenue derived therefrom may be budgeted for expenditure in such

year, such revenue shall be credited to the funds of the taxing subdivision

or subdivisions and shall be carried forward to the credit of such funds

for the ensuing budget year in the manner provided for carrying forward

balances remaining in such funds at the end of a budget year.

Sec. 2. On and after July 1, 2003, K.S.A. 12-192 is hereby amended

to read as follows: 12-192. (a) Except as otherwise provided by subsection

(b), (d) or (h), all revenue received by the director of taxation from a

countywide retailers' sales tax shall be apportioned among the county and

each city located in such county in the following manner: (1) One-half of

all revenue received by the director of taxation shall be apportioned

among the county and each city located in such county in the proportion

that the total tangible property tax levies made in such county in the

preceding year for all funds of each such governmental unit bear to the

total of all such levies made in the preceding year, and (2) 1/2 of all revenue

received by the director of taxation from such countywide retailers' sales

tax shall be apportioned among the county and each city located in such

county, first to the county that portion of the revenue equal to the pro-

portion that the population of the county residing in the unincorporated

area of the county bears to the total population of the county, and second

to the cities in the proportion that the population of each city bears to

the total population of the county, except that no persons residing within

the Fort Riley military reservation shall be included in the determination

of the population of any city located within Riley county. All revenue

apportioned to a county shall be paid to its county treasurer and shall be

credited to the general fund of the county.

(b) (1) As an alternative and in lieu of the apportionment formula

provided in subsection (a), all revenue received by the director of taxation

from a countywide retailers' sales tax imposed within Johnson county at

the rate of .75% or 1% after the effective date of this act may be appor-

tioned among the county and each city located in such county in the

following manner: (A) The revenue received from the first .5% rate of

tax shall be apportioned in the manner prescribed by subsection (a) and

(B) the revenue received from the rate of tax exceeding .5% shall be

apportioned as follows: (i) One-fourth shall be apportioned among the

county and each city located in such county in the proportion that the

total tangible property tax levies made in such county in the preceding

year for all funds of each such governmental unit bear to the total of all

such levies made in the preceding year and (ii) one-fourth shall be ap-

portioned among the county and each city located in such county, first to

the county that portion of the revenue equal to the proportion that the

population of the county residing in the unincorporated area of the county

bears to the total population of the county, and second to the cities in the

proportion that the population of each city bears to the total population

of the county and (iii) one-half shall be retained by the county for its sole

use and benefit.

(2) In lieu of the apportionment formula provided in subsection (a),

all money received by the director of taxation from a countywide sales tax

imposed within Montgomery county pursuant to the election held on

November 8, 1994, shall be remitted to and shall be retained by the

county and expended only for the purpose for which the revenue received

from the tax was pledged. All revenue apportioned and paid from the

imposition of such tax to the treasurer of any city prior to the effective

date of this act shall be remitted to the county treasurer and expended

only for the purpose for which the revenue received from the tax was

pledged.

(c) (1) Except as otherwise provided by paragraph (2) of this sub-

section, for purposes of subsections (a) and (b), the term ``total tangible

property tax levies'' means the aggregate dollar amount of tax revenue

derived from ad valorem tax levies applicable to all tangible property

located within each such city or county. The ad valorem property tax levy

of any county or city district entity or subdivision shall be included within

this term if the levy of any such district entity or subdivision is applicable

to all tangible property located within each such city or county.

(2) For the purposes of subsections (a) and (b), any ad valorem prop-

erty tax levied on property located in a city in Johnson county for the

purpose of providing fire protection service in such city shall be included

within the term ``total tangible property tax levies'' for such city regardless

of its applicability to all tangible property located within each such city.

If the tax is levied by a district which extends across city boundaries, for

purposes of this computation, the amount of such levy shall be appor-

tioned among each city in which such district extends in the proportion

that such tax levied within each city bears to the total tax levied by the

district.

(d) (1) All revenue received from a countywide retailers' sales tax

imposed pursuant to paragraphs (2), (6), (7), (8) or, (9) or (12) of sub-

section (b) of K.S.A. 12-187, and amendments thereto, shall be remitted

to and shall be retained by the county and expended only for the purpose

for which the revenue received from the tax was pledged.

(2) Except as otherwise provided in paragraph (5) of subsection (b)

of K.S.A. 12-187, and amendments thereto, all revenues received from a

countywide retailers' sales tax imposed pursuant to paragraph (5) of sub-

section (b) of K.S.A. 12-187, and amendments thereto, shall be remitted

to and shall be retained by the county and expended only for the purpose

for which the revenue received from the tax was pledged.

(e) All revenue apportioned to the several cities of the county shall

be paid to the respective treasurers thereof and deposited in the general

fund of the city. Whenever the territory of any city is located in two or

more counties and any one or more of such counties do not levy a coun-

tywide retailers' sales tax, or whenever such counties do not levy coun-

tywide retailers' sales taxes at a uniform rate, the revenue received by

such city from the proceeds of the countywide retailers' sales tax, as an

alternative to depositing the same in the general fund, may be used for

the purpose of reducing the tax levies of such city upon the taxable tan-

gible property located within the county levying such countywide retail-

ers' sales tax.

(f) Prior to March 1 of each year, the secretary of revenue shall advise

each county treasurer of the revenue collected in such county from the

state retailers' sales tax for the preceding calendar year.

(g) Prior to December 31 of each year, the clerk of every county

imposing a countywide retailers' sales tax shall provide such information

deemed necessary by the secretary of revenue to apportion and remit

revenue to the counties and cities pursuant to this section.

(h) The provisions of subsections (a) and (b) for the apportionment

of countywide retailers' sales tax shall not apply to any revenues received

pursuant to a county or countywide retailers' sales tax levied or collected

under K.S.A. 2001 Supp. 74-8929, and amendments thereto. All such

revenue collected under K.S.A. 2001 Supp. 74-8929, and amendments

thereto, shall be deposited into the redevelopment bond fund established

by K.S.A. 2001 Supp. 74-8927, and amendments thereto, for the period

of time set forth in K.S.A. 2001 Supp. 74-8927, and amendments thereto.

Sec. 3. On and after July 1, 2003, K.S.A. 12-198 is hereby amended

to read as follows: 12-198. (a) A compensating use tax for the privilege of

using or storing within a city or county any tangible personal property or

any vehicle which is required to be registered under the provisions of

article 1 of chapter 8 of the Kansas Statutes Annotated, and amendments

thereto, or any vessel, as defined by K.S.A. 82a-802, and amendments

thereto, is hereby imposed by every city, county or municipal university

imposing a retailers' sales tax. The rate of any such tax shall be fixed at

the same rate as such city's, county's or university's retailers' sales tax.

Any city, county or municipal university imposing a compensating use tax

is prohibited from administering or collecting such tax locally, but shall

utilize the services of the state department of revenue to administer,

enforce and collect such tax. Such tax shall be identical in its application

and exemptions therefrom to the Kansas compensating tax, and all laws

and rules and regulations of the state department of revenue relating to

the Kansas compensating tax shall apply to such local compensating use

tax insofar as the same may be made applicable.

(b) The secretary of revenue is authorized to administer, enforce and

collect a city's, county's or municipal university's compensating use tax

and to adopt such rules and regulations necessary for the efficient and

effective administration, enforcement and collection thereof. The state

director of taxation shall cause such taxes to be collected within the

boundaries of such taxing subdivision at the same time and in the same

manner provided for the collection of the state compensating use tax. All

moneys collected by the director of taxation pursuant to the provisions of

this section shall be credited to the city and county compensating use tax

fund or to the municipal university compensating use tax fund, which

funds are hereby established in the state treasury. Any refund due on any

city's, county's municipal university's compensating use tax collected pur-

suant to this section shall be paid out of the sales tax refund fund and

reimbursement to such fund shall be made by the director of taxation

from collections of local compensating use tax revenue. All moneys col-

lected pursuant to this section for a city or county shall be remitted at

least quarterly by the state treasurer to the treasurer of such city, county

or university.

(c) All revenue received by any county treasurer from a countywide

compensating use tax shall be apportioned among the county and each

city located in such county in the same manner as provided in K.S.A. 12-

192, and amendments thereto, for the apportionment of revenue received

from a countywide retailers' sales tax.

Sec. 4. On and after July 1, 2003, K.S.A. 75-5151 is hereby amended

to read as follows: 75-5151. The secretary of revenue may require, con-

sistent with sound cash management policies, that any taxpayer whose

total sales tax liability exceeds $100,000 in any calendar year, any taxpayer

whose total withholding tax liability exceeds $100,000 in any calendar

year, and any person owing any taxes or fees in connection with any

return, report or document other than for sales tax or withholding tax

liability, shall remit their tax liability by electronic funds transfer no later

than the date required for such remittance except that the secretary may

adopt rules and regulations prescribing alternative filing and payment

dates not later than the last day of the month in which the tax was oth-

erwise due. Electronic funds transfers may be made by wire transfers of

funds through the federal reserve system or by any other means estab-

lished by the secretary, with the approval of the state treasurer, which

insures the availability of such funds to the state on the date of payment.

Evidence of such payment shall be furnished to the secretary on or before

the due date of the tax as established by law. Failure to timely make such

payment in immediately available funds or failure to provide such evi-

dence of payment in a timely manner shall subject the taxpayer to penalty

and interest as provided by law for delinquent or deficient tax payments.

All sales and use tax remittances from model 1, 2 and 3 sellers must be

remitted electronically. Any data that accompanies a remittance must be

formatted using uniform tax type and payment type codes approved by

the secretary.

Sec. 5. On and after July 1, 2003, K.S.A. 2002 Supp. 79-3602 is

hereby amended to read as follows: 79-3602. (a) ``Persons'' means any

individual, firm, copartnership, joint adventure, association, corporation,

estate or trust, receiver or trustee, or any group or combination acting as

a unit, and the plural as well as the singular number; and shall specifically

mean any city or other political subdivision of the state of Kansas engaging

in a business or providing a service specifically taxable under the provi-

sions of this act.

(b) ``Director'' means the state director of taxation.

(c) ``Sale'' or ``sales'' means the exchange of tangible personal prop-

erty, as well as the sale thereof for money, and every transaction, condi-

tional or otherwise, for a consideration, constituting a sale, including the

sale or furnishing of electrical energy, gas, water, services or entertain-

ment taxable under the terms of this act and including, except as provided

in the following provision, the sale of the use of tangible personal property

by way of a lease, license to use or the rental thereof regardless of the

method by which the title, possession or right to use the tangible personal

property is transferred. The term ``sale'' or ``sales'' shall not mean the sale

of the use of any tangible personal property used as a dwelling by way of

a lease or rental thereof for a term of more than 28 consecutive days.

(d) ``Retailer'' means a person regularly engaged in the business of

selling tangible personal property at retail or furnishing electrical energy,

gas, water, services or entertainment, and selling only to the user or con-

sumer and not for resale.

(e) ``Retail sale'' or ``sale at retail'' means all sales made within the

state of tangible personal property or electrical energy, gas, water, services

or entertainment for use or consumption and not for resale.

(f) ``Tangible personal property'' means corporeal personal property.

Such term shall include: (1) Any computer software program which is not

a custom computer software program, as described by subsection (s) of

K.S.A. 79-3603, and amendments thereto; and (2) any prepaid telephone

calling card or prepaid authorization number, or recharge of such card

or number, as described by subsection (b) of K.S.A. 79-3603, and amend-

ments thereto.

(g) ``selling price'' means the total cost to the consumer exclusive of

discounts allowed and credited, but including freight and transportation

charges from retailer to consumer.

(h) ``Gross receipts'' means the total selling price or the amount re-

ceived as defined in this act, in money, credits, property or other consid-

eration valued in money from sales at retail within this state; and em-

braced within the provisions of this act. The taxpayer, may take credit in

the report of gross receipts for: (1) An amount equal to the selling price

of property returned by the purchaser when the full sale price thereof,

including the tax collected, is refunded in cash or by credit; and (2) an

amount equal to the allowance given for the trade-in of property.

(i) ``Taxpayer'' means any person obligated to account to the director

for taxes collected under the terms of this act.

(j) ``Isolated or occasional sale'' means the nonrecurring sale of tan-

gible personal property, or services taxable hereunder by a person not

engaged at the time of such sale in the business of selling such property

or services. Any religious organization which makes a nonrecurring sale

of tangible personal property acquired for the purpose of resale shall be

deemed to be not engaged at the time of such sale in the business of

selling such property. Such term shall include: (1) Any sale by a bank,

savings and loan institution, credit union or any finance company licensed

under the provisions of the Kansas uniform consumer credit code of tan-

gible personal property which has been repossessed by any such entity;

and (2) any sale of tangible personal property made by an auctioneer or

agent on behalf of not more than two principals or households if such

sale is nonrecurring and any such principal or household is not engaged

at the time of such sale in the business of selling tangible personal prop-

erty.

(k) ``Service'' means those services described in and taxed under the

provisions of K.S.A. 79-3603 and amendments thereto.

(l) ``Ingredient or component part'' means tangible personal property

which is necessary or essential to, and which is actually used in and be-

comes an integral and material part of tangible personal property or serv-

ices produced, manufactured or compounded for sale by the producer,

manufacturer or compounder in its regular course of business. The fol-

lowing items of tangible personal property are hereby declared to be

ingredients or component parts, but the listing of such property shall not

be deemed to be exclusive nor shall such listing be construed to be a

restriction upon, or an indication of, the type or types of property to be

included within the definition of ``ingredient or component part'' as

herein set forth:

(1) Containers, labels and shipping cases used in the distribution of

property produced, manufactured or compounded for sale which are not

to be returned to the producer, manufacturer or compounder for reuse.

(2) Containers, labels, shipping cases, paper bags, drinking straws,

paper plates, paper cups, twine and wrapping paper used in the distri-

bution and sale of property taxable under the provisions of this act by

wholesalers and retailers and which is not to be returned to such whole-

saler or retailer for reuse.

(3) Seeds and seedlings for the production of plants and plant prod-

ucts produced for resale.

(4) Paper and ink used in the publication of newspapers.

(5) Fertilizer used in the production of plants and plant products

produced for resale.

(6) Feed for animals, fowl and aquatic plants and animals, the primary

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, fur, or the production of offspring for use for

any such purpose or purposes.

(m) ``Property which is consumed'' means tangible personal property

which is essential or necessary to and which is used in the actual process

of and consumed, depleted or dissipated within one year in (1) the pro-

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

ing of tangible personal property, (2) the providing of services, (3) the

irrigation of crops, for sale in the regular course of business, or (4) the

storage or processing of grain by a public grain warehouse or other grain

storage facility, and which is not reusable for such purpose. The following

is a listing of tangible personal property, included by way of illustration

but not of limitation, which qualifies as property which is consumed:

(A) Insecticides, herbicides, germicides, pesticides, fungicides, fu-

migants, antibiotics, biologicals, pharmaceuticals, vitamins and chemicals

for use in commercial or agricultural production, processing or storage of

fruit, vegetables, feeds, seeds, grains, animals or animal products whether

fed, injected, applied, combined with or otherwise used;

(B) electricity, gas and water; and

(C) petroleum products, lubricants, chemicals, solvents, reagents and

catalysts.

(n) ``Political subdivision'' means any municipality, agency or subdi-

vision of the state which is, or shall hereafter be, authorized to levy taxes

upon tangible property within the state or which certifies a levy to a

municipality, agency or subdivision of the state which is, or shall hereafter

be, authorized to levy taxes upon tangible property within the state. Such

term also shall include any public building commission, housing, airport,

port, metropolitan transit or similar authority established pursuant to law.

(o) ``Municipal corporation'' means any city incorporated under the

laws of Kansas.

(p) ``Quasi-municipal corporation'' means 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.

(q) ``Nonprofit blood bank'' means any nonprofit place, organization,

institution or establishment that is operated wholly or in part for the

purpose of obtaining, storing, processing, preparing for transfusing, fur-

nishing, donating or distributing human blood or parts or fractions of

single blood units or products derived from single blood units, whether

or not any remuneration is paid therefor, or whether such procedures are

done for direct therapeutic use or for storage for future use of such prod-

ucts.

(r) ``Educational institution'' means any nonprofit school, college and

university that offers education at a level above the twelfth grade, and

conducts regular classes and courses of study required for accreditation

by, or membership in, the North Central Association of Colleges and

Schools, the state board of education, or that otherwise qualify as an

``educational institution,'' as defined by K.S.A. 74-50,103, and amend-

ments thereto. Such phrase shall include: (1) A group of educational in-

stitutions that operates exclusively for an educational purpose; (2) non-

profit endowment associations and foundations organized and operated

exclusively to receive, hold, invest and administer moneys and property

as a permanent fund for the support and sole benefit of an educational

institution; (3) nonprofit trusts, foundations and other entities organized

and operated principally to hold and own receipts from intercollegiate

sporting events and to disburse such receipts, as well as grants and gifts,

in the interest of collegiate and intercollegiate athletic programs for the

support and sole benefit of an educational institution; and (4) nonprofit

trusts, foundations and other entities organized and operated for the pri-

mary purpose of encouraging, fostering and conducting scholarly inves-

tigations and industrial and other types of research for the support and

sole benefit of an educational institution.

Except as otherwise provided, as used in the Kansas retailers' sales tax

act:

(a) ``Agent'' means a person appointed by a seller to represent the

seller before the member states.

(b) ``Agreement'' means the multistate agreement entitled the stream-

lined sales and use tax agreement approved by the streamlined sales tax

implementing states at Chicago, Illinois on November 12, 2002.

(c) ``Alcoholic beverages'' means beverages that are suitable for hu-

man consumption and contain .05% or more of alcohol by volume.

(d) ``Certified automated system (CAS)'' means software certified un-

der the agreement to calculate the tax imposed by each jurisdiction on a

transaction, determine the amount of tax to remit to the appropriate state

and maintain a record of the transaction.

(e) ``Certified service provider (CSP)'' means an agent certified under

the agreement to perform all the seller's sales and use tax functions, other

than the seller's obligation to remit tax on its own purchases.

(f) ``Computer'' means an electronic device that accepts information

in digital or similar form and manipulates it for a result based on a se-

quence of instructions.

(g) ``Computer software'' means a set of coded instructions designed

to cause a computer or automatic data processing equipment to perform

a task.

(h) ``Delivered electronically'' means delivered to the purchaser by

means other than tangible storage media.

(i) ``Delivery charges'' means charges by the seller of personal prop-

erty or services for preparation and delivery to a location designated by

the purchaser of personal property or services including, but not limited

to, transportation, shipping, postage, handling, crating and packing.

(j) ``Direct mail'' means printed material delivered or distributed by

United States mail or other delivery services to a mass audience or to

addressees on a mailing list provided by the purchaser or at the direction

of the purchaser when the cost of the items are not billed directly to the

recipients. Direct mail includes tangible personal property supplied di-

rectly or indirectly by the purchaser to the direct mail seller for inclusion

in the package containing the printed material. Direct mail does not in-

clude multiple items of printed material delivered to a single address.

(k) ``Director'' means the state director of taxation.

(l) ``Educational institution'' means any nonprofit school, college and

university that offers education at a level above the twelfth grade, and

conducts regular classes and courses of study required for accreditation

by, or membership in, the North Central Association of Colleges and

Schools, the state board of education, or that otherwise qualify as an

``educational institution,'' as defined by K.S.A. 74-50,103, and amend-

ments thereto. Such phrase shall include: (1) A group of educational in-

stitutions that operates exclusively for an educational purpose; (2) non-

profit endowment associations and foundations organized and operated

exclusively to receive, hold, invest and administer moneys and property

as a permanent fund for the support and sole benefit of an educational

institution; (3) nonprofit trusts, foundations and other entities organized

and operated principally to hold and own receipts from intercollegiate

sporting events and to disburse such receipts, as well as grants and gifts,

in the interest of collegiate and intercollegiate athletic programs for the

support and sole benefit of an educational institution; and (4) nonprofit

trusts, foundations and other entities organized and operated for the pri-

mary purpose of encouraging, fostering and conducting scholarly inves-

tigations and industrial and other types of research for the support and

sole benefit of an educational institution.

(m) ``Electronic'' means relating to technology having electrical, dig-

ital, magnetic, wireless, optical, electromagnetic or similar capabilities.

(n) ``Food and food ingredients'' means substances, whether in liquid,

concentrated, solid, frozen, dried or dehydrated form, that are sold for

ingestion or chewing by humans and are consumed for their taste or

nutritional value. ``Food and food ingredients'' does not include alcoholic

beverages or tobacco.

(o) ``Gross receipts'' means the total selling price or the amount re-

ceived as defined in this act, in money, credits, property or other consid-

eration valued in money from sales at retail within this state; and em-

braced within the provisions of this act. The taxpayer, may take credit in

the report of gross receipts for: (1) An amount equal to the selling price

of property returned by the purchaser when the full sale price thereof,

including the tax collected, is refunded in cash or by credit; and (2) an

amount equal to the allowance given for the trade-in of property.

(p) ``Ingredient or component part'' means tangible personal property

which is necessary or essential to, and which is actually used in and

becomes an integral and material part of tangible personal property or

services produced, manufactured or compounded for sale by the producer,

manufacturer or compounder in its regular course of business. The fol-

lowing items of tangible personal property are hereby declared to be in-

gredients or component parts, but the listing of such property shall not

be deemed to be exclusive nor shall such listing be construed to be a

restriction upon, or an indication of, the type or types of property to be

included within the definition of ``ingredient or component part'' as herein

set forth:

(1) Containers, labels and shipping cases used in the distribution of

property produced, manufactured or compounded for sale which are not

to be returned to the producer, manufacturer or compounder for reuse.

(2) Containers, labels, shipping cases, paper bags, drinking straws,

paper plates, paper cups, twine and wrapping paper used in the distri-

bution and sale of property taxable under the provisions of this act by

wholesalers and retailers and which is not to be returned to such whole-

saler or retailer for reuse.

(3) Seeds and seedlings for the production of plants and plant prod-

ucts produced for resale.

(4) Paper and ink used in the publication of newspapers.

(5) Fertilizer used in the production of plants and plant products

produced for resale.

(6) Feed for 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 hu-

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

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

use for any such purpose or purposes.

(q) ``Isolated or occasional sale'' means the nonrecurring sale of tan-

gible personal property, or services taxable hereunder by a person not

engaged at the time of such sale in the business of selling such property

or services. Any religious organization which makes a nonrecurring sale

of tangible personal property acquired for the purpose of resale shall be

deemed to be not engaged at the time of such sale in the business of selling

such property. Such term shall include: (1) Any sale by a bank, savings

and loan institution, credit union or any finance company licensed under

the provisions of the Kansas uniform consumer credit code of tangible

personal property which has been repossessed by any such entity; and (2)

any sale of tangible personal property made by an auctioneer or agent on

behalf of not more than two principals or households if such sale is non-

recurring and any such principal or household is not engaged at the time

of such sale in the business of selling tangible personal property.

(r) ``Lease or rental'' means any transfer of possession or control of

tangible personal property for a fixed or indeterminate term for consid-

eration. A lease or rental may include future options to purchase or ex-

tend.

(1) Lease or rental does not include: (A) A transfer of possession or

control of property under a security agreement or deferred payment plan

that requires the transfer of title upon completion of the required pay-

ments;

(B) a transfer or possession or control of property under an agreement

that requires the transfer of title upon completion of required payments

and payment of an option price does not exceed the greater of $100 or

1% of the total required payments; or

(C) providing tangible personal property along with an operator for

a fixed or indeterminate period of time. A condition of this exclusion is

that the operator is necessary for the equipment to perform as designed.

For the purpose of this subsection, an operator must do more than main-

tain, inspect or set-up the tangible personal property.

(2) Lease or rental does include agreements covering motor vehicles

and trailers where the amount of consideration may be increased or de-

creased by reference to the amount realized upon sale or disposition of

the property as defined in 26 U.S.C. 7701(h)(1).

(3) This definition shall be used for sales and use tax purposes re-

gardless if a transaction is characterized as a lease or rental under gen-

erally accepted accounting principles, the internal revenue code, the uni-

form commercial code, K.S.A. 84-101 et seq. and amendments thereto, or

other provisions of federal, state or local law.

(4) This definition will be applied only prospectively from the effective

date of this act and will have no retroactive impact on existing leases or

rentals.

(s) ``Load and leave'' means delivery to the purchaser by use of a

tangible storage media where the tangible storage media is not physically

transferred to the purchaser.

(t) ``Member state'' means a state that has entered in the agreement,

pursuant to provisions of article VIII of the agreement.

(u) ``Model 1 seller'' means a seller that has selected a CSP as its agent

to perform all the seller's sales and use tax functions, other than the seller's

obligation to remit tax on its own purchases.

(v) ``Model 2 seller'' means a seller that has selected a CAS to perform

part of its sales and use tax functions, but retains responsibility for re-

mitting the tax.

(w) ``Model 3 seller'' means a seller that has sales in at least five mem-

ber states, has total annual sales revenue of at least $500,000,000, has a

proprietary system that calculates the amount of tax due each jurisdiction

and has entered into a performance agreement with the member states

that establishes a tax performance standard for the seller. As used in this

subsection a seller includes an affiliated group of sellers using the same

proprietary system.

(x) ``Municipal corporation'' means any city incorporated under the

laws of Kansas.

(y) ``Nonprofit blood bank'' means any nonprofit place, organization,

institution or establishment that is operated wholly or in part for the

purpose of obtaining, storing, processing, preparing for transfusing, fur-

nishing, donating or distributing human blood or parts or fractions of

single blood units or products derived from single blood units, whether

or not any remuneration is paid therefor, or whether such procedures are

done for direct therapeutic use or for storage for future use of such prod-

ucts.

(z) ``Persons'' means any individual, firm, copartnership, joint adven-

ture, association, corporation, estate or trust, receiver or trustee, or any

group or combination acting as a unit, and the plural as well as the sin-

gular number; and shall specifically mean any city or other political sub-

division of the state of Kansas engaging in a business or providing a service

specifically taxable under the provisions of this act.

(aa) ``Political subdivision'' means any municipality, agency or sub-

division of the state which is, or shall hereafter be, authorized to levy taxes

upon tangible property within the state or which certifies a levy to a

municipality, agency or subdivision of the state which is, or shall hereafter

be, authorized to levy taxes upon tangible property within the state. Such

term also shall include any public building commission, housing, airport,

port, metropolitan transit or similar authority established pursuant to

law.

(bb) ``Prescription'' means an order, formula or recipe issued in any

form of oral, written, electronic or other means of transmission by a duly

licensed practitioner authorized by the laws of this state.

(cc) ``Prewritten computer software'' means computer software, in-

cluding prewritten upgrades, which is not designed and developed by the

author or other creator to the specifications of a specific purchaser. The

combining of two or more prewritten computer software programs or

prewritten portions thereof does not cause the combination to be other

than prewritten computer software. Prewritten computer software in-

cludes software designed and developed by the author or other creator to

the specifications of a specific purchaser when it is sold to a person other

than the purchaser. Where a person modifies or enhances computer soft-

ware of which the person is not the author or creator, the person shall be

deemed to be the author or creator only of such person's modifications or

enhancements. Prewritten computer software or a prewritten portion

thereof that is modified or enhanced to any degree, where such modifi-

cation or enhancement is designed and developed to the specifications of

a specific purchaser, remains prewritten computer software, except that

where there is a reasonable, separately stated charge or an invoice or

other statement of the price given to the purchaser for such modification

or enhancement, such modification or enhancement shall not constitute

prewritten computer software.

(dd) ``Property which is consumed'' means tangible personal property

which is essential or necessary to and which is used in the actual process

of and consumed, depleted or dissipated within one year in (1) the pro-

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

ing of tangible personal property, (2) the providing of services, (3) the

irrigation of crops, for sale in the regular course of business, or (4) the

storage or processing of grain by a public grain warehouse or other grain

storage facility, and which is not reusable for such purpose. The following

is a listing of tangible personal property, included by way of illustration

but not of limitation, which qualifies as property which is consumed:

(A) Insecticides, herbicides, germicides, pesticides, fungicides, fumi-

gants, antibiotics, biologicals, pharmaceuticals, vitamins and chemicals

for use in commercial or agricultural production, processing or storage of

fruit, vegetables, feeds, seeds, grains, animals or animal products whether

fed, injected, applied, combined with or otherwise used;

(B) electricity, gas and water; and

(C) petroleum products, lubricants, chemicals, solvents, reagents and

catalysts.

(ee) ``Purchase price'' applies to the measure subject to use tax and

has the same meaning as sales price.

(ff) ``Purchaser'' means a person to whom a sale of personal property

is made or to whom a service is furnished.

(gg) ``Quasi-municipal corporation'' means 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.

(hh) ``Registered under this agreement'' means registration by a seller

with the member states under the central registration system provided in

article IV of the agreement.

(ii) ``Retailer'' means a seller regularly engaged in the business of sell-

ing, leasing or renting tangible personal property at retail or furnishing

electrical energy, gas, water, services or entertainment, and selling only

to the user or consumer and not for resale.

(jj) ``Retail sale'' or ``sale at retail'' means any sale, lease or rental for

any purpose other than for resale, sublease or subrent.

(kk) ``Sale'' or ``sales'' means the exchange of tangible personal prop-

erty, as well as the sale thereof for money, and every transaction, condi-

tional or otherwise, for a consideration, constituting a sale, including the

sale or furnishing of electrical energy, gas, water, services or entertain-

ment taxable under the terms of this act and including, except as provided

in the following provision, the sale of the use of tangible personal property

by way of a lease, license to use or the rental thereof regardless of the

method by which the title, possession or right to use the tangible personal

property is transferred. The term ``sale'' or ``sales'' shall not mean the sale

of the use of any tangible personal property used as a dwelling by way of

a lease or rental thereof for a term of more than 28 consecutive days.

(11) (1) ``Sales or selling price'' applies to the measure subject to sales

tax and means the total amount of consideration, including cash, credit,

property and services, for which personal property or services are sold,

leased or rented, valued in money, whether received in money or other-

wise, without any deduction for the following:

(A) The seller's cost of the property sold;

(B) the cost of materials used, labor or service cost, interest, losses,

all costs of transportation to the seller, all taxes imposed on the seller and

any other expense of the seller;

(C) charges by the seller for any services necessary to complete the

sale, other than delivery and installation charges;

(D) delivery charges;

(E) installation charges; and

(F) the value of exempt personal property given to the purchaser

where taxable and exempt personal property have been bundled together

and sold by the seller as a single product or piece of merchandise.

(2) ``Sales or selling price'' shall not include:

(A) Discounts, including cash, term or coupons that are not reim-

bursed by a third party that are allowed by a seller and taken by a pur-

chaser on a sale;

(B) interest, financing and carrying charges from credit extended on

the sale of personal property or services, if the amount is separately stated

on the invoice, bill of sale or similar document given to the purchaser;

(C) any taxes legally imposed directly on the consumer that are sep-

arately stated on the invoice, bill of sale or similar document given to the

purchaser; and

(D) the amount equal to the allowance given for the trade-in of prop-

erty, if separately stated on the invoice, billing or similar document given

to the purchaser.

(mm) ``Seller'' means a person making sales, leases or rentals of per-

sonal property or services.

(nn) ``Service'' means those services described in and taxed under the

provisions of K.S.A. 79-3603 and amendments thereto.

(oo) ``Sourcing rules'' means the rules set forth in sections 16 through

19, K.S.A. 12-191 and 12-191a, and amendments thereto, which shall

apply to identify and determine the state and local taxing jurisdiction sales

or use taxes to pay, or collect and remit on a particular retail sale.

(pp) ``Tangible personal property'' means personal property that can

be seen, weighed, measured, felt or touched, or that is in any other manner

perceptible to the senses. Tangible personal property includes electricity,

water, gas, steam and prewritten computer software.

(qq) ``Taxpayer'' means any person obligated to account to the direc-

tor for taxes collected under the terms of this act.

(rr) ``Tobacco'' means cigarettes, cigars, chewing or pipe tobacco or

any other item that contains tobacco.

Sec. 6. On and after July 1, 2003, K.S.A. 2002 Supp. 79-3603 is

hereby amended to read as follows: 79-3603. For the privilege of engaging

in the business of selling tangible personal property at retail in this state

or rendering or furnishing any of the services taxable under this act, there

is hereby levied and there shall be collected and paid a tax at the rate of

5.3% on and after July 1, 2002, and before July 1, 2004, 5.2% on and after

July 1, 2004, and before July 1, 2005, and 5% on and after July 1, 2005,

and, within a redevelopment district established pursuant to K.S.A. 74-

8921, and amendments thereto, there is hereby levied and there shall be

collected and paid an additional tax at the rate of 2% until the earlier of

the date the bonds issued to finance or refinance the redevelopment

project have been paid in full or the final scheduled maturity of the first

series of bonds issued to finance any part of the project upon:

(a) The gross receipts received from the sale of tangible personal

property at retail within this state;

(b) (1) the gross receipts from intrastate telephone or telegraph serv-

ices; (2) the gross receipts received from the sale of interstate telephone

or telegraph services, which (A) originate within this state and terminate

outside the state and are billed to a customer's telephone number or

account in this state; or (B) originate outside this state and terminate

within this state and are billed to a customer's telephone number or ac-

count in this state except that the sale of interstate telephone or telegraph

service does not include: (A) Any interstate incoming or outgoing wide

area telephone service or wide area transmission type service which en-

titles the subscriber to make or receive an unlimited number of com-

munications to or from persons having telephone service in a specified

area which is outside the state in which the station provided this service

is located; (B) any interstate private communications service to the per-

sons contracting for the receipt of that service that entitles the purchaser

to exclusive or priority use of a communications channel or group of

channels between exchanges; (C) any value-added nonvoice service in

which computer processing applications are used to act on the form, con-

tent, code or protocol of the information to be transmitted; (D) any tel-

ecommunication service to a provider of telecommunication services

which will be used to render telecommunications services, including car-

rier access services; or (E) any service or transaction defined in this sec-

tion among entities classified as members of an affiliated group as pro-

vided by section 1504 of the federal internal revenue code of 1986, as in

effect on January 1, 2001. For the purposes of this subsection the term

gross receipts does not include purchases of telephone, telegraph or tel-

ecommunications using a prepaid telephone calling card or prepaid au-

thorization number. As used in this subsection, a prepaid telephone call-

ing card or prepaid authorization number means the right to exclusively

make telephone calls, paid for in advance, that enables the origination of

calls using an access number or authorization code or both, whether man-

ually or electronically dialed; and (3) the gross receipts from the provision

of services taxable under this subsection which are billed on a combined

basis with nontaxable services, shall be accounted for and the tax remitted

as follows: The taxable portion of the selling price of those combined

services shall include only those charges for taxable services if the selling

price for the taxable services can be readily distinguishable in the retailer's

books and records from the selling price for the nontaxable services. Oth-

erwise, the gross receipts from the sale of both taxable and nontaxable

services billed on a combined basis shall be deemed attributable to the

taxable services included therein. Within 90 days of billing taxable services

on a combined basis with nontaxable services, the retailer shall enter into

a written agreement with the secretary identifying the methodology to be

used in determining the taxable portion of the selling price of those com-

bined services. The burden of proving that any receipt or charge is not

taxable shall be upon the retailer. Upon request from the customer, the

retailer shall disclose to the customer the selling price for the taxable

services included in the selling price for the taxable and nontaxable serv-

ices billed on a combined basis;

(c) the gross receipts from the sale or furnishing of gas, water, elec-

tricity and heat, which sale is not otherwise exempt from taxation under

the provisions of this act, and whether furnished by municipally or pri-

vately owned utilities, except that, on and after January 1, 2006, for sales

of gas, electricity and heat delivered through mains, lines or pipes to

residential premises for noncommercial use by the occupant of such prem-

ises, and for agricultural use and also, for such use, all sales of propane

gas, the state rate shall be 0%; and for 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 occupant of residential premises, the state

rate shall be 0%, but such tax shall not be levied and collected upon the

gross receipts from: (1) The sale of a rural water district benefit unit; (2)

a water system impact fee, system enhancement fee or similar fee col-

lected by a water supplier as a condition for establishing service; or (3)

connection or reconnection fees collected by a water supplier;

(d) the gross receipts from the sale of meals or drinks furnished at

any private club, drinking establishment, catered event, restaurant, eating

house, dining car, hotel, drugstore or other place where meals or drinks

are regularly sold to the public;

(e) the gross receipts from the sale of admissions to any place pro-

viding amusement, entertainment or recreation services including admis-

sions to state, county, district and local fairs, but such tax shall not be

levied and collected upon the gross receipts received from sales of ad-

missions to any cultural and historical event which occurs triennially;

(f) the gross receipts from the operation of any coin-operated device

dispensing or providing tangible personal property, amusement or other

services except laundry services, whether automatic or manually operated;

(g) the gross receipts from the service of renting of rooms by hotels,

as defined by K.S.A. 36-501 and amendments thereto, or by accommo-

dation brokers, as defined by K.S.A. 12-1692, and amendments thereto

but such tax shall not be levied and collected upon the gross receipts

received from sales of such service to the federal government and any

agency, officer or employee thereof in association with the performance

of official government duties;

(h) the gross receipts from the service of renting or leasing of tangible

personal property except such tax shall not apply to the renting or leasing

of machinery, equipment or other personal property owned by a city and

purchased from the proceeds of industrial revenue bonds issued prior to

July 1, 1973, in accordance with the provisions of K.S.A. 12-1740 through

12-1749, and amendments thereto, and any city or lessee renting or leas-

ing such machinery, equipment or other personal property purchased

with the proceeds of such bonds who shall have paid a tax under the

provisions of this section upon sales made prior to July 1, 1973, shall be

entitled to a refund from the sales tax refund fund of all taxes paid

thereon;

(i) the gross receipts from the rendering of dry cleaning, pressing,

dyeing and laundry services except laundry services rendered through a

coin-operated device whether automatic or manually operated;

(j) the gross receipts from the rendering of the services of washing

and washing and waxing of vehicles;

(k) the gross receipts from cable, community antennae and other sub-

scriber radio and television services;

(l) (1) except as otherwise provided by paragraph (2), the gross re-

ceipts received from the sales of tangible personal property to all con-

tractors, subcontractors or repairmen for use by them in erecting struc-

tures, or building on, or otherwise improving, altering, or repairing real

or personal property.

(2) Any such contractor, subcontractor or repairman who maintains

an inventory of such property both for sale at retail and for use by them

for the purposes described by paragraph (1) shall be deemed a retailer

with respect to purchases for and sales from such inventory, except that

the gross receipts received from any such sale, other than a sale at retail,

shall be equal to the total purchase price paid for such property and the

tax imposed thereon shall be paid by the deemed retailer;

(m) the gross receipts received from fees and charges by public and

private clubs, drinking establishments, organizations and businesses for

participation in sports, games and other recreational activities, but such

tax shall not be levied and collected upon the gross receipts received from:

(1) Fees and charges by any political subdivision, by any organization

exempt from property taxation pursuant to paragraph Ninth of K.S.A. 79-

201, and amendments thereto, or by any youth recreation organization

exclusively providing services to persons 18 years of age or younger which

is exempt from federal income taxation pursuant to section 501(c)(3) of

the federal internal revenue code of 1986, for participation in sports,

games and other recreational activities; and (2) entry fees and charges for

participation in a special event or tournament sanctioned by a national

sporting association to which spectators are charged an admission which

is taxable pursuant to subsection (e);

(n) the gross receipts received from dues charged by public and pri-

vate clubs, drinking establishments, organizations and businesses, pay-

ment of which entitles a member to the use of facilities for recreation or

entertainment, but such tax shall not be levied and collected upon the

gross receipts received from: (1) Dues charged by any organization ex-

empt from property taxation pursuant to paragraphs Eighth and Ninth of

K.S.A. 79-201, and amendments thereto; and (2) sales of memberships

in a nonprofit organization which is exempt from federal income taxation

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

1986, and whose purpose is to support the operation of a nonprofit zoo;

(o) the gross receipts received from the isolated or occasional sale of

motor vehicles or trailers but not including: (1) The transfer of motor

vehicles or trailers by a person to a corporation or limited liability com-

pany solely in exchange for stock securities or membership interest in

such corporation or limited liability company; or (2) the transfer of motor

vehicles or trailers by one corporation or limited liability company to

another when all of the assets of such corporation or limited liability

company are transferred to such other corporation or limited liability

company; or (3) the sale of motor vehicles or trailers which are subject

to taxation pursuant to the provisions of K.S.A. 79-5101 et seq., and

amendments thereto, by an immediate family member to another im-

mediate family member. For the purposes of clause (3), immediate family

member means lineal ascendants or descendants, and their spouses. In

determining the base for computing the tax on such isolated or occasional

sale, the fair market value of any motor vehicle or trailer traded in by the

purchaser to the seller may be deducted from the selling price;

(p) the gross receipts received for the service of installing or applying

tangible personal property which when installed or applied is not being

held for sale in the regular course of business, and whether or not such

tangible personal property when installed or applied remains tangible

personal property or becomes a part of real estate, except that no tax shall

be imposed upon the service of installing or applying tangible personal

property in connection with the original construction of a building or

facility, the original construction, reconstruction, restoration, remodeling,

renovation, repair or replacement of a residence or the construction, re-

construction, restoration, replacement or repair of a bridge or highway.

For the purposes of this subsection:

(1) ``Original construction'' shall mean the first or initial construction

of a new building or facility. The term ``original construction'' shall include

the addition of an entire room or floor to any existing building or facility,

the completion of any unfinished portion of any existing building or fa-

cility and the restoration, reconstruction or replacement of a building or

facility damaged or destroyed by fire, flood, tornado, lightning, explosion

or earthquake, but such term, except with regard to a residence, shall not

include replacement, remodeling, restoration, renovation or reconstruc-

tion under any other circumstances;

(2) ``building'' shall mean only those enclosures within which individ-

uals customarily are employed, or which are customarily used to house

machinery, equipment or other property, and including the land improve-

ments immediately surrounding such building;

(3) ``facility'' shall mean a mill, plant, refinery, oil or gas well, water

well, feedlot or any conveyance, transmission or distribution line of any

cooperative, nonprofit, membership corporation organized under or sub-

ject to the provisions of K.S.A. 17-4601 et seq., and amendments thereto,

or of any municipal or quasi-municipal corporation, including the land

improvements immediately surrounding such facility; and

(4) ``residence'' shall mean only those enclosures within which indi-

viduals customarily live;

(q) the gross receipts received for the service of repairing, servicing,

altering or maintaining tangible personal property which when such serv-

ices are rendered is not being held for sale in the regular course of busi-

ness, and whether or not any tangible personal property is transferred in

connection therewith. The tax imposed by this subsection shall be appli-

cable to the services of repairing, servicing, altering or maintaining an

item of tangible personal property which has been and is fastened to,

connected with or built into real property;

(r) the gross receipts from fees or charges made under service or

maintenance agreement contracts for services, charges for the providing

of which are taxable under the provisions of subsection (p) or (q);

(s) the gross receipts received from the sale of computer software,

the sale of the service of providing computer software other than pre-

written computer software and the sale of the services of modifying, al-

tering, updating or maintaining computer software. As used in this sub-

section, ``computer software'' means information and directions loaded

into a computer which dictate different functions to be performed by the

computer. Computer software includes any canned or prewritten pro-

gram which is held or existing for general or repeated sale, even if the

program was originally developed for a single end user as custom com-

puter software, whether the computer software is installed or delivered

electronically by tangible storage media physically transferred to the pur-

chaser or by load and leave;

(t) the gross receipts received for telephone answering services, mo-

bile telecommunication services, beeper services and other similar serv-

ices. On and after August 1, 2002, the provisions of the federal mobile

telecommunications sourcing act as in effect on January 1, 2002, shall be

applicable to all sales of mobile telecommunication services taxable pur-

suant to this subsection. The secretary of revenue is hereby authorized

and directed to perform any act deemed necessary to properly implement

such provisions;

(u) the gross receipts received from the sale of prepaid telephone

calling cards or prepaid authorization numbers and the recharge of such

cards or numbers. A prepaid telephone calling card or prepaid authori-

zation number means the right to exclusively make telephone calls, paid

for in advance, that enables the origination of calls using an access number

or authorization code or both, whether manually or electronically dialed.

If the sale or recharge of such card or number does not take place at the

vendor's place of business, it shall be conclusively determined to take

place at the customer's shipping address; if there is no item shipped then

it shall be the customer's billing address calling service as defined in sec-

tion 19, and amendments thereto; and

(v) the gross receipts received from the sales of bingo cards, bingo

faces and instant bingo tickets by licensees under K.S.A. 79-4701, et seq.,

and amendments thereto, shall be taxed at a rate of: (1) 4.9% on July 1,

2000, and before July 1, 2001; and (2) 2.5% on July 1, 2001, and before

July 1, 2002. From and after July 1, 2002, all sales of bingo cards, bingo

faces and instant bingo tickets by licensees under K.S.A. 79-4701 et seq.,

and amendments thereto, shall be exempt from taxes imposed pursuant

to this section.

Sec. 7. On and after July 1, 2003, K.S.A. 2002 Supp. 79-3606 is

hereby amended to read as follows: 79-3606. The following shall be ex-

empt 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. 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, electricity or heat to others and such items of personal property 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 or district described in subsection (s), the total cost of which is

paid from funds of such political subdivision or district and which would

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

directly by such political subdivision or district. 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, equip-

ment or tools used in the constructing, equipping, reconstructing, main-

taining, repairing, enlarging, furnishing or remodeling facilities for any

political subdivision of the state or any such district. As used in this sub-

section, 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, en-

larging, furnishing or remodeling facilities which are to be leased to the

donor. When any political subdivision of the state, district described in

subsection (s), public or private nonprofit hospital or public hospital au-

thority, 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, 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 the

political subdivision, district described in subsection (s), 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 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. 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, the political subdivision, district described in

subsection (s), 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 pur-

pose 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;.

As used in this subsection, ``drug'' means a compound, substance or prep-

aration and any component of a compound, substance or preparation,

other than food and food ingredients, dietary supplements or alcoholic

beverages, recognized in the official United States pharmacopoeia, official

homeopathic pharmacopoeia of the United States or official national for-

mulary, and supplement to any of them, intended for use in the diagnosis,

cure, mitigation, treatment or prevention of disease or intended to affect

the structure or any function of the body;

(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 devices and orthopedic appliances mobility

enhancing equipment prescribed in writing by a person licensed to prac-

tice the healing arts, dentistry or optometry. For the purposes of this

subsection, the term prosthetic and orthopedic appliances means any ap-

paratus, instrument, device, or equipment 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 mobility; such term shall include acces-

sories 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;: (1) ``Mobility enhancing equipment''

means equipment including repair and replacement parts to same, but

does not include durable medical equipment, which is primarily and cus-

tomarily used to provide or increase the ability to move from one place

to another and which is appropriate for use either in a home or a motor

vehicle; is not generally used by persons with normal mobility; and does

not include any motor vehicle or equipment on a motor vehicle normally

provided by a motor vehicle manufacturer; and (2) ``prosthetic device''

means a replacement, corrective or supportive device including repair and

replacement parts for same worn on or in the body to artificially replace

a missing portion of the body, prevent or correct physical deformity or

malfunction or support a weak or deformed portion of the body;

(s) except as provided in K.S.A. 2002 Supp. 82a-2101, and amend-

ments thereto, all sales of tangible personal property or services pur-

chased directly or indirectly by a groundwater management district or-

ganized or operating under the authority of K.S.A. 82a-1020 et seq. and

amendments thereto, by a rural water district organized or operating un-

der the authority of K.S.A. 82a-612, and amendments thereto, or by a

water supply district organized or operating under the authority of K.S.A.

19-3501 et seq., 19-3522 et seq. or 19-3545, and amendments thereto,

which property or services are used in the construction activities, opera-

tion 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. For all sales of natural gas,

electricity and heat delivered through mains, lines or pipes pursuant to

the provisions of subsection (w)(1) and (w)(2), the provisions of this sub-

section shall expire on December 31,2005;

(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 occurring prior to January 1, 2006;

(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, including durable

medical 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 exemption shall not apply to tangible

personal property customarily used for human habitation purposes. As

used in this subsection, ``durable medical equipment'' means equipment

including repair and replacement parts for such equipment, but does not

include mobility enhancing equipment as defined in subsection (r) which

can withstand repeated use, is primarily and customarily used to serve a

medical purpose, generally is not useful to a person in the absence of illness

or injury and is not worn in or on the body;

(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;

(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. 8. On and after July 1, 2003, K.S.A. 79-3607 is hereby amended

to read as follows: 79-3607. (a) Retailers shall make returns to the director

at the times prescribed by this section upon forms prescribed and fur-

nished by the director stating: (1) The name and address of the retailer;

(2) the total amount of gross sales of all tangible personal property and

taxable services rendered by the retailer during the period for which the

return is made; (3) the total amount received during the period for which

the return is made on charge and time sales of tangible personal property

made and taxable services rendered prior to the period for which the

return is made; (4) deductions allowed by law from such total amount of

gross sales and from total amount received during the period for which

the return is made on such charge and time sales; (5) receipts during the

period for which the return is made from the total amount of sales of

tangible personal property and taxable services rendered during such pe-

riod in the course of such business, after deductions allowed by law have

been made; (6) receipts during the period for which the return is made

from charge and time sales of tangible personal property made and tax-

able services rendered prior to such period in the course of such business,

after deductions allowed by law have been made; (7) gross receipts during

the period for which the return is made from sales of tangible personal

property and taxable services rendered in the course of such business

upon the basis of which the tax is imposed. The return shall include such

other pertinent information as the director may require. In making such

return, the retailer shall determine the market value of any consideration,

other than money, received in connection with the sale of any tangible

personal property in the course of the business and shall include such

value in the return. Such value shall be subject to review and revision by

the director as hereinafter provided. Refunds made by the retailer during

the period for which the return is made on account of tangible personal

property returned to the retailer shall be allowed as a deduction under

subdivision (4) of this section in case the retailer has theretofore included

the receipts from such sale in a return made by such retailer and paid

taxes therein imposed by this act. The retailer shall, at the time of making

such return, pay to the director the amount of tax herein imposed, except

as otherwise provided in this section. The director may extend the time

for making returns and paying the tax required by this act for any period

not to exceed 60 days under such rules and regulations as the secretary

of revenue may prescribe. When the total tax for which any retailer is

liable under this act, does not exceed the sum of $80 in any calendar year,

the retailer shall file an annual return on or before January 25 of the

following year. When the total tax liability does not exceed $1,600 in any

calendar year, the retailer shall file returns quarterly on or before the

25th day of the month following the end of each calendar quarter. When

the total tax liability exceeds $1,600 in any calendar year, the retailer shall

file a return for each month on or before the 25th day of the following

month. When the total tax liability exceeds $32,000 in any calendar year,

the retailer shall be required to pay the sales tax liability for the first 15

days of each month to the director on or before the 25th day of that

month. Any such payment shall accompany the return filed for the pre-

ceding month. A retailer will be considered to have complied with the

requirements to pay the first 15 days' liability for any month if, on or

before the 25th day of that month, the retailer paid 90% of the liability

for that fifteen-day period, or 50% of such retailer's liability in the im-

mediate preceding calendar year for the same month as the month in

which the fifteen-day period occurs computed at the rate applicable in

the month in which the fifteen-day period occurs, and, in either case, paid

any underpayment with the payment required on or before the 25th day

of the following month. Such retailers shall pay their sales tax liabilities

for the remainder of each such month at the time of filing the return for

such month. Determinations of amounts of liability in a calendar year for

purposes of determining filing requirements shall be made by the director

upon the basis of amounts of liability by those retailers during the pre-

ceding calendar year or by estimates in cases of retailers having no pre-

vious sales tax histories. The director is hereby authorized to modify the

filing schedule for any retailer when it is apparent that the original de-

termination was inaccurate.

(b) All model 1, model 2 and model 3 sellers are required to file re-

turns electronically. Any model 1, model 2 or model 3 seller may submit

its sales and use tax returns in a simplified format approved by the di-

rector. Any seller that is registered under the agreement, which does not

have a legal requirement to register in this state, and is not a model 1,

model 2 or model 3 seller, may submit its sales and use tax returns as

follows: (1) Upon registration, the director shall provide to the seller the

returns required;

(2) seller shall file a return anytime within one year of the month of

initial registration, and future returns are required on an annual basis in

succeeding years; and

(3) in addition to the returns required in subsection (b)(2), sellers are

required to submit returns in the month following any month in which

they have accumulated state and local sales tax funds for this state in the

amount of $1,600 or more.

Sec. 9. On and after July 1, 2003, K.S.A. 79-3608 is hereby amended

to read as follows: 79-3608. (a) Except as otherwise provided, it shall be

unlawful for any person to engage in the business of selling tangible per-

sonal property at retail or furnishing taxable services in this state without

a registration certificate from the director of taxation. Application for such

certificate shall be made to the director upon forms furnished by the

director, and shall state the name of the applicant, the address or ad-

dresses at which the applicant proposes to engage in such business, and

the character of such business. Utilities taxable under this act shall not

be required to register but shall comply with all other provisions of this

act. The taxpayer may be registered by an agent. Such appointment of

the agent by the taxpayer shall be in writing and submitted to the director.

The taxpayer shall be issued a registration certificate to engage in the

business for which application is made unless the applicant at the time of

making such application owes any sales tax, penalty or interest, and in

such case, before a registration certificate is issued, the director of taxa-

tion shall require the applicant to pay the amount owed.

(b) A separate registration certificate shall be issued for each place of

business, and shall be conspicuously displayed therein.

(c) A seller registering under the agreement is considered registered

in this state and shall not be required to pay any registration fees or other

charges to register in this state if the seller has no legal requirement to

register. A written signature from the seller registering under the agree-

ment is not required. An agent may register a seller under uniform pro-

cedures determined by the secretary. A seller may cancel its registration

under the system at any time under uniform procedures determined by

the secretary. Cancellation does not relieve the seller of its liability for

remitting to this state any taxes collected.

Sec. 10. On and after July 1, 2003, K.S.A. 2002 Supp. 79-3650 is

hereby amended to read as follows: 79-3650. (a) A refund request may

be filed directly by a consumer or purchaser if the consumer or purchaser:

(1) Paid the tax directly to the department; (2) provides evidence that the

retailer refused or was unavailable to refund the tax; (3) provides evidence

that the retailer did not act upon its refund request in a timely manner

as provided in subsection (b), or; (4) provides a notarized statement to

the department from the retailer that the retailer: (A) Will not claim a

refund of the same tax included in the purchaser's or consumer's refund

request; (B) agrees to provide to the consumer or purchaser any infor-

mation or documentation in the retailer's possession needed for submis-

sion to the department to support or prove the refund claim; (C) has

remitted to the state the tax sought to be refunded; and (D) has not taken

or will not take a credit for such tax. A retailer providing false information

in any such statement shall be subject to penalties prescribed by K.S.A.

2002 Supp. 79-3615(h), and amendments thereto.

(b) A cause of action against the seller for the over-collected sales or

use taxes does not accrue until a purchaser has provided written notice

to a seller and the seller has had 60 days to respond. Such notice to the

seller must contain the information necessary to determine the validity of

the request. In connection with a purchaser's request from a seller for

over-collected sales or use taxes, a seller shall be presumed to have a

reasonable business practice, if in the collection of such sales or use taxes,

the seller uses either a provider or a system, including a proprietary sys-

tem, that is certified by the state and has remitted to the state all taxes

collected less any deductions, credits or collection allowances. If the di-

rector of taxation finds upon proper showing that a consumer or purchaser

submitted a refund request to a retailer that was not acted upon by the

retailer in a timely manner, the director shall extend the time for filing

the request with the department beyond the three year limitation period

that is otherwise provided by the time attributed to the delay caused by

the retailer.

Sec. 11. On and after July 1, 2003, K.S.A. 79-3651 is hereby

amended to read as follows: 79-3651. (a) For the purpose of the proper

administration of the Kansas retailers' sales tax act and to prevent evasion

of the tax imposed thereunder, it shall be presumed that all gross receipts

from the sale of tangible personal property or enumerated services are

subject to tax until the contrary is established. The burden of proving that

a sale is not subject to tax is upon the vendor seller unless the vendor

seller takes from the purchaser an exemption certificate to the effect that

the property or service purchased is not subject to tax.

(b) An exemption certificate shall relieve the vendor seller from col-

lecting and remitting tax when taken in good faith. A vendor shall be

presumed to have accepted an exemption certificate in good faith in the

absence of evidence to the contrary. A vendor shall be deemed to have

accepted an exemption certificate in good faith if the vendor: (1) Main-

tains a completed exemption certificate; (2) has ascertained the identity

of the person or entity who presented the exemption certificate; and (3)

has not been shown by a preponderance of the evidence to have had

knowledge that the presentation of the certificate was improper if the

seller has obtained the required identifying information as determined by

the director, from the purchaser and the reason for claiming the exemption

at the time of purchase and has maintained proper records of exempt

transactions pursuant to subsection (a) of K.S.A. 79-3609, and amend-

ments thereto and provided them to the director when requested, except

that a seller who fraudulently fails to collect the tax or solicits purchasers

to participate in the unlawful claim of an exemption shall not be relieved

from such liability. The seller shall obtain the same information for proof

of a claimed exemption regardless of the medium in which the transaction

occurred. The purchaser improperly claiming an exemption shall remain

liable for the nonpayment of tax.

(c) The exemption certificate shall be substantially in such form as

the director may prescribe. The seller shall use the standard form for

claiming an exemption electronically as adopted by the director. A vendor

seller may require a purchaser to provide a copy of the purchaser's sales

tax registration certificate with a resale certificate as a condition for hon-

oring the purchaser's resale exemption claim. A purchaser is not required

to provide a signature to claim an exemption from tax unless a paper

exemption certificate is used.

(d) To lawfully present a resale exemption certificate the purchaser

must be engaged in the business of selling property or services of the

same kind that is purchased, hold a registration certificate, and at the

time of purchase, either intend to resell the property in the regular course

of business or be unable to ascertain whether the property will be resold

or used for some other purpose.

(e) Any person who issues a resale certificate or other exemption

certificate in order to unlawfully avoid payment of tax for business or

personal gain shall be guilty of a misdemeanor and upon conviction shall

be punished by a fine of not more than $1,000 or imprisonment for not

more than one year, or by both. In addition, if the director determines

that a person issued a resale certificate in order to unlawfully avoid pay-

ment of tax for business or personal gain, the director shall increase any

penalty that is due from the person under K.S.A. 79-3615, and amend-

ments thereto, by $250 or 10 times the tax due, whichever is greater, on

each transaction where the misuse of a resale certificate occurred.

(f) Exemption certificates issued by a nonprofit entity claiming a spe-

cific exemption under K.S.A. 79-3606, and amendments thereto, shall

bear the name and address of the entity and indicate the subsection under

which the exemption is being claimed. Such certificate shall be signed by

an officer, office manager or other administrator of the nonprofit entity,

if in paper form, and contain the driver's license number of the signer.

The certificate shall be substantially in such form as the director may

prescribe. Payments made on an exempt entity's check, warrant, voucher

or is charged to the entity's account shall relieve the vendor seller from

collecting and remitting the tax if it is taken in good faith.

(g) It shall be the duty of every person who purchases tangible per-

sonal property or services that are taxable under this act to pay the full

amount of tax that is lawfully due to the retailer making the sale. Any

person who willfully and intentionally refuses to pay such tax to the re-

tailer shall be guilty of a misdemeanor and upon conviction shall be pun-

ished and fined as provided by subsection (g) of K.S.A. 79-3615, and

amendments thereto.

New Sec. 12. State sales tax rate changes must take effect on the first

day of a calendar quarter. The secretary shall make a reasonable effort to

provide sellers with as much advance notice as practicable of any rate

changes, legislative change in the tax base and amendments to sales and

use tax rules and regulations. Failure of a seller to receive such notice or

failure of the secretary to provide such notice to a seller or limit the

effective date of a rate change shall not relieve the seller of its obligation

to collect sales or use tax or otherwise comply with any such legislative,

rule or regulatory changes.

New Sec. 13. On and after the databases are developed pursuant to

subsections (a), (b) and (c) of section 14 and amendments thereto and

after the state has joined and become a member of the agreement, sellers

and certified service providers (CSPs) are relieved from liability for state

and local sales and use tax for having charged and collected the incorrect

amount of sales tax resulting from the seller or certified service provider

relying on erroneous data provided by the secretary on tax rates, bound-

aries or taxing jurisdiction assignments. If the secretary provides an ad-

dress-based system for assigning taxing jurisdictions that meets the

requirements developed pursuant to the federal mobile telecommuni-

cations sourcing act, no liability relief is provided to sellers or certified

service providers for errors resulting from reliance on the information

provided under the provisions of subsection (c) of section 14 and amend-

ments thereto.

New Sec. 14. (a) The secretary shall provide and maintain a database

that describes boundary changes for all taxing jurisdictions. This database

shall include a description of the change and the effective date of the

change for sales and use tax purposes.

(b) The secretary shall provide and maintain a database of all sales

and use tax rates for all taxing jurisdictions. For the identification of coun-

ties and cities, codes corresponding to the rates must be provided ac-

cording to federal information processing standards (FIPS) as developed

by the national institute of standards and technology. For the identifica-

tion of all other jurisdictions, codes corresponding to the rates must be

in the format determined by the secretary.

(c) The secretary must provide and maintain a database that assigns

each five- and nine-digit zip code to the proper rates and taxing jurisdic-

tions. The lowest combined tax rate imposed in the zip code area shall

apply if the area includes more than one tax rate in any level of taxing

jurisdiction. If a nine-digit zip code designation is not available for a street

address, or if a seller is unable to determine the nine-digit zip code des-

ignation of a purchaser after exercising due diligence to determine the

designation, the seller may apply the rate for the five-digit zip code area.

For purposes of this section, there is a rebuttable presumption that a

seller has exercised due diligence if the seller has attempted to determine

the nine-digit zip code designation by utilizing software approved by the

secretary that makes this designation from the street address and the five-

digit zip code of the purchaser.

(d) The secretary shall participate with other member states in the

development of an address-based system for assigning taxing jurisdictions.

The system must meet the requirements developed pursuant to the fed-

eral mobile telecommunications sourcing act (4 U.S.C. § 119).

(e) The electronic databases provided for in subsections (a), (b), (c)

and (d) shall be in downloadable format as determined by the secretary.

The provisions of subsections (c) and (d) do not apply when the purchased

product is received by the purchaser at the business location of the seller.

New Sec. 15. (a) The retail sale of a product shall be sourced in

accordance with section 16 and amendments thereto. The provisions of

section 16 and amendments thereto apply regardless of the characteri-

zation of a product as tangible personal property, a digital good or a

service. The provisions of section 16 and amendments thereto only apply

to determine a seller's obligation to pay or collect and remit a sales or

use tax with respect to the seller's retail sale of a product. These provisions

do not affect the obligation of a purchaser or lessee to remit tax on the

use of the product to the taxing jurisdictions of that use.

(b) Section 16 and amendments thereto does not apply to sales or

use taxes levied on the following: (1) The retail sale or transfer of water

craft, modular homes, manufactured homes or mobile homes. The retail

sale of these items shall be sourced according to K.S.A. 12-191 and

amendments thereto;

(2) the retail sales, excluding lease or rental, of motor vehicles, trail-

ers, semi-trailers or aircraft that do not qualify as transportation equip-

ment, as defined in subsection (d) of section 16 and amendments thereto.

The retail sale of these items shall be sourced according to K.S.A. 12-191

and amendments thereto and the lease or rental of these items must be

sourced according to subsection (c) of section 16 and amendments

thereto; and

(3) telecommunications services, as set out in section 19 and amend-

ments thereto, shall be sourced in accordance with section 19 and amend-

ments thereto.

New Sec. 16. (a) The retail sale, excluding lease or rental, of a prod-

uct shall be sourced as follows: (1) When the product is received by the

purchaser at a business location of the seller, the sale is sourced to that

business location;

(2) when the product is not received by the purchaser at a business

location of the seller, the sale is sourced to the location where receipt by

the purchaser, or the purchaser's donee, designated as such by the pur-

chaser, occurs, including the location indicated by instructions for delivery

to the purchaser or donee, known to the seller;

(3) when subsection (a)(1) and (a)(2) do not apply, the sale is sourced

to the location indicated by an address for the purchaser that is available

from the business records of the seller that are maintained in the ordinary

course of the seller's business when use of this address does not constitute

bad faith;

(4) when subsections (a)(1), (a)(2) and (a)(3) do not apply, the sale is

sourced to the location indicated by an address for the purchaser obtained

during the consummation of the sale, including the address of a pur-

chaser's payment instrument, if no other address is available, when use

of this address does not constitute bad faith;

(5) when none of the previous rules of subsection (a)(1), (a)(2), (a)(3)

or (a)(4) apply, including the circumstance in which the seller is without

sufficient information to apply the previous rules, then the location will

be determined by the address from which tangible personal property was

shipped, from which the digital good or the computer software delivered

electronically was first available for transmission by the seller, or from

which the service was provided, disregarding for these purposes any lo-

cation that merely provided the digital transfer of the product sold.

(b) The lease or rental of tangible personal property, other than prop-

erty identified in subsection (c) or (d), shall be sourced as follows: (1) For

a lease or rental that requires recurring periodic payments, the first pe-

riodic payment is sourced the same as a retail sale in accordance with the

provisions of subsection (a). Periodic payments made subsequent to the

first payment are sourced to the primary property location for each period

covered by the payment. The primary property location shall be as indi-

cated by an address for the property provided by the lessee that is avail-

able to the lessor from its records maintained in the ordinary course of

business, when use of this address does not constitute bad faith. The

property location shall not be altered by intermittent use at different

locations, such as use of business property that accompanies employees

on business trips and service calls;

(2) for a lease or rental that does not require recurring periodic pay-

ments, the payment is sourced the same as a retail sale in accordance

with the provisions of subsection (a); and

(3) this subsection does not affect the imposition or computation of

sales or use tax on leases or rentals based on a lump sum or accelerated

basis, or on the acquisition of property for lease.

(c) The lease or rental of motor vehicles, trailers, semi-trailers or air-

craft that do not qualify as transportation equipment, as defined in sub-

section (d), shall be sourced as follows: (1) For a lease or rental that

requires recurring periodic payments, each periodic payment is sourced

to the primary property location. The primary property location shall be

as indicated by an address for the property provided by the lessee that is

available to the lessor from its records maintained in the ordinary course

of business, when use of this address does not constitute bad faith. This

location shall not be altered by intermittent use at different locations;

(2) for a lease or rental that does not require recurring periodic pay-

ments, the payment is sourced the same as a retail sale in accordance

with the provisions of subsection (a); and

(3) this subsection does not affect the imposition or computation of

sales or use tax on leases or rentals based on a lump sum or accelerated

basis or on the acquisition of property for lease.

(d) The retail sale, including lease or rental, of transportation equip-

ment shall be sourced the same as a retail sale in accordance with the

provisions of subsection (a), notwithstanding the exclusion of lease or

rental in subsection (a). ``Transportation equipment'' means any of the

following: (1) Locomotives and railcars that are utilized for the carriage

of persons or property in interstate commerce;

(2) trucks and truck-tractors with a gross vehicle weight rating

(GVWR) of 10,001 pounds or greater, trailers, semi-trailers or passenger

buses that are: (A) Registered through the international registration plan;

and

(B) operated under authority of a carrier authorized and certificated

by the United States department of transportation or another federal or

a foreign authority to engage in the carriage of persons or property in

interstate or foreign commerce;

(3) aircraft that are operated by air carriers authorized and certifi-

cated by the United States department of transportation or another fed-

eral or a foreign authority to engage in the carriage of persons or property

in interstate or foreign commerce; and

(4) containers designed for use on and component parts attached or

secured on the items set forth in subsection (d)(1), (d)(2) and (d)(3).

(e) As used in this section, the terms ``receive'' and ``receipt'' mean:

(1) Taking possession of tangible personal property;

(2) making first use of services; or

(3) taking possession or making first use of digital goods, whichever

comes first. The terms receive and receipt do not include possession by

a shipping company on behalf of the purchaser.

New Sec. 17. (a) Notwithstanding the provisions of section 16 and

amendments thereto, a business purchaser that is not a holder of a direct

pay permit that knows at the time of its purchase of a digital good, com-

puter software delivered electronically or a service that the digital good,

computer software delivered electronically or service will be concurrently

available for use in more than one jurisdiction shall deliver to the seller

in conjunction with its purchase a multiple points of use or MPU exemp-

tion form disclosing this fact.

(b) Upon receipt of the MPU exemption form, the seller is relieved

of all obligation to collect, pay or remit the applicable tax and the pur-

chaser shall be obligated to collect, pay or remit the applicable tax on a

direct pay basis.

(c) A purchaser delivering the MPU exemption form may use any

reasonable, but consistent and uniform, method of apportionment that is

supported by the purchaser's business records as they exist at the time of

the consummation of the sale.

(d) The MPU exemption form will remain in effect for all future sales

by the seller to the purchaser, except as to the subsequent sale's specific

apportionment that is governed by the principle of subsection (c) and the

facts existing at the time of the sale, until it is revoked in writing.

(e) A holder of a direct pay permit shall not be required to deliver

the MPU exemption form to the seller. A direct pay permit holder shall

follow the provisions of subsection (c) in apportioning the tax due on a

digital good or a service that will be concurrently available for use in more

than one jurisdiction.

New Sec. 18. (a) (1) Notwithstanding the provisions of section 16

and amendments thereto, a purchaser of direct mail that is not a holder

of a direct pay permit shall provide to the seller in conjunction with the

purchase either a direct mail form or information to show the jurisdictions

to which the direct mail is delivered to recipients.

(2) Upon receipt of the direct mail form, the seller is relieved of all

obligations to collect, pay or remit the applicable tax and the purchaser

is obligated to pay or remit the applicable tax on a direct pay basis. A

direct mail form shall remain in effect for all future sales of direct mail

by the seller to the purchaser until it is revoked in writing.

(3) Upon receipt of information from the purchaser showing the ju-

risdictions to which the direct mail is delivered to recipients, the seller

shall collect the tax according to the delivery information provided by the

purchaser. In the absence of bad faith, the seller is relieved of any further

obligation to collect tax on any transaction where the seller has collected

tax pursuant to the delivery information provided by the purchaser.

(b) If the purchaser of direct mail does not have a direct pay permit

and does not provide the seller with either a direct mail form or delivery

information, as required by subsection (a), the seller shall collect the tax

according to subsection (a)(5) of section 16 and amendments thereto.

Nothing in this subsection shall limit a purchaser's obligation for sales or

use tax to any state to which the direct mail is delivered.

(c) If a purchaser of direct mail provides the seller with documen-

tation of direct pay authority, the purchaser shall not be required to pro-

vide a direct mail form or delivery information to the seller.

New Sec. 19. (a) Except for the defined telecommunication services

in subsection (c), the sale of telecommunication service sold on a call-by-

call basis shall be sourced to each level of taxing jurisdiction where the

call originates and terminates in that jurisdiction or each level of taxing

jurisdiction where the call either originates or terminates and in which

the service address is also located.

(b) Except for the defined telecommunication services in subsection

(c), a sale of telecommunications services sold on a basis other than a call-

by-call basis, is sourced to the customer's place of primary use.

(c) The sale of the following telecommunication services shall be

sourced to each level of taxing jurisdiction as follows: (1) A sale of mobile

communications services other than air-to-ground radiotelephone service

and prepaid calling service, is sourced to the customer's place of primary

use as required by the mobile telecommunications sourcing act;

(2) a sale of post-paid calling service is sourced to the origination

point of the telecommunications signal as first identified by either the

seller's telecommunications system, or information received by the seller

from its service provider, where the system used to transport such signals

is not that of the seller; and

(3) a sale of prepaid calling service is sourced in accordance with

section 16 and amendments thereto, except that in the case of a sale of

mobile telecommunications service that is a prepaid telecommunications

service, the rule provided in subsection (a)(5) of section 16 and amend-

ments thereto shall include as an option the location associate with the

mobile telephone number.

(d) A sale of a private communication service is sourced as follows:

(1) Service for a separate charge related to a customer channel termina-

tion point is sourced to each level of jurisdiction in which such customer

channel termination point is located;

(2) service where all customer termination points are located entirely

within one jurisdiction or levels of jurisdiction is sourced in such juris-

diction in which the customer channel termination points are located;

(3) service for segments of a channel between two customer channel

termination points located in different jurisdictions and which segment

of channel are separately charged is sourced 50% in each level of juris-

diction in which the customer channel termination points are located; and

(4) service for segments of a channel located in more than one juris-

diction or levels of jurisdiction and which segments are not separately

billed is sourced in each jurisdiction based on the percentage determined

by dividing the number of customer channel termination points in such

jurisdiction by the total number of customer channel termination points.

(e) As used in this section: (1) ``Air-to-ground radiotelephone service''

means a radio service, as that term is defined in 47 CFR 22.99, in which

common carriers are authorized to offer and provide radio telecommu-

nications service for hire to subscribers in aircraft;

(2) ``call-by-call basis'' means any method of charging for telecom-

munications services where the price is measured by individual calls;

(3) ``communications channel'' means a physical or virtual path of

communications over which signals are transmitted between or among

customer channel termination points;

(4) ``customer'' means the person or entity that contracts with the

seller of telecommunications services. If the end user of telecommuni-

cations services is not the contracting party, the end user of the telecom-

munications service is the customer of the telecommunication service,

but this sentence only applies for the purpose of sourcing sales of tele-

communications services under this section. Customer does not include

a reseller of telecommunications service or for mobile telecommunica-

tions service of a serving carrier under an agreement to serve the cus-

tomer outside the home service provider's licensed service area;

(5) ``customer channel termination point'' means the location where

the customer either inputs or receives the communication;

(6) ``end user'' means the person who utilizes the telecommunication

service. In the case of an entity, end user means the individual who utilizes

the services on behalf of the entity;

(7) ``home service provider'' means the same as that term in defined

in section 124(5) of Public Law 106-252 (mobile telecommunications

sourcing act);

(8) ``mobile telecommunications service'' means the same as that

term is defined in section 124(5) of Public Law 106-252 (mobile telecom-

munications sourcing act);

(9) ``place of primary use'' means the street address representative of

where the customer's use of the telecommunications service primarily

occurs, which must be the residential street address or the primary busi-

ness street address of the customer. In the case of mobile telecommu-

nications services, place of primary use must be within the licensed serv-

ice area of the home service provider;

(10) ``post-paid calling service'' means the telecommunications serv-

ice obtained by making a payment on a call-by-call basis either through

the use of a credit card or payment mechanism such as a bank card, travel

card, credit card or debit card, or by charge made to which a telephone

number which is not associated with the origination or termination of the

telecommunications service. A post-paid calling service includes a tele-

communications service that would be a prepaid calling service except it

is not exclusively a telecommunication service;

(11) ``prepaid calling service'' means the right to access exclusively

telecommunications services, which must be paid for in advance and

which enables the origination of calls using an access number or author-

ization code, whether manually or electronically dialed, and that is sold

in predetermined units or dollars of which the number declines with use

in a known amount;

(12) ``private communication service'' means a telecommunication

service that entitles the customer to exclusive or priority use of a com-

munications channel or group of channels between or among termination

points, regardless of the manner in which such channel or channels are

connected, and includes switching capacity, extension lines, stations and

any other associated services that are provided in connection with the use

of such channel or channels; and

(13) ``service address'' means: (A) The location of the telecommuni-

cations equipment to which a customer's call is charged and from which

the call originates or terminates, regardless of where the call is billed or

paid;

(B) if the location in subsection (13)(A) is not known, service address

means the origination point of the signal of the telecommunications serv-

ices first identified by either the seller's telecommunications system or in

information received by the seller from its service provider, where the

system used to transport such signals is not that of the seller; and

(C) if the location in subsections (13)(A) and (13)(B) are not known,

the service address means the location of the customer's place of primary

use.

New Sec. 20. (a) A seller is allowed a deduction from taxable sales

for bad debts attributable to taxable sales of such seller that have become

uncollectable. Any deduction taken that is attributed to bad debts shall

not include interest.

(b) The amount of the bad debt deduction shall be calculated pur-

suant to 26 U.S.C. § 166(b), except that such amount shall be adjusted

to exclude financing charges or interest, sales or use taxes charged on the

purchase price, uncollectable amounts on property that remain in the

possession of the seller until the full purchase price is paid and expenses

incurred in attempting to collect any debt and repossessed property.

(c) Bad debts may be deducted on the return for the period during

which the bad debt is written off as uncollectable in the seller's books

and records and is eligible to be deducted for federal income tax purposes.

For purposes of this subsection, a seller who is not required to file federal

income tax returns may deduct a bad debt on a return filed for the period

in which the bad debt is written off as uncollectable in the seller's books

and records and would be eligible for a bad debt deduction for federal

income tax purposes if the seller was required to file a federal income tax

return.

(d) If a deduction is taken for a bad debt and the debt is subsequently

collected in whole or in part, the tax on the amount so collected must be

paid and reported on the return filed for the period in which the collec-

tion is made.

(e) When the amount of bad debt exceeds the amount of taxable sales

for the period during which the bad debt is written off, a refund claim

may be filed by the seller within the applicable statute of limitations for

refund claim pursuant to subsection (b) of K.S.A. 79-3609 and amend-

ments thereto; however, the statute of limitations shall be measured from

the due date of the return on which the bad debt could first be claimed.

(f) Where filing responsibilities have been assumed by a certified

service provider, the service provider may claim, on behalf of the seller,

any bad debt allowance provided by this section. The certified service

provider must credit or refund the full amount of any bad debt allowance

or refund received to the seller.

(g) For the purposes of reporting a payment received on a previously

claimed bad debt, any payments made on a debt or account must first be

applied proportionally to the taxable price of the property or service and

the sales tax thereon, and secondly to interest, service charges and any

other charges.

(h) In situations where the books and records of the seller, or certified

service provider on behalf of the seller, claiming the bad debt allowance

support an allocation of the bad debts among the member states, such

an allocation is permitted.

New Sec. 21. (a) The purpose of this section is to set forth this state's

policy for the protection of the confidentiality rights of all participants in

the system and of the privacy interests of consumers who deal with model

1 sellers.

(b) As used in this section: (1) ``Confidential taxpayer information''

means all information that is protected under this state's laws, rules and

regulations and privileges;

(2) ``personally identifiable information'' means information that

identifies a person; and

(3) ``anonymous data'' means information that does not identify a per-

son.

(c) A fundamental precept in model 1 is to preserve the privacy of

consumers by protecting their anonymity. With very limited exceptions,

a certified service provider (CSP) shall perform its tax calculation, remit-

tance and reporting functions without retaining the personally identifiable

information of consumers.

(d) The secretary shall provide public notification to consumers, in-

cluding their exempt purchasers, of the department's practices relating

to the collection, use and retention of personally identifiable information.

(e) When any personally identifiable information that has been col-

lected and retained is no longer required to ensure the validity of ex-

emptions from taxation that are claimed by reason of a consumer's status

or the intended use of the goods or services purchased, such information

shall no longer be retained by the department.

(f) When personally identifiable information regarding an individual

is retained by or on behalf of the department, the secretary shall provide

reasonable access by such individual to such individual's own information

in the department's possession and a right to correct any inaccurately

recorded information.

(g) If anyone other than this state, or a person authorized by this

state's law or the agreement, seeks to discover personally identifiable

information, the secretary shall make a reasonable and timely effort to

notify the individual of such request.

(h) This privacy policy is subject to enforcement by the attorney gen-

eral.

New Sec. 22. (a) When the seller is computing the amount of tax

owed by the purchaser and remitted to the state: (1) Tax computation

must be carried to the third decimal place; and

(2) the tax must be rounded to a whole cent using a method that

rounds up to the next cent whenever the third decimal place is greater

than four.

(b) Sellers may elect to compute the tax due on a transaction on an

item or an invoice basis. The rounding rule may be applied to the aggre-

gated state and local taxes.

New Sec. 23. (a) The secretary shall complete a taxability matrix.

This state's entries in the matrix shall be provided and maintained by the

secretary in a database that is in a downloadable format.

(b) The secretary shall provide reasonable notice of changes in the

taxability of the products or services listed in the taxability matrix.

(c) Sellers and certified service providers are relieved from liability

to this state or any local taxing jurisdiction for having charged and col-

lected the incorrect amount of state or local sales or use tax resulting from

the seller or certified service providers relying on erroneous data provided

by the secretary in the taxability matrix.

New Sec. 24. The effective date of state or local sales or use tax rate

changes for services covering a period starting before and ending after

the statutory effective date shall be as follows: (a) For a rate increase, the

new rate shall apply to the first billing period starting on or after the

effective date; and

(b) for a rate decrease, the new rate shall apply to bills rendered on

or after the effective date.

New Sec. 25. (a) The secretary shall participate in an online regis-

tration system that will allow sellers to register in this state and other

member states.

(b) By registering, the seller agrees to collect and remit sales and use

taxes for all taxable sales into this state as well as the other member states,

including member states joining after the seller's registration. Withdrawal

or revocation of this state from the agreement shall not relieve a seller of

its responsibility to remit taxes previously or subsequently collected on

behalf of this state.

(c) If the seller has a requirement to register prior to registering un-

der the agreement, the seller must register pursuant to K.S.A. 79-3608

and amendments thereto.

(d) Registration with the central registration system and the collec-

tion of sales and use taxes in this state shall not be used as a factor in

determining whether the seller has nexus with this state for any tax at any

time.

New Sec. 26. (a) Subject to the limitations in this section: (1) Am-

nesty is granted for uncollected or unpaid sales or use tax to a seller who

registers to pay or to collect and remit applicable sales or use tax on sales

made to purchasers in this state in accordance with the terms of the

agreement, provided that the seller was not so registered in this state in

the twelve-month period preceding the effective date of this state's par-

ticipation in the agreement;

(2) the amnesty will preclude assessment for uncollected or unpaid

sales or use tax together with penalty or interest for sales made during

the period the seller was not registered in this state, provided registration

occurs within 12 months of the effective date of this state's participation

in the agreement; and

(3) amnesty similarly shall be provided if this state joins the agree-

ment after the seller has registered.

(b) The amnesty is not available to a seller with respect to any matter

or matters for which the seller received notice of the commencement of

an audit and which audit is not yet finally resolved including any related

administrative and judicial processes.

(c) The amnesty is not available for sales or use taxes already paid or

remitted to this state or to taxes collected by the seller.

(d) The amnesty is fully effective, absent the seller's fraud or inten-

tional misrepresentation of a material fact, as long as the seller continues

registration and continues payment or collection and remittance of ap-

plicable sales or use taxes for a period of at least thirty-six months. The

statute of limitations applicable to asserting a tax liability during this

thirty-six month period is tolled.

(e) The amnesty is applicable only to sales or use taxes due from a

seller in its capacity as a seller and not to sales or use taxes due from a

seller in its capacity as a buyer.

(f) This provision shall become effective as of the date that this state

joins and becomes a member state of the agreement.

New Sec. 27. When registering under the agreement, the seller may

select one of the following methods of remittances or other method al-

lowed by K.S.A. 79-3607 and amendments thereto to remit the taxes

collected: (a) Model 1, wherein a seller selects a certified service provider

as an agent to perform all the seller's sales or use tax functions, other than

the seller's obligation to remit tax on its own purchases;

(b) model 2, wherein a seller selects a certified automated system to

use which calculates the amount of tax due on a transaction; or

(c) model 3, wherein a seller utilizes its own proprietary automated

sales tax system that has been certified as a certified automated system.

New Sec. 28. (a) The provisions of sections 12 through 28 and

amendments thereto shall be known and may be cited as the streamlined

sales and use tax agreement conformity act.

(b) The provisions of sections 12 through 28 shall be effective on and

after July 1, 2003.

Sec. 29. On and after July 1, 2003, K.S.A. 12-189a is hereby amended

to read as follows: 12-189a. The following sales shall be subject to the

taxes levied and collected by all cities and counties under the provisions

of K.S.A. 12-187 et seq. and amendments thereto:

(a) All sales of natural gas, electricity, heat and water delivered

through mains, lines or pipes to residential premises for noncommercial

use by the occupant of such premises and all sales of natural gas, elec-

tricity, heat and water delivered through mains, lines or pipes for agri-

cultural use, except that effective January 1, 2006, the provisions of this

subsection shall expire for sales of water pursuant to this subsection;

(b) 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; and

(c) all sales of intrastate telephone and telegraph services for non-

commercial use.

Sec. 30. On and after July 1, 2003, K.S.A. 2002 Supp. 79-32,206 is

hereby amended to read as follows: 79-32,206. For all taxable years com-

mencing after December 31, 2001, there shall be allowed as a credit

against the tax liability of a taxpayer imposed under the Kansas income

tax act, the premiums tax upon insurance companies imposed pursuant

to K.S.A. 40-252, and amendments thereto, and the privilege tax as meas-

ured by net income of financial institutions imposed pursuant to article

11 of chapter 79 of the Kansas Statutes Annotated, an amount equal to

15% of the property tax levied for property tax years 2002, 2003 and 2004,

20% of the property tax levied for property tax years 2005 and 2006, and

25% of the property tax levied for property tax year 2007, and all such

years thereafter, actually and timely paid during an income or privilege

taxable year upon commercial and industrial machinery and equipment

classified for property taxation purposes pursuant to section 1 of article

11 of the Kansas constitution in subclass (5) or (6) of class 2, machinery

and equipment classified for such purposes in subclass (2) of class 2. For

all taxable years commencing after December 31, 2004, there shall be

allowed as a credit against the tax liability of a taxpayer imposed under

the Kansas income tax act an amount equal to 20% of the property tax

levied for property tax years 2005 and 2006, and 25% of the property tax

levied for property tax year 2007 and all such years thereafter, actually

and timely paid during an income taxable year upon railroad machinery

and equipment classified for property tax purposes pursuant to section 1

of article 11 of the Kansas constitution in subclass (3) of class 2. Prior to

the 2004 legislative session, the joint committee on economic develop-

ment shall conduct a study of the economic impact of the foregoing pro-

vision. If the amount of such tax credit exceeds the taxpayer's income tax

liability for the taxable year, the amount thereof which exceeds such tax

liability shall be refunded to the taxpayer. If the taxpayer is a corporation

having an election in effect under subchapter S of the federal internal

revenue code, a partnership or a limited liability company, the credit

provided by this section shall be claimed by the shareholders of such

corporation, the partners of such partnership or the members of such

limited liability company in the same manner as such shareholders, part-

ners or members account for their proportionate shares of the income or

loss of the corporation, partnership or limited liability company.

Sec. 31. On and after July 1, 2003, K.S.A. 12-188 is hereby amended

to read as follows: 12-188. The following classes of cities are hereby es-

tablished for the purpose of imposing limitations and prohibitions upon

the levying of sales and excise taxes or taxes in the nature of an excise

upon sales or transfers of personal or real property or the use thereof, or

the rendering or furnishing of services by cities as authorized and pro-

vided by article 12, section 5, of the constitution of the state of Kansas:

Class A cities. All cities in the state of Kansas which have the authority

to levy and collect excise taxes or taxes in the nature of an excise upon

the sales or transfers of personal or real property or the use thereof, or

the rendering or furnishing of services by cities.

Class B cities. All cities in the state of Kansas which have the authority

to levy and collect excise taxes or taxes in the nature of an excise upon

the sales or transfers of personal or real property or the use thereof, or

the rendering or furnishing of services for the purpose of financing the

provision of health care services.

Class C cities. All cities in the state of Kansas having a population of

more than 290,000 located in a county having a population of more than

350,000 which has the authority to levy and collect excise taxes or taxes

in the nature of an excise upon the sales or transfers of personal or real

property or the use thereof, or the rendering or furnishing of services.

Class D cities. All cities in the state of Kansas located in Cowley, Ellis,

Ellsworth, Finney, Harper, Johnson, Labette, Lyon, Montgomery, Osage,

Reno or, Woodson or Wyandotte county or in both Riley and

Pottawatomie counties which have the authority to levy and collect excise

taxes or taxes in the nature of an excise upon the sales or transfers of

personal or real property or the use thereof, or the rendering or furnishing

of services.

Sec. 32. On and after July 1, 2003, K.S.A. 2002 Supp. 12-187 is

hereby amended to read as follows: 12-187. (a) (1) No city shall impose

a retailers' sales tax under the provisions of this act without the governing

body of such city having first submitted such proposition to and having

received the approval of a majority of the electors of the city voting

thereon at an election called and held therefor. The governing body of

any city may submit the question of imposing a retailers' sales tax and the

governing body shall be required to submit the question upon submission

of a petition signed by electors of such city equal in number to not less

than 10% of the electors of such city.

(2) The governing body of any class B city located in any county which

does not impose a countywide retailers' sales tax pursuant to paragraph

(5) of subsection (b) may submit the question of imposing a retailers' sales

tax at the rate of .25%, .5%, .75% or 1% and pledging the revenue re-

ceived therefrom for the purpose of financing the provision of health care

services, as enumerated in the question, to the electors at an election

called and held thereon. The tax imposed pursuant to this paragraph shall

be deemed to be in addition to the rate limitations prescribed in K.S.A.

12-189, and amendments thereto. As used in this paragraph, health care

services shall include but not be limited to the following: Local health

departments, city, county or district hospitals, city or county nursing

homes, preventive health care services including immunizations, prenatal

care and the postponement of entry into nursing homes by home health

care services, mental health services, indigent health care, physician or

health care worker recruitment, health education, emergency medical

services, rural health clinics, integration of health care services, home

health services and rural health networks.

(b) (1) The board of county commissioners of any county may submit

the question of imposing a countywide retailers' sales tax to the electors

at an election called and held thereon, and any such board shall be re-

quired to submit the question upon submission of a petition signed by

electors of such county equal in number to not less than 10% of the

electors of such county who voted at the last preceding general election

for the office of secretary of state, or upon receiving resolutions request-

ing such an election passed by not less than 2/3 of the membership of the

governing body of each of one or more cities within such county which

contains a population of not less than 25% of the entire population of the

county, or upon receiving resolutions requesting such an election passed

by 2/3 of the membership of the governing body of each of one or more

taxing subdivisions within such county which levy not less than 25% of

the property taxes levied by all taxing subdivisions within the county.

(2) The board of county commissioners of Anderson, Atchison, Bar-

ton, Butler, Chase, Cowley, Cherokee, Crawford, Ford, Jefferson, Lyon,

Montgomery, Neosho, Osage, Ottawa, Riley, Saline, Seward, Sumner,

Wabaunsee, Wilson and Wyandotte counties may submit the question of

imposing a countywide retailers' sales tax and pledging the revenue re-

ceived therefrom for the purpose of financing the construction or re-

modeling of a courthouse, jail, law enforcement center facility or other

county administrative facility, to the electors at an election called and

held thereon. The tax imposed pursuant to this paragraph shall expire

when sales tax sufficient to pay all of the costs incurred in the financing

of such facility has been collected by retailers as determined by the sec-

retary of revenue. Nothing in this paragraph shall be construed to allow

the rate of tax imposed by Butler, Chase, Cowley, Lyon, Montgomery,

Neosho, Riley, Sumner or Wilson county pursuant to this paragraph to

exceed or be imposed at any rate other than the rates prescribed in K.S.A.

12-189, and amendments thereto.

(3) (A) Except as otherwise provided in this paragraph, the result of

the election held on November 8, 1988, on the question submitted by

the board of county commissioners of Jackson county for the purpose of

increasing its countywide retailers' sales tax by 1% is hereby declared

valid, and the revenue received therefrom by the county shall be ex-

pended solely for the purpose of financing the Banner Creek reservoir

project. The tax imposed pursuant to this paragraph shall take effect on

the effective date of this act and shall expire not later than five years after

such date.

(B) The result of the election held on November 8, 1994, on the

question submitted by the board of county commissioners of Ottawa

county for the purpose of increasing its countywide retailers' sales tax by

1% is hereby declared valid, and the revenue received therefrom by the

county shall be expended solely for the purpose of financing the erection,

construction and furnishing of a law enforcement center and jail facility.

(4) The board of county commissioners of Finney and Ford counties

may submit the question of imposing a countywide retailers' sales tax at

the rate of .25% and pledging the revenue received therefrom for the

purpose of financing all or any portion of the cost to be paid by Finney

or Ford county for construction of highway projects identified as system

enhancements under the provisions of paragraph (5) of subsection (b) of

K.S.A. 68-2314, and amendments thereto, to the electors at an election

called and held thereon. Such election shall be called and held in the

manner provided by the general bond law. The tax imposed pursuant to

this paragraph shall expire upon the payment of all costs authorized pur-

suant to this paragraph in the financing of such highway projects. Nothing

in this paragraph shall be construed to allow the rate of tax imposed by

Finney or Ford county pursuant to this paragraph to exceed the maximum

rate prescribed in K.S.A. 12-189, and amendments thereto. If any funds

remain upon the payment of all costs authorized pursuant to this para-

graph in the financing of such highway projects in Finney county, the

state treasurer shall remit such funds to the treasurer of Finney county

and upon receipt of such moneys shall be deposited to the credit of the

county road and bridge fund. If any funds remain upon the payment of

all costs authorized pursuant to this paragraph in the financing of such

highway projects in Ford county, the state treasurer shall remit such funds

to the treasurer of Ford county and upon receipt of such moneys shall

be deposited to the credit of the county road and bridge fund.

(5) The board of county commissioners of any county may submit the

question of imposing a retailers' sales tax at the rate of .25%, .5%, .75%

or 1% and pledging the revenue received therefrom for the purpose of

financing the provision of health care services, as enumerated in the ques-

tion, to the electors at an election called and held thereon. Whenever any

county imposes a tax pursuant to this paragraph, any tax imposed pursuant

to paragraph (2) of subsection (a) by any city located in such county shall

expire upon the effective date of the imposition of the countywide tax,

and thereafter the state treasurer shall remit to each such city that portion

of the countywide tax revenue collected by retailers within such city as

certified by the director of taxation. The tax imposed pursuant to this

paragraph shall be deemed to be in addition to the rate limitations pre-

scribed in K.S.A. 12-189, and amendments thereto. As used in this par-

agraph, health care services shall include but not be limited to the follow-

ing: Local health departments, city or county hospitals, city or county

nursing homes, preventive health care services including immunizations,

prenatal care and the postponement of entry into nursing homes by home

care services, mental health services, indigent health care, physician or

health care worker recruitment, health education, emergency medical

services, rural health clinics, integration of health care services, home

health services and rural health networks.

(6) The board of county commissioners of Allen county may submit

the question of imposing a countywide retailers' sales tax at the rate of

.5% and pledging the revenue received therefrom for the purpose of

financing the costs of operation and construction of a solid waste disposal

area or the modification of an existing landfill to comply with federal

regulations to the electors at an election called and held thereon. The tax

imposed pursuant to this paragraph shall expire upon the payment of all

costs incurred in the financing of the project undertaken. Nothing in this

paragraph shall be construed to allow the rate of tax imposed by Allen

county pursuant to this paragraph to exceed or be imposed at any rate

other than the rates prescribed in K.S.A. 12-189 and amendments

thereto.

(7) The board of county commissioners of Clay, Dickinson and Miami

county may submit the question of imposing a countywide retailers' sales

tax at the rate of .50% in the case of Clay and Dickinson county and at a

rate of up to 1% in the case of Miami county, and pledging the revenue

received therefrom for the purpose of financing the costs of roadway

construction and improvement to the electors at an election called and

held thereon. The tax imposed pursuant to this paragraph shall expire

after five years from the date such tax is first collected.

(8) The board of county commissioners of Sherman county may sub-

mit the question of imposing a countywide retailers' sales tax at the rate

of .25%, .5% or .75% and pledging the revenue therefrom for the purpose

of financing the costs of the county roads 64 and 65 construction and

improvement project. The tax imposed pursuant to this paragraph shall

expire upon payment of all costs authorized pursuant to this paragraph

in the financing of such project.

(9) The board of county commissioners of Cowley, Russell and

Woodson county may submit the question of imposing a countywide re-

tailers' sales tax at the rate of .5% in the case of Russell and Woodson

county and at a rate of up to .25%, in the case of Cowley county and

pledging the revenue received therefrom for the purpose of financing

economic development initiatives or public infrastructure projects. The

tax imposed pursuant to this paragraph shall expire after five years from

the date such tax is first collected.

(10) The board of county commissioners of Franklin county may sub-

mit the question of imposing a countywide retailers' sales tax at the rate

of .25% and pledging the revenue received therefrom for the purpose of

financing recreational facilities. The tax imposed pursuant to this para-

graph shall expire upon payment of all costs authorized in financing such

facilities.

(11) The board of county commissioners of Douglas county may sub-

mit to the question of imposing a countywide retailers' sales tax at the

rate of .25% and pledging the revenue received therefrom for the pur-

poses of preservation, access and management of open space, and for

industrial and business park related economic development.

(12) The board of county commissioners of Shawnee county may sub-

mit the question of imposing a countywide retailers' sales tax at the rate

of .25% and pledging the revenue received therefrom to the city of Topeka

for the purpose of financing the costs of rebuilding the Topeka boulevard

bridge and other public infrastructure improvements associated with such

project to the electors at an election called and held thereon. The tax

imposed pursuant to this paragraph shall expire upon payment of all costs

authorized in financing such project.

(13) The board of county commissioners of Jackson county may sub-

mit the question of imposing a countywide retailers' sales tax at a rate of

.4% and pledging the revenue received therefrom as follows: 50% of such

revenues for the purpose of financing for economic development initia-

tives; and 50% of such revenues for the purpose of financing public in-

frastructure projects to the electors at an election called and held thereon.

The tax imposed pursuant to this paragraph shall expire after seven years

from the date such tax is first collected.

(c) The boards of county commissioners of any two or more contig-

uous counties, upon adoption of a joint resolution by such boards, may

submit the question of imposing a retailers' sales tax within such counties

to the electors of such counties at an election called and held thereon

and such boards of any two or more contiguous counties shall be required

to submit such question upon submission of a petition in each of such

counties, signed by a number of electors of each of such counties where

submitted equal in number to not less than 10% of the electors of each

of such counties who voted at the last preceding general election for the

office of secretary of state, or upon receiving resolutions requesting such

an election passed by not less than 2/3 of the membership of the governing

body of each of one or more cities within each of such counties which

contains a population of not less than 25% of the entire population of

each of such counties, or upon receiving resolutions requesting such an

election passed by 2/3 of the membership of the governing body of each

of one or more taxing subdivisions within each of such counties which

levy not less than 25% of the property taxes levied by all taxing subdivi-

sions within each of such counties.

(d) Any city retailers' sales tax in the amount of .5% being levied by

a city on July 1, 1990, shall continue in effect until repealed in the manner

provided herein for the adoption and approval of such tax or until re-

pealed by the adoption of an ordinance so providing. In addition to any

city retailers' sales tax being levied by a city on July 1, 1990, any such city

may adopt an additional city retailers' sales tax in the amount of .25% or

.5%, provided that such additional tax is adopted and approved in the

manner provided for the adoption and approval of a city retailers' sales

tax. Any countywide retailers' sales tax in the amount of .5% or 1% in

effect on July 1, 1990, shall continue in effect until repealed in the manner

provided herein for the adoption and approval of such tax.

(e) A class D city shall have the same power to levy and collect a city

retailers' sales tax that a class A city is authorized to levy and collect and

in addition, the governing body of any class D city may submit the ques-

tion of imposing an additional city retailers' sales tax in the amount of

.125%, .25%, .5% or .75% and pledging the revenue received therefrom

for economic development initiatives, strategic planning initiatives or for

public infrastructure projects including buildings to the electors at an

election called and held thereon. Any additional sales tax imposed pur-

suant to this paragraph shall expire no later than five years from the date

of imposition thereof, except that any such tax imposed by any class D

city after the effective date of this act shall expire no later than 10 years

from the date of imposition thereof.

(f) Any city or county proposing to adopt a retailers' sales tax shall

give notice of its intention to submit such proposition for approval by the

electors in the manner required by K.S.A. 10-120, and amendments

thereto. The notices shall state the time of the election and the rate and

effective date of the proposed tax. If a majority of the electors voting

thereon at such election fail to approve the proposition, such proposition

may be resubmitted under the conditions and in the manner provided in

this act for submission of the proposition. If a majority of the electors

voting thereon at such election shall approve the levying of such tax, the

governing body of any such city or county shall provide by ordinance or

resolution, as the case may be, for the levy of the tax. Any repeal of such

tax or any reduction or increase in the rate thereof, within the limits

prescribed by K.S.A. 12-189, and amendments thereto, shall be accom-

plished in the manner provided herein for the adoption and approval of

such tax except that the repeal of any such city retailers' sales tax may be

accomplished by the adoption of an ordinance so providing.

(g) The sufficiency of the number of signers of any petition filed

under this section shall be determined by the county election officer.

Every election held under this act shall be conducted by the county elec-

tion officer.

(h) The governing body of the city or county proposing to levy any

retailers' sales tax shall specify the purpose or purposes for which the

revenue would be used, and a statement generally describing such pur-

pose or purposes shall be included as a part of the ballot proposition.

Sec. 33. On and after July 1, 2003, K.S.A. 2002 Supp. 12-189 is

hereby amended to read as follows: 12-189. Except as otherwise provided

by paragraph (2) of subsection (a) of K.S.A. 12-187, and amendments

thereto, the rate of any class A, class B or class C city retailers' sales tax

shall be fixed in the amount of .25%, .5%, .75% or 1% which amount

shall be determined by the governing body of the city. Except as otherwise

provided by paragraph (2) of subsection (a) of K.S.A. 12-187, and amend-

ments thereto, the rate of any class D city retailers' sales tax shall be fixed

in the amount of .10%, .25%, .5%, .75%, 1%, 1.125%, 1.25%, 1.5% or

1.75%. The rate of any countywide retailers' sales tax shall be fixed in an

amount of either .25%, .5%, .75% or 1% which amount shall be deter-

mined by the board of county commissioners, except that:

(a) The board of county commissioners of Wabaunsee county, for the

purposes of paragraph (2) of subsection (b) of K.S.A. 12-187, and amend-

ments thereto, may fix such rate at 1.25%; the board of county commis-

sioners of Osage county, for the purposes of paragraph (2) of subsection

(b) of K.S.A. 12-187, and amendments thereto, may fix such rate at 1.25%

or 1.5%; the board of county commissioners of Cherokee, Crawford,

Ford, Saline, Seward or Wyandotte county, for the purposes of paragraph

(2) of subsection (b) of K.S.A. 12-187, and amendments thereto, may fix

such rate at 1.5%, the board of county commissioners of Atchison county,

for the purposes of paragraph (2) of subsection (b) of K.S.A. 12-187, and

amendments thereto, may fix such rate at 1.5% or 1.75% and the board

of county commissioners of Anderson, Barton, Jefferson or Ottawa

county, for the purposes of paragraph (2) of subsection (b) of K.S.A. 12-

187, and amendments thereto, may fix such rate at 2%;

(b) the board of county commissioners of Jackson county, for the

purposes of paragraph (3) of subsection (b) of K.S.A. 12-187, and amend-

ments thereto, may fix such rate at 2%;

(c) the boards of county commissioners of Finney and Ford counties,

for the purposes of paragraph (4) of subsection (b) of K.S.A. 12-187, and

amendments thereto, may fix such rate at .25%;

(d) the board of county commissioners of any county for the purposes

of paragraph (5) of subsection (b) of K.S.A. 12-187, and amendments

thereto, may fix such rate at a percentage which is equal to the sum of

the rate allowed to be imposed by a board of county commissioners on

the effective date of this act plus .25%, .5%, .75% or 1%, as the case

requires;

(e) the board of county commissioners of Dickinson county, for the

purposes of paragraph (7) of subsection (b) of K.S.A. 12-187, and amend-

ments thereto, may fix such rate at 1.5%, and the board of county com-

missioners of Miami county, for the purposes of paragraph (7) of subsec-

tion (b) of K.S.A. 12-187, and amendments thereto, may fix such rate at

1.25%, 1.5%, 1.75% or 2%;

(f) the board of county commissioners of Sherman county, for the

purposes of paragraph (8) of subsection (b) of K.S.A. 12-187, and amend-

ments thereto, may fix such rate at 1.5%, 1.75% or 2%;

(g) the board of county commissioners of Russell county for the pur-

poses of paragraph (9) of subsection (b) of K.S.A. 12-187, and amend-

ments thereto, may fix such rate at 1.5%;

(h) the board of county commissioners of Franklin county, for the

purposes of paragraph (10) of subsection (b) of K.S.A. 12-187, and

amendments thereto, may fix such rate at 1.75%; or

(i) the board of county commissioners of Douglas county, for the

purposes of paragraph (11) of subsection (b) of K.S.A. 12-187, and

amendments thereto, may fix such rate at 1.25%.; or

(j) the board of county commissioners of Jackson county, for the pur-

poses of subsection (b)(13) of K.S.A. 12-187 and amendments thereto, may

fix such rate at 1.4%.

Any county or city levying a retailers' sales tax is hereby prohibited

from administering or collecting such tax locally, but shall utilize the serv-

ices of the state department of revenue to administer, enforce and collect

such tax. Except as otherwise specifically provided in K.S.A. 12-189a, and

amendments thereto, such tax shall be identical in its application, and

exemptions therefrom, to the Kansas retailers' sales tax act and all laws

and administrative rules and regulations of the state department of rev-

enue relating to the Kansas retailers' sales tax shall apply to such local

sales tax insofar as such laws and rules and regulations may be made

applicable. The state director of taxation is hereby authorized to admin-

ister, enforce and collect such local sales taxes and to adopt such rules

and regulations as may be necessary for the efficient and effective ad-

ministration and enforcement thereof.

Upon receipt of a certified copy of an ordinance or resolution author-

izing the levy of a local retailers' sales tax, the director of taxation shall

cause such taxes to be collected within or without the boundaries of such

taxing subdivision at the same time and in the same manner provided for

the collection of the state retailers' sales tax. Such copy shall be submitted

to the director of taxation within 30 days after adoption of any such or-

dinance or resolution. All moneys collected by the director of taxation

under the provisions of this section shall be credited to a county and city

retailers' sales tax fund which fund is hereby established in the state treas-

ury. Any refund due on any county or city retailers' sales tax collected

pursuant to this act shall be paid out of the sales tax refund fund and

reimbursed by the director of taxation from collections of local retailers'

sales tax revenue. Except for local retailers' sales tax revenue required to

be deposited in the redevelopment bond fund established under K.S.A.

74-8927, and amendments thereto, all local retailers' sales tax revenue

collected within any county or city pursuant to this act shall be appor-

tioned and remitted at least quarterly by the state treasurer, on instruction

from the director of taxation, to the treasurer of such county or city.

Revenue that is received from the imposition of a local retailers' sales

tax which exceeds the amount of revenue required to pay the costs of a

special project for which such revenue was pledged shall be credited to

the city or county general fund, as the case requires.

The director of taxation shall provide, upon request by a city or county

clerk or treasurer of any city or county levying a local retailers' sales tax,

monthly reports identifying each retailer having a place of business in

such city or county setting forth the tax liability and the amount of such

tax remitted by each retailer during the preceding month and identifying

each business location maintained by the retailer within such city or

county. Such report shall be made available to the clerk or treasurer of

such city or county within a reasonable time after it has been requested

from the director of taxation. The director of taxation shall be allowed to

assess a reasonable fee for the issuance of such report. Information re-

ceived by any city or county pursuant to this section shall be confidential,

and it shall be unlawful for any officer or employee of such city or county

to divulge any such information in any manner. Any violation of this par-

agraph by a city or county officer or employee is a class B misdemeanor,

and such officer or employee shall be dismissed from office.

Sec. 34. On and after July 1, 2003, K.S.A. 72-6431 is hereby

amended to read as follows: 72-6431. (a) The board of each district shall

levy an ad valorem tax upon the taxable tangible property of the district

in the school years specified in subsection (b) for the purpose of:

(1) Financing that portion of the district's general fund budget which

is not financed from any other source provided by law;

(2) paying a portion of the costs of operating and maintaining public

schools in partial fulfillment of the constitutional obligation of the legis-

lature to finance the educational interests of the state; and

(3) with respect to any redevelopment district established prior to

July 1, 1997, pursuant to K.S.A. 12-1771, and amendments thereto, pay-

ing a portion of the principal and interest on bonds issued by cities under

authority of K.S.A. 12-1774, and amendments thereto, for the financing

of redevelopment projects upon property located within the district.

(b) The tax required under subsection (a) shall be levied at a rate of

20 mills in the 2001-02 school year and in the 2002-03 school year 2003-

04 and 2004-05 school years.

(c) The proceeds from the tax levied by a district under authority of

this section, except the proceeds of such tax levied for the purpose of

paying a portion of the principal and interest on bonds issued by cities

under authority of K.S.A. 12-1774, and amendments thereto, for the fi-

nancing of redevelopment projects upon property located within the dis-

trict, shall be deposited in the general fund of the district.

(d) On June 1 of each year, the amount, if any, by which a district's

local effort exceeds the amount of the district's state financial aid, as

determined by the state board, shall be remitted to the state treasurer.

Upon receipt of any such remittance, the state treasurer shall deposit the

same in the state treasury to the credit of the state school district finance

fund.

(e) No district shall proceed under K.S.A. 79-1964, 79-1964a or 79-

1964b, and amendments thereto.

Sec. 35. K.S.A. 74-2433 is hereby amended to read as follows: 74-

2433. (a) There is hereby created a state board of tax appeals, referred

to in this act as the board. The board shall be composed of five three

members who shall be appointed by the governor, subject to confirmation

by the senate as provided in K.S.A. 75-4315b, and amendments thereto.

After January 15, 1999, three the effective date of this act, one of such

members shall: (1) have been regularly admitted to practice law in the

state of Kansas; and (2) for a period of at least five years, have engaged

in the active practice of law as a lawyer, judge of a court of record or any

other court in this state, or; and one of such members shall have engaged

in active practice as a certified public accountant who has maintained

registration as an active attorney with the Kansas supreme court, or any

combination thereof for a period of at least five years. No successor shall

be appointed for the two members of the board whose terms of office

expired on January 15, 2003, and if any such appointment is made prior

to the effective date of this act, any such member's term of office shall

expire on the effective date of this act. Except as provided by K.S.A. 46-

2601, no person appointed to the board shall exercise any power, duty or

function as a member of the board until confirmed by the senate. Not

more than three two members of the board shall be of the same political

party. Members of the board shall be residents of the state. Subject to

the provisions of K.S.A. 75-4315c, and amendments thereto, no more than

one shall be appointed from each any one of the congressional districts

of Kansas and the remainder from the state at large. The members of the

board shall be selected with special reference to training and experience

for duties imposed by this act and shall be individuals with legal, account-

ing or appraisal training and experience. Members shall be subject to the

supreme court rules of judicial conduct applicable to all judges of the

district court. The board shall be bound by the doctrine of stare decisis

limited to published decisions of an appellate court other than a district

court. Members shall hold office for terms of four years and until their

successors are appointed and confirmed. Except as otherwise provided,

such terms of office shall expire on January 15 of the last year of such

term. If a vacancy occurs on the board, the governor shall appoint a

successor to fill the vacancy for the unexpired term. The governor shall

select one of its members to serve as chairperson. The votes of three two

members shall be required for any action to be taken by the board. Meet-

ings may be called by the chairperson and shall be called on request of a

majority of the members of the board and when otherwise prescribed by

statute.

(b) Any member of the state board of tax appeals may be removed

by the governor for cause, after public hearing conducted in accordance

with the provisions of the Kansas administrative procedure act.

(c) The state board of tax appeals shall appoint, subject to approval

by the governor, an executive director of the board, to serve at the plea-

sure of the board. The executive director shall: (1) Be in the unclassified

service under the Kansas civil service act; (2) devote full time to the

executive director's assigned duties; (3) receive such compensation as

determined by the board, subject to the limitations of appropriations

thereof; and (4) have familiarity with the tax appeals process sufficient to

fulfill the duties of the office of executive director. The executive director

shall perform such duties as directed by the board.

(d) Appeals decided by the state board of tax appeals which are

deemed of sufficient importance to be published shall be published by

the board.

(e) After appointment, members of the state board of tax appeals shall

complete the following course requirements: (1) A tested appraisal course

of not less than 30 clock hours of instruction consisting of the fundamen-

tals of real property appraisal with an emphasis on the cost and sales

approaches to value; (2) a tested appraisal course of not less than 30 clock

hours of instruction consisting of the fundamentals of real property ap-

praisal with an emphasis on the income approach to value; (3) a tested

appraisal course of not less than 30 clock hours of instruction with an

emphasis on mass appraisal; (4) an appraisal course with an emphasis on

Kansas property tax laws and; (5) an appraisal course on the techniques

and procedures for the valuation of state assessed properties with an em-

phasis on unit valuation; and (6) a tested appraisal course on the tech-

niques and procedures for the valuation of land devoted to agricultural

use pursuant to K.S.A. 79-1476, and amendments thereto. The executive

director shall adopt rules and regulations prescribing a timetable for the

completion of the course requirements and prescribing continued edu-

cation requirements for members of the board.

(f) The state board of tax appeals shall have no capacity or power to

sue or be sued.

Sec. 36. On and after July 1, 2003, K.S.A. 2002 Supp. 79-201x is

hereby amended to read as follows: 79-201x. For taxable years 2001 and

2002 2003 and 2004, the following described property, to the extent

herein specified, shall be and is hereby exempt from the property tax

levied pursuant to the provisions of K.S.A. 72-6431, and amendments

thereto: Property used for residential purposes to the extent of $20,000

of its appraised valuation.

Sec. 37. On and after July 1, 2003, K.S.A. 2002 Supp. 79-3295 is

hereby amended to read as follows: 79-3295. (a) The term ``employee''

means a resident of this state as defined by subsection (b) of K.S.A. 79-

32,109, and amendments thereto, performing services for an employer

either within or without the state and a nonresident performing services

within this state, and includes an officer, employee or elected official of

the United States, a state, territory, or any political subdivision thereof or

any agency or instrumentality thereof, and an officer of a corporation.

(b) The term ``employer'' means any person, firm, partnership, lim-

ited liability company, corporation, association, trust or fiduciary of any

kind or other type organization qualifying as an employer for federal in-

come tax withholding purposes and who maintains an office, transacts

business in or derives any income from sources within the state of Kansas

for whom an individual performs or performed any services, of whatever

nature, as the employee of such employer, and who has control of the

payment of wages for such services, or is the officer, agent or employee

of the person having control of the payment of wages. It also includes the

United States, the state and all political subdivisions thereof, and all agen-

cies or instrumentalities of any of them.

(c) The term ``distributee'' means any person or organization who

receives a distribution which is subject to withholding of income tax pur-

suant to this act.

(d) The term ``distribution'' means a distribution from a corporation

for which an election as an S corporation under subchapter S of the

federal internal revenue code is in effect, from a limited liability company

formed under the laws of the state of Kansas, or from a partnership.

(e) The term ``nonresident'' means an individual domiciled outside of

this state and an entity whose commercial domicile is outside of this state.

For corporations, commercial domicile is as defined in K.S.A. 79-3271

and amendments thereto.

(f) The term ``payee'' means any person or organization who receives

a payment other than wages, or a payment of a pension, annuity or de-

ferred income, which is subject to withholding of income tax pursuant to

this act.

(g) The term ``payer'' means any person or organization, other than

an employer, who makes a payment other than wages, or a payment of a

pension, annuity or deferred income, which is subject to withholding of

income tax pursuant to this act.

(f) (h) The term ``payment other than wages'' means a payment that

is subject to federal income tax withholding and taxable under the Kansas

income tax act, and that is a payment:

(1) For any supplemental unemployment compensation, annuity, or

sick pay;

(2) pursuant to a voluntary withholding agreement;

(3) of gambling winnings;

(4) of taxable payments of Indian casino profits;

(5) for any vehicle fringe benefit; or

(6) of periodic payments of pensions, annuities, and other deferred

income;

(7) of nonperiodic distributions of pensions, annuities, and other de-

ferred income; or

(8) of eligible rollover distributions of pensions, annuities, and other

deferred income of a management or consulting fee paid in the ordinary

course of a trade, business or other for profit venture.

(g) The term ``payor'' means any person or organization, other than

an employer, who makes payments, other than wages or distributions,

which are subject to withholding of income tax pursuant to this act.

(h) (i) The term ``pension, annuity or other deferred income'' means

a payment that is taxable under the Kansas income tax act, and that is a

payment:

(1) Of periodic payments of pensions, annuities and other deferred

income;

(2) of nonperiodic distributions of pensions, annuities and other de-

ferred income; or

(3) of eligible rollover distributions of pensions, annuities and other

deferred income.

(j) The term ``wages'' means wages as defined by section 3401(a) of

the federal internal revenue code which are taxable under the Kansas

income tax act, and shall include any prize or award paid to a professional

athlete at a sporting event held in this state.

Sec. 38. On and after July 1, 2003, K.S.A. 2002 Supp. 79-3298 is

hereby amended to read as follows: 79-3298. (a) Every employer and

payor, payer, person or organization deducting and withholding tax shall

remit the taxes and file returns in accordance with the following provi-

sions.:

(1) Whenever the total amount withheld exceeds $100,000 in any

calendar year, the employer or payor, payer, person or organization de-

ducting and withholding tax shall remit the taxes withheld in accordance

with the following schedule: Each calendar month shall be divided into

four remittance periods that end on the 7th, 15th, 21st and the last day

of such month. If at the end of any one or all of such remittance periods

the total undeposited taxes equal or exceed $667, the taxes shall be re-

mitted within three banking days. Saturdays, Sundays and legal holidays

shall not be treated as banking days.

(2) Whenever the total amount withheld exceeds $8,000 but does not

exceed $100,000 in any calendar year, the employer or payor, payer, per-

son or organization deducting and withholding tax shall remit the taxes

withheld for wages paid during the first 15 days of any month on or before

the 25th day of the month. The employer or payor, payer, person or

organization deducting and withholding tax shall remit the taxes withheld

for wages paid during the remainder of that month on or before the 10th

day of the following month.

(3) Whenever the total amount withheld exceeds $1,200 but does not

exceed $8,000 in any calendar year, the employer or payor, payer, person

or organization deducting and withholding tax shall remit the taxes with-

held during any month on or before the 15th day of the following month.

(4) Whenever the total amount withheld exceeds $200 but does not

exceed $1,200 in any calendar year, the employer or payor, payer, person

or organization deducting and withholding tax shall remit the taxes with-

held in any calendar quarter on or before the 25th day of the first month

following the end of that calendar quarter.

(5) Whenever the total amount withheld does not exceed $200 in any

calendar year, the employer or payor, payer, person or organization de-

ducting and withholding tax shall remit the taxes withheld during that

year on or before January 25 of the following year.

(b) Each remittance required under the provisions of subsection (a)

shall be accompanied by a Kansas withholding tax remittance form pre-

scribed and furnished by the director.

(c) Every employer or payor, payer, person or organization deducting

and withholding tax and making remittances pursuant to subsection (a)

shall file a return on a form prescribed and furnished by the director for

each calendar year on or before the last day of February of the following

year.

(d) The excess of any remittance over the actual taxes withheld in any

withholding period shall be credited against the liability for following

withholding periods until exhausted. A refund shall be allowed in accord-

ance with K.S.A. 79-32,105, and amendments thereto, where an over-

payment cannot be adjusted by an offset against the liability for a sub-

sequent withholding period.

(e) For purposes of determining filing requirements, determinations

of amounts withheld during a calendar year by employers or payors for

purposes of determining filing requirements, payers, persons or organi-

zations deducting and withholding tax shall be made by the director upon

the basis of amounts withheld by those employers or payors, payers, per-

sons or organizations during the preceding calendar year or by estimates

in cases of employers or payors, payers, persons or organizations having

no previous withholding histories. The director is hereby authorized to

modify the filing schedule for any employer or payor, payer, person or

organization deducting and withholding tax when it is apparent that the

original determination was inaccurate.

(f) Whenever the director has cause to believe that money withheld

by an employer or payor, payer, person or organization deducting and

withholding tax pursuant to this act may be converted, diverted, lost, or

otherwise not timely paid in accordance with this section, the director

shall have the power to require returns and payment from any such em-

ployer or payor, payer, person or organization at any time at more fre-

quent intervals than prescribed by this section in order to secure full

payment to the state of all amounts withheld by such employer or payor,

payer, person or organization in accordance with this act.

Sec. 39. On and after July 1, 2003, K.S.A. 2002 Supp. 79-3299 is

hereby amended to read as follows: 79-3299. (a) Every employer or payor

shall, payer, person or organization deducting and withholding tax, on or

before January 31 of each year, shall prepare a statement for each em-

ployee or payee on a form prescribed by the director stating the amount

of wages or payments other than wages subject to Kansas income tax paid

during the preceding year, the total amount of tax withheld, if any, from

such wages or payments other than wages by the employer or payor,

payer, person or organization pursuant to this act and such other infor-

mation as may be prescribed by the director. One copy of such statement

shall be filed by the employer or payor, payer, person or organization

with the division of taxation on or before the last day of February of each

year. Two copies of such statement shall be given to the employee or

payee concerned, one of which will be filed by the employee or payee

with the tax return required by this chapter.

(b) In the case of an employee whose employment is terminated be-

fore the end of a calendar year, the statement required by subsection (a)

may be mailed at the time provided in that subsection to the last known

address of the employee, or issued at the time of the last payment to the

employee, at the employer's option.

(c) Any employer or payor, payer, person or organization deducting

and withholding tax who willfully intentionally fails to furnish a statement

to an employee or payee as required under the provisions of subsections

(a) and (b) of this section shall be guilty of a nonperson misdemeanor and

upon conviction thereof shall be punished by a fine not exceeding $100

for each such offense.

(d) The annual statement of wages and salaries paid and amount with-

held required by this section shall be in lieu of the annual information

return required under K.S.A. 79-3222 and amendments thereto.

Sec. 40. On and after July 1, 2003, K.S.A. 2002 Supp. 79-32,100 is

hereby amended to read as follows: 79-32,100. (a) The tax deducted and

withheld under this act shall not be allowed as a deduction either to the

employer or payor, payer, person or organization deducting and with-

holding tax or to the employee or payee in computing taxable income

under the ``Kansas income tax act.''

(b) The full amount of wages and salaries or payments other than

wages from which an amount was withheld in accordance with this act

shall be included in the gross income of the employee or payee unless

such wages and salaries or payments other than wages or a portion thereof

are otherwise excludable under the provisions of the ``Kansas income tax

act.''

(c) The amount deducted and withheld under this act during any

calendar year from the wages or payments other than wages of an indi-

vidual taxpayer shall be allowed as a credit against the income tax oth-

erwise imposed on such taxpayer by the ``Kansas income tax act,'' whether

or not such amount was remitted to the division of taxation by the em-

ployer or payor, payer, person or organization deducting and withholding

tax in accordance with the terms of this act.

(d) If the amount withheld under this act during any calendar year

exceeds the individual income tax liability of the employee-payee-taxpayer

any excess shall be applied to any other income tax owed the state of

Kansas by such individual (,including fines, penalties and interest, if any),

and the balance of such excess, if any, refunded to the taxpayer as pro-

vided in subsection (c) of K.S.A. 79-32,105, and amendments thereto.

Sec. 41. On and after July 1, 2003, K.S.A. 2002 Supp. 79-32,100a is

hereby amended to read as follows: 79-32,100a. (a) Every payor payer

who is required under federal law to withhold upon payments other than

wages pursuant to the federal internal revenue code as defined by K.S.A.

79-3295 and amendments thereto, shall withhold and deduct and with-

hold an amount to be determined in accordance with K.S.A. 79-32,100d,

and amendments thereto, whenever the payee is a person whose primary

residence is in Kansas.

(b) A determination by the internal revenue service that relieves a

payor payer from withholding responsibility with respect to payments

other than wages to a payee shall also apply for Kansas income tax with-

holding purposes. Whenever a payor payer is required to reinstate with-

holding for federal income tax with regard to any payee, such obligation

shall be equally applicable for Kansas withholding purposes.

(c) Every payor who makes a distribution as defined by subsection

(d) of K.S.A. 79-3295, and amendments thereto, shall withhold and de-

duct an amount to be determined in accordance with K.S.A. 79-32,100d,

and amendments thereto, from amounts distributed or distributable to

each nonresident shareholder or partner. Every payer who is required

under federal law to withhold upon payments of a pension, annuity or

other deferred income, as defined by K.S.A. 79-3295 and amendments

thereto, shall deduct and withhold an amount to be determined in ac-

cordance with K.S.A. 79-32,100d and amendments thereto, whenever the

payee is a resident of the state of Kansas.

(d) Every payer who makes a payment of a management fee or a

consulting fee to a nonresident shall deduct and withhold an amount to

be determined in accordance with K.S.A. 2002 Supp. 79-32,100d and

amendments thereto.

New Sec. 42. (a) Corporations for which an election as an S corpo-

ration under subchapter S of the federal internal revenue code is in effect

are required to deduct and withhold tax at a rate equal to the maximum

rate imposed on individuals pursuant to subsection (a) of K.S.A. 79-32,110

and amendments thereto, from a nonresident shareholder's share of Kan-

sas taxable income of the corporation, whether distributed or undistri-

buted, and pay the withheld amount to the department in the manner

prescribed by the department. For a taxable year beginning after 2002,

the corporation shall make a return and pay over the withhold funds on

or before the due date of the S corporation's income tax return, including

extensions. Taxes withheld in the name of the nonresident shareholder

must be used as credit against taxes due at the time the nonresident files

a return of income or other applicable information return for the taxable

year.

(b) An S corporation required to withhold taxes on distributed or

undistributed income shall file a return with each payment of tax to the

department, on forms prescribed by the secretary, disclosing such infor-

mation as required by the secretary pursuant to subsection (i). The S

corporation shall furnish to each nonresident shareholder a written state-

ment as required by K.S.A. 79-3299 and amendments thereto as proof of

the amount of the nonresident shareholder's share of distributed or un-

distributed income and of the amount that has been withheld.

(c) Partnerships are required to withhold tax at a rate equal to the

maximum rate imposed on individuals pursuant to subsection (a) of K.S.A.

79-32,110 and amendments thereto, from a nonresident partner's share

of Kansas taxable income of the partnership, whether distributed or un-

distributed, and pay the withheld amount to the department in the man-

ner prescribed by the department. For a taxable year beginning after

2002, the partnership shall make a return and pay over the withheld funds

on or before the due date of the partnership's income tax return, including

extensions. Taxes withheld in the name of the nonresident partner must

be used as credit against taxes due at the time the nonresident files a

return of tax or other applicable information return for the taxable year.

(d) A partnership required to withhold taxes on distributed or undis-

tributed income shall file a return with each payment of tax to the de-

partment, on forms prescribed by the secretary, disclosing such infor-

mation as required by the secretary pursuant to subsection (i). The

partnership shall furnish to each nonresident shareholder a written state-

ment as required by K.S.A. 79-3299 and amendments thereto, as proof

of the amount of the nonresident shareholder's share of distributed or

undistributed income that has been withheld.

(e) Limited liability companies are required to withhold tax at a rate

equal to the maximum rate imposed on individuals pursuant to subsection

(a) of K.S.A. 79-32,110 and amendments thereto, from a nonresident

member's share of Kansas taxable income of the limited liability company,

whether distributed or undistributed, and pay the withheld amount to the

department in the manner prescribed by the department. For a taxable

year beginning after 2002, the limited liability company shall make a re-

turn and pay over the withheld funds on or before the due date of the

limited liabilities income tax return, including extensions. Taxes withheld

in the name of the nonresident member must be used as credit against

taxes due at the time the nonresident files a return of tax or other appli-

cable information return for the taxable year.

(f) A limited liability company required to withhold taxes on distrib-

uted or undistributed income shall file a return with each payment of tax

to the department, on forms prescribed by the secretary, disclosing such

information as required by the secretary pursuant to subsection (i). The

limited liability company shall furnish to each nonresident member a writ-

ten statement as required by K.S.A. 79-3299 and amendments thereto,

as proof of the amount of the nonresident member's share of distributed

or undistributed income that has been withheld.

(g) If a nonresident shareholder, partner or member provides the S

corporation, partnership or limited liability company with a statement that

the shareholder or partner is an organization exempt from income taxes

under section 501(a) of the federal internal revenue code, then the S

corporation, partnership or limited liability company is not required to

withhold with regard to that shareholder, partner or member. The state-

ment must contain the shareholder's, partner's or member's name, fed-

eral identification number, internal revenue code section exemption num-

ber, and a copy of the internal revenue service exemption letter.

(h) (1) For purposes of computing the penalty under K.S.A. 79-

32,107 and amendments thereto, the amount withheld is deemed a pay-

ment of estimated tax, and an equal part of the amount is deemed paid

on each estimated tax due date for the previous taxable year.

(2) If a nonresident shareholder, partner or member files an affidavit

with the department in a form acceptable to the department by which

such nonresident shareholder, partner or member agrees to be subject

to the personal jurisdiction of the department in courts of this state for

the purpose of determining and collecting any Kansas taxes, including

estimated taxes, together with any related interest and penalties, then the

S corporation, partnership or limited liability company is not required to

withhold with regard to that shareholder, partner or member. The de-

partment may revoke an exemption granted by this subsection at any time

it determines that the nonresident shareholder, partner or member is not

abiding by its terms.

(i) The department is authorized to require such returns and other

information as it considers appropriate to administer the provisions of this

section, and to issue rulings and promulgate regulations as necessary or

appropriate to implement this section.

(j) The director of taxation may allow a nonresident individual share-

holder, partner or member to not file a Kansas income tax return if the

nonresident individual shareholder's, partner's or member's only source

of Kansas income was such nonresident shareholder's, partner's or mem-

ber's share of the S corporation's, partnership's or limited liability com-

pany's income which was derived from or attributable to sources within

this state, and the S corporation, partnership or limited liability company

has remitted the amount required by subsections (a), (c) or (e) on behalf

of such nonresident shareholder, partner or member. The amount re-

mitted shall be retained in satisfaction of the Kansas income tax liability

of the nonresident individual shareholder, partner or member.

(k) The provisions of this section shall be part of and supplemental

to the Kansas withholding and declaration of estimated tax act.

(l) The provisions of this section shall be effective on and after July

1, 2003.

Sec. 43. On and after July 1, 2003, K.S.A. 2002 Supp. 79-32,100b is

hereby amended to read as follows: 79-32,100b. (a) Every employer or

payor, payer, person or organization required to deduct and withhold tax

from wages of an employee or, payments other than wages of a payee or

from a distribution, under this act shall be liable for the payment of such

tax whether or not it is collected from the employee or, payee or distri-

butee by the employer or payor, payer, person or organization. For pur-

poses of assessment and collection, any amount required to be withheld

and paid over to the department of revenue, and any additions to tax,

penalties and interest with respect thereto, shall be considered the tax of

the employer.

(b) Any amount of tax withheld shall constitute a special fund in trust

for the department of revenue.

(c) No employee or, payee or distributee shall have any right of action

against their employer or payor, payer, person or organization deducting

and withholding tax in respect to any moneys deducted and withheld

from wages or, payments other than wages or distributions and paid over

to the department of revenue in compliance or in intended compliance

with this act.

Sec. 44. On and after July 1, 2003, K.S.A. 2002 Supp. 79-32,100c is

hereby amended to read as follows: 79-32,100c. (a) If an employer or

payor, payer, person or organization deducting and withholding tax fails

to deduct and withhold the tax as required under this act, and thereafter,

the income tax against which the tax may be credited is paid, the tax

required to be deducted and withheld shall not be collected from the

employer or payor, payer, person or organization. The payment of such

tax does not, however, operate to relieve the employer, payer, person or

organization from liability for penalties, interest or additions to the tax

applicable with respect to such failure to deduct and withhold. The em-

ployer or payor will, payer, person or organization shall not be relieved

under this provision from liability for payment of the tax required to be

withheld unless it can be shown that the income tax against which the tax

required to be withheld under this act may be credited has been paid.

(b) Every agent or other person having control, receipt, custody or

disposal of, or paying the wages of an employee or group of employees

employed by one or more employers, is for the purpose of this act des-

ignated to be an employer. In the case of the corporation, the officers

and board of directors are likewise considered employers. Employers of

classes named in this section shall be subject to all the provisions of law

including penalties as is their principal. Any employer who willfully fails

to collect the tax imposed by the Kansas withholding tax act or truthfully

account for any pay over such tax, or willfully attempts in any manner to

evade or defeat any tax or the payment thereof, shall be subject to a

penalty equal to the total amount of the tax evaded, or not collected, or

not accounted for and paid over in addition to other penalties provided

by law.

Sec. 45. K.S.A. 2002 Supp. 79-15,101 is hereby amended to read as

follows: 79-15,101. As used in this act unless the context otherwise re-

quires:

(a) Any term used in this act shall have the same meaning as when

used in a comparable context in the internal revenue code. Any reference

in this act to ``federal law'' or the ``internal revenue code'' shall mean the

provisions of the United States internal revenue code of 1986, as such

code exists on December 31, 1997. Any reference in this act to a specific

provision of the internal revenue code shall be to such provision as it

exists on December 31, 1997. However, for estates of decedents dying on

or after January 1, 2007, any determination made under K.S.A. 79-15,102

and amendments thereto regarding whether the estate is required by fed-

eral law to file a return for federal estate taxes shall be made by referring

to the provisions of the United States internal revenue code of 1986, as

such code exists on December 31, 2001.

(b) ``Decedent'' includes the testator, intestate, grantor, bargainer,

vender or donor.

(b) (c) ``Deemed executor'' includes any person in actual or construc-

tive possession of any property of the decedent.

(c) (d) ``Director'' means the director of taxation.

(e) ``Distributee'' means a beneficiary, legatee, devisee, heir, next of

kin, grantee, donee, vendee, joint tenant or successor.

(d) (f) ``Domicile'' refers to that place where a person resides, has an

intention to remain and to which they intend to return following any

absence.

(e) (g) ``Estate'' and ``property'' shall mean the real, personal and

mixed property or interest therein of the testator, intestate, grantor, bar-

gainor, vendor or donor which shall pass or be transferred to legatees,

devisees, heirs, next of kin, grantees, donees, vendees, or successors and

shall include all personal property within or without the state.

(f) (h) ``Executor'' and ``administrator'' mean the duly appointed,

qualified and acting executor or administrator of the decedent in this

state.

(g) (i) ``Nonresident decedent'' means a decedent who was not a res-

ident decedent at the time of death.

(h) (j) ``Personal representative'' means the executor, administrator

or deemed executor of the decedent.

(i) (k) ``Resident decedent'' means a decedent who was domiciled in

this state at the time of death. A person who spent in the aggregate more

than six months of the calendar year immediately preceding such person's

death within this state shall be presumed to have been a resident for

purposes of this act, in the absence of proof to the contrary.

(j) (l) ``Secretary'' means the secretary of revenue, or the secretary's

designee.

(k) (m) ``Tax'' includes tax, penalty and interest, unless the context of

a particular section otherwise requires.

(n) ``Tax situs'' relates to location of property for the purpose of im-

posing tax. Real estate or tangible personal property reflected in the Kan-

sas gross estate shall be considered to have a tax situs within Kansas if,

at the time of the decedent's death, the property was physically located

within the state of Kansas. Oil and gas leases on lands in this state and

all interests created thereby, or arising therefrom, shall be considered as

tangible personal property having an actual situs in this state. Intangible

property reflected in the Kansas gross estate, including moneys on deposit

with financial institutions, shall be presumed to have a tax situs within

Kansas if the decedent was a resident decedent at the time of death.

(l) (o) ``Transfer'' shall include the passing of property or any interest

therein in possession or enjoyment, present or future, by inheritance,

descent, devise, succession, bequest, grant, deed, bargain, sale, gift or

appointment in the manner herein prescribed.

Sec. 46. K.S.A. 2002 Supp. 79-15,102 is hereby amended to read as

follows: 79-15,102. (a) A tax is hereby imposed on the estate of every

resident decedent, and every nonresident decedent who died holding an

interest in property with a Kansas tax situs, whose estate is required by

federal law to file a return for federal estate taxes. For estates of decedents

dying on or after January 1, 2007, the determination of whether the estate

is required by federal law to file a return for federal estate taxes shall be

made by referring to the provisions of the United States internal revenue

code of 1986, as such code exists on December 31, 2001. The amount of

such tax shall be equal to the amount of the maximum credit allowable

by section 2011 of the internal revenue code against the tax imposed on

the transfer of the estate of the decedent by section 2001 of the internal

revenue code.

(b) When the estate of a resident decedent consists of property within

and without the state, or in the case of the estate of a nonresident de-

cedent who died holding an interest in property with a Kansas tax situs,

the tax imposed under subsection (a) shall be the percentage thereof that

the gross estate for federal estate tax purposes less the value of all property

included therein having a tax situs which is not within the jurisdiction of

the state of Kansas, bears to the total gross estate for federal estate tax

purposes shall consist of property with a tax situs in Kansas and property

with a tax situs outside Kansas, the tax imposed by subsection (a) shall be

multiplied by the percentage determined by dividing the value of all prop-

erty included in the gross estate which is within the jurisdiction of the

state of Kansas by the value of all property included in the gross estate.

Sec. 47. K.S.A. 2002 Supp. 79-15,103 is hereby amended to read as

follows: 79-15,103. (a) Except as otherwise provided, the personal rep-

resentative of every estate subject to the tax imposed by K.S.A. 2002

Supp. 79-15,102 and amendments thereto who is required by federal law

to file a return for federal estate taxes shall make and file in the office of

the director a return on forms prepared and furnished by the secretary

together with a copy of the federal estate tax return on or before the date

the federal estate tax return is required to be filed. The personal repre-

sentative of any decedent whose estate is not taxable under the provisions

of this act, may obtain a determination of the director that no tax liability

exists on such estate by filing a return on forms prepared and furnished

by the secretary stating that such estate is not taxable.

(b) The taxes imposed under the provisions of this act shall be paid

by the personal representative to the director at the expiration of nine

months after the death of the decedent.

(c) If the taxes contemplated by this act are not paid when due, in-

terest at the rate prescribed by subsection (b) of K.S.A. 79-2968, and

amendments thereto, shall be charged and collected commencing at the

time the same become payable.

(b) In those estates in which no executor or administrator has been

appointed, the deemed executor shall make and file such return. In the

event there is more than one deemed executor, all deemed executors shall

be jointly responsible for completing and filing one return reporting all of

the assets of the estate except as hereinafter provided.

(c) If, after exercising due diligence, the personal representative mak-

ing and filing such return is unable to make a complete return as to any

part of the gross estate of the decedent, the personal representative shall

make and file a return reporting all information as to the estate assets,

including a description thereof and the name of any person holding a legal

or beneficial interest in the assets, to the best of such personal represen-

tative's knowledge.

Sec. 48. K.S.A. 2002 Supp. 79-15,109 is hereby amended to read as

follows: 79-15,109. (a) As soon as practicable after the return is filed and

the taxes paid, the director shall issue a closing letter. Such closing letter

shall be issued to the personal representative upon the director being

satisfied that there has been a final determination of all taxes due and

that all such taxes have been paid.

(b) The closing letter shall be applicable only to assets reported in the

return filed with the director. To the extent the gross assets of the decedent

were reported, the issuance of a closing letter shall be conclusive evidence

that all taxes have been determined and paid and shall release any lien

which attached to the decedent's property, or the property of any personal

representative or distributee, unless notice of such lien has been filed un-

der section 61, and amendments thereto.

New Sec. 49. Any tax liability for tax imposed pursuant to K.S.A.

2002 Supp. 79-15,127 which may have accrued prior to the effective date

of this act is hereby abolished. Any such tax paid shall be refunded to the

taxpayer pursuant to the procedure prescribed by this section. Each claim

for a 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 tax paid. All refunds

shall be paid from the inheritance or succession tax refund fund, which

is hereby created, upon warrants of the director of accounts and reports

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

New Sec. 50. Returns made in accordance with the provisions of this

act shall be filed on or before the date the federal estate tax return is

required to be filed.

New Sec. 51. (a) Upon a showing of good cause the director may

grant a reasonable extension of time for filing a return.

(b) A request for an extension of time to file shall be made in the

manner and form prescribed by the secretary. No such extension shall be

for more than six months, except in the event of litigation directly involv-

ing the estate.

(c) Notwithstanding a grant of an extension of time to file, the taxes

shall be due and payable at the same time and in the same manner as if

no such extension had been granted.

New Sec. 52. All returns, statements or other documents required

to be filed under any provision of this act shall be filed with the office of

the director of taxation, or at such other place as the secretary may by

rule or regulation prescribe.

New Sec. 53. (a) Any return, statement or other document required

to be made under any provision of this act shall be signed in accordance

with forms or regulations prescribed by the secretary.

(b) The fact that an individual's name is signed to a return, statement

or other document shall be prima facie evidence for all purposes that the

return, statement or other document was actually signed by the

individual.

(c) Except as otherwise provided by the secretary, any return, dec-

laration, statement or other document required to be made under any

provision of this act shall contain or be verified by a written declaration

that it is made under penalties of perjury.

New Sec. 54. If any person fails to make a return required by this

act or by regulations prescribed thereunder, but consents to disclose all

information necessary for the preparation thereof, the director may pre-

pare such return. After such return is signed by the person, such return

may be received by the director as the return of the person.

New Sec. 55. (a) The director is authorized to provide with respect

to any amount required to be shown on a return, statement or any other

document, that if the amount of such item is other than a whole-dollar

amount either:

(1) The fractional part of a dollar shall be disregarded; or

(2) the fractional part of a dollar shall be disregarded unless it

amounts to $.50 or more, in which case the amount, to be determined

without regard to the fractional part of a dollar, shall be increased by $1.

(b) Any person making a return, statement or other document shall

be allowed, under regulations prescribed by the secretary, to make such

return, statement or other document without regard to subsection (a).

(c) The provisions of subsections (a) and (b) shall not be applicable

to items which must be taken into account in making the computations

necessary to determine the amount required to be shown on a form, but

shall be applicable only to such final amount.

New Sec. 56. (a) The tax imposed under the provisions of this act

shall be paid by the personal representative.

(b) The personal representative, or each personal representative if

there is more than one, shall be personally liable for the tax to the extent

of the property in the personal representative's actual or constructive

possession which has a Kansas tax situs, less any amounts the personal

representative is required to pay to third parties who have a legally en-

forceable claim to the property that has priority under state or federal

law over the tax imposed by this act.

New Sec. 57. (a) The tax imposed under the provisions of this act

shall be paid at the expiration of nine months after the death of the

decedent.

(b) The person required to make the return, without assessment or

notice and demand from the director, shall pay such tax to the office of

the director of taxation, or at such other place as the secretary may by

rule or regulation prescribe.

New Sec. 58. (a) If any personal representative fails to file a return

or pay the tax if one is due, at the time required by or under the provisions

of this act, there shall be added to the tax an additional amount equal to

1% of the unpaid balance of the tax due for each month or fraction thereof

during which such failure continues, not exceeding 24% in the aggregate,

plus interest at the rate prescribed by subsection (a) of K.S.A. 79-2968,

and amendments thereto, from the date the tax was due until paid.

(b) If after review of a return the director determines that the un-

derpayment of tax was due to the failure of the personal representative

to make a reasonable attempt to comply with the provisions of this act, a

penalty shall be imposed in the amount of 25% of the unpaid balance of

tax due.

(c) If any personal representative has failed to file a return or has

filed an incorrect or insufficient return, and after notice from the director

refuses or neglects within 20 days to file a proper return, the director

shall determine the value of the taxable estate according to the best avail-

able information and assess the tax together with a penalty of 50% of the

unpaid balance of tax due plus interest at the rate prescribed by subsec-

tion (a) of K.S.A. 79-2968, and amendments thereto, from the date the

tax was originally due to the date of payment.

(d) Any personal representative who, with fraudulent intent, fails to

pay any tax or to make, render or sign any return, or to supply any infor-

mation, within the time required by or under the provisions of this act,

shall be assessed a penalty equal to the amount of the unpaid balance of

tax due plus interest at the rate prescribed by subsection (a) of K.S.A. 79-

2968, and amendments thereto, from the date the tax was originally due

to the date of payment. Such person shall also be guilty of a misdemeanor

and, upon conviction, shall be fined not more than $1,000 or be impris-

oned in the county jail not less than 30 days nor more than one year, or

both such fine and imprisonment.

(e) Any personal representative who intentionally signs a fraudulent

return shall be guilty of a felony, and upon conviction shall be punished

by imprisonment for a term not exceeding five years.

(f) (1) Whenever the director determines that the failure of the per-

sonal representative to comply with the provisions of subsection (a), (b)

or (c) was due to reasonable causes, the director may waive or reduce any

of the penalties upon making a record of the reasons therefor.

(2) No penalty shall be assessed hereunder with respect to any un-

derpayment of estate tax liability reported on any amended return filed

by any personal representative who at the time of filing pays such un-

derpayment and where the return is not being examined at the time of

filing.

(3) No penalty assessed hereunder shall be collected if the personal

representative has had the tax abated on appeal, and any penalty collected

upon such tax shall be refunded.

New Sec. 59. Whenever the director has reason to believe that a

personal representative may be unwilling or unable to fulfill the filing

requirements of K.S.A. 79-15,103, and amendments thereto, relating to

the filing of a return, or of section 56, and amendments thereto, relating

to the payment of the tax, or that a distributee receiving property liable

for the payment of tax is about to depart from the state or to remove any

property which is subject to tax, including proceeds from the sale or

disposal of such property, or to conceal themselves or such property, or

to transfer, commingle, disburse or otherwise manipulate such property

in order to frustrate or preclude the calculation of tax due thereon or

collection of tax due therefrom, or to do any other act tending to preju-

dice, jeopardize or render wholly or partially ineffective the determination

or collection of tax unless proceedings are brought without delay, the

director shall immediately make an assessment for all such taxes due,

noting such finding on the assessment. Thereupon notices of lien may be

filed in accordance with section 61, and amendments thereto, or, in the

director's discretion, a warrant may be issued for the collection of tax as

provided in section 62, and amendments thereto. Any person liable for

tax, within 30 days from the date of filing of such notice of lien or warrant,

may request review in the manner prescribed by K.S.A. 79-3226, and

amendments thereto, on the correctness of the jeopardy assessment. If

the director finds that in certain cases collection of the tax may be jeop-

ardized by delay, the director, in the exercise of discretion, immediately

may issue notice and demand for payment of tax found to be due. In such

cases, collection may be stayed by the giving of such security as the di-

rector may consider adequate.

New Sec. 60. (a) The property of the estate of every decedent whose

estate is required to file an estate tax return pursuant to K.S.A. 79-15,103,

and amendments thereto, in whatever form of investment it may happen

to be, shall be charged with a lien for all taxes, penalties and interest

thereon which are or may become due on such property.

(b) Unless the estate tax imposed by this act is sooner paid in full, it

shall be a lien upon the gross estate of the decedent for 10 years from

the date of death, except that such part of the gross estate as is used for

the payment of charges against the estate and expenses of its administra-

tion, allowed by any court having jurisdiction therefor, shall be divested

of such lien.

(c) Except as otherwise provided, if the taxes imposed under this act

are not paid when due, the spouse, transferee, trustee, surviving tenant,

person in possession of the property by reason of the exercise, nonexercise

or release of a power of appointment or beneficiary, who receives, or has

on the date of the decedent's death, property included in the gross estate,

to the extent of the value of such property at the time of the decedent's

death, shall be personally liable for such tax. The provisions of this sub-

section shall not apply to the trustee of an employee's trust which meets

the requirements of section 401(a) of the federal internal revenue code.

Any part of such property transferred by, or transferred by a transferee

of such spouse, transferee, trustee, surviving tenant, person in possession

or beneficiary to a purchaser or holder of a security interest shall be

divested of the lien provided for in subsection (a) and a similar lien shall

then attach to all the property of such spouse, transferee, trustee, surviv-

ing tenant, person in possession or beneficiary or transferee of any such

person, except any part transferred to a purchaser or a holder of a security

interest.

New Sec. 61. (a) Whenever the director has reason to believe that

any property which is subject to tax, including proceeds from the sale or

disposal of such property, may be transferred, commingled, disbursed,

concealed within or removed from the state, or otherwise manipulated in

order to frustrate or preclude the collection of tax from such property,

the director may file against such property written notice of the lien im-

posed by section 60, and amendments thereto.

(b) A notice of lien shall be filed with the register of deeds in any

county where any property subject to tax is located, upon forms pre-

scribed by the secretary. In the event an exact tax liability has been de-

termined, the notice may recite the amount of such liability.

(c) Upon satisfaction of the lien, or upon its release or divestiture in

accordance with section 64, and amendments thereto, the director shall

issue notice of the release of such lien, on forms prescribed by the

director.

New Sec. 62. (a) If the personal representative fails to timely pay the

taxes imposed by this act, the director may enforce the director's lien by

the issuance of a warrant under the director's hand and official seal, di-

rected to the sheriff of any county of the state, commanding such sheriff

to levy upon and sell the real and personal property of the distributee

found within the sheriff's county for the payment of the amount thereof,

with the added penalty, interest and the cost of executing the warrant,

and to return such warrant to the director and pay to the director the

money collected by virtue thereof not more than 60 days from the date

of the warrant. The sheriff, within five days after the receipt of the war-

rant, shall file with the clerk of the district court of the sheriff's county a

copy thereof, and thereupon the clerk shall enter in the appearance

docket in appropriate columns, the name of the distributee named in the

warrant, the amount of the tax or portion thereof and interest for which

the warrant is issued and the date such copy is filed. The amount of such

warrant docketed shall thereupon become a lien upon the title to, and

interest in, the real property of the distributee against whom it is issued

in the same manner, as a judgment duly docketed in the office of such

clerk. The sheriff shall proceed in the same manner and with like effect

as prescribed by law with respect to executions issued against property

upon judgments of a court of record and shall be entitled to the same

fees for the sheriff's services to be collected in the same manner.

(b) The court in which the warrant is docketed shall have jurisdiction

over all subsequent proceedings as fully as though a judgment had been

rendered in the court. In the discretion of the director, a warrant of like

terms, force and effect may be issued and directed to any officer or em-

ployee of the director, and in the execution thereof such officer or em-

ployee shall have all the powers conferred by laws upon sheriffs, and the

subsequent proceedings thereunder shall be the same as provided where

the warrant is issued directly to the sheriff. The distributee shall have the

right to redeem the real estate within a period of 18 months from the

date of such sale. If a warrant is returned, unsatisfied in full, the director

shall have the same remedies to enforce the claim for taxes as if the state

of Kansas had recovered judgment against the distributee for the amount

of the tax. No law exempting any goods and chattels, land and tenements

from forced sale under execution shall apply to a levy and sale under any

such warrants or upon any execution issued upon any judgment rendered

in any action for estate taxes. The director shall have the right at any time

after the warrant has been returned unsatisfied or satisfied only in part,

to issue alias warrants until the full amount of the tax is collected.

New Sec. 63. In cases where the tax is due and payable, the director

of taxation may bring an action for collection. All actions shall be prose-

cuted by the attorney for the director in the name of the state, and such

actions may be brought in the same courts as other actions for money.

New Sec. 64. The lien imposed by section 60, and amendments

thereto, shall be divested or released only in accordance with the follow-

ing provisions:

(a) The lien shall be divested upon the payment of all taxes, penalty

and interest due;

(b) the lien shall be divested after 10 years from the date of the de-

cedent's death;

(c) that portion of the decedent's property which is used for the pay-

ment of charges against the estate and expenses of its administration,

allowed by any court having jurisdiction thereof, shall be divested of such

lien;

(d) the lien shall not affect any property after it has been sold or

disposed of for value by the executors or administrators in accordance

with K.S.A. 59-1410 and 59-1413, and amendments thereto, or otherwise

in accordance with law, but in all such cases a lien shall attach to the

proceeds realized from any such sale or other disposition for all taxes and

interest thereon which are or may be due on such property. Tax due or

payable from the proceeds of such sale or disposal of such property shall

be collected by the personal representative in accordance with the pro-

visions of section 56, and amendments thereto, or by the director in ac-

cordance with the provisions of section 62 or 63, and amendments

thereto; and

(e) that portion of the decedent's property which must be sold, trans-

ferred or disposed of for the payment of taxes against the estate shall be

divested of the lien, but only to the extent a specific release of has been

granted by the director.

New Sec. 65. (a) Whenever the lien imposed by section 60, and

amendments thereto, has been released in accordance with the provisions

of section 64, and amendments thereto, and the personal representative

makes written request for proof of such release, the director shall furnish

such personal representative with notice of release. Any such notice of

release shall be in such form as prescribed by the director and may in-

clude use of or reference to the closing letter issued by the director or

may be included as part of that closing letter.

(b) When the notice of release applies to real property, such notice

may be filed in the office of the register of deeds in any county where

any such real property included in the gross estate is located or, when

the estate is involved in proceedings before the district court, with the

court. At the discretion of the director, such notice of release may be

filed by the director or may be provided to the personal representative

for filing.

New Sec. 66. The provisions of sections 50 through 66 and amend-

ments thereto shall be part of and supplemental to the Kansas estate tax

act.

New Sec. 67. (a) The executive director of the state board of tax

appeals shall charge and collect a filing fee, established by rules and reg-

ulations adopted by the state board of tax appeals, for any appeal in any

proceeding under the tax protest, tax grievance or tax exemption statutes

or in any other original proceeding for such board to recover all or part

of the costs of processing such actions incurred by the state board of tax

appeals. No filing fee shall be imposed on applications by taxpayers for

refunds of protested taxes under the provisions of K.S.A. 79-2005, and

amendments thereto, or for appeals from decisions rendered pursuant to

K.S.A. 79-1448, and amendments thereto, with regard to single-family

residential property. Not-for-profit organizations shall not be charged a

filing fee exceeding $10 for any appeal if the valuation of the property

that is the subject of the controversy does not exceed $100,000.

(b) There is hereby created in the state treasury the BOTA filing fee

fund.

(c) The executive director of the board of tax appeals shall remit to

the state treasurer at least monthly all tax appeal filing fees received by

the state board of tax appeals. Upon receipt of any such remittance, the

state treasurer shall deposit the amount in the state treasury to the credit

of the BOTA filing fee fund.

(d) All expenditures from the BOTA filing fee fund shall be made in

accordance with appropriation acts upon warrants of the director of ac-

counts and reports issued pursuant to vouchers approved by the executive

director of the state board of tax appeals or a person or persons designated

by such executive director.

New Sec. 68. (a) (1) Notwithstanding the provisions of any other law

to the contrary, with respect to the following taxes administered by the

department of revenue, an amnesty from the assessment or payment of

all penalties and interest with respect to unpaid taxes or taxes due and

owing shall apply upon compliance with the provisions of this section and

if such tax liability is paid in full within the amnesty period, from October

1, 2003, to November 30, 2003: (A) Privilege tax under K.S.A. 79-1106

et seq. and amendments thereto; (B) taxes under the Kansas estate tax

act, K.S.A. 2002 Supp. 79-15,100 et seq. and amendments thereto; (C)

taxes under the Kansas income tax act, K.S.A. 79-3201 et seq. and amend-

ments thereto; (D) taxes under the Kansas withholding and declaration

of estimated tax act, K.S.A. 79-3294 et seq. and amendments thereto; (E)

taxes under the Kansas cigarette and tobacco products act, K.S.A. 79-

3301 et seq. and amendments thereto; (F) taxes under the Kansas retail-

ers' sales tax act, K.S.A. 79-3601 et seq. and amendments thereto and the

Kansas compensating tax act, K.S.A. 79-3701 et seq. and amendments

thereto; (G) local sales and use taxes under K.S.A. 12-187 et seq. and

amendments thereto; (H) liquor enforcement tax under K.S.A. 79-4101

et seq. and amendments thereto; (I) liquor drink tax under K.S.A. 79-

41a01 et seq. and amendments thereto; and (J) mineral severance tax

under K.S.A. 79-4216 et seq. and amendments thereto.

(2) Except for the Kansas privilege tax and individual and corporate

income tax, amnesty shall apply only to tax liabilities due and unpaid for

tax periods ending on or before December 31, 2002. For the Kansas

privilege tax and individual and corporate income tax, amnesty shall apply

only to tax liabilities due and unpaid for tax periods ending on or before

December 31, 2001. For the eligible taxes and tax periods, amnesty shall

apply to the under-reporting of such tax liabilities, the nonpayment of

such taxes and the nonreporting of such tax liabilities.

(3) Amnesty shall not apply to any matter or matters for which, on or

after February 6, 2003, any one of the following circumstances exist: (A)

The taxpayer has received notice of the commencement of an audit; (B)

an audit is in progress; (C) the taxpayer has received notice of an assess-

ment pursuant to K.S.A. 79-2971 or 79-3643 and amendments thereto;

(D) as a result of an audit, the taxpayer has received notice of a proposed

or estimated assessment or notice of an assessment; (E) the time to ad-

ministratively appeal an issued assessment has not yet expired; or (F) an

assessment resulting from an audit, or any portion of such assessment, is

pending in the administrative appeals process before the secretary or

secretary's designee pursuant to K.S.A. 79-3226 or 79-3610 and amend-

ments thereto or the board of tax appeals, or is pending in the judicial

review process before any state or federal district or appellate court. Am-

nesty shall not apply to any matter that is the subject of an assessment,

or any portion of an assessment, which has been affirmed by a reviewing

state or federal district or appellate court. Amnesty shall not apply to any

party to any criminal investigation or to any civil or criminal litigation that

is pending in any court of the United States or this state for nonpayment,

delinquency or fraud in relation to any tax imposed by the state of Kansas.

(b) Upon written application by the taxpayer, on forms prescribed by

the secretary of revenue, and upon compliance with the provisions of this

section, the department of revenue shall not seek to collect any penalty

or interest which may be applicable with respect to taxes eligible for

amnesty.

(c) Amnesty for penalties and interest shall be granted only to those

eligible taxpayers who, within the amnesty period of October 1, 2003, to

November 30, 2003, and in accordance with rules and regulations estab-

lished by the secretary of revenue, have properly filed a tax return for

each taxable period for which amnesty is requested, paid the entire bal-

ance of tax due and obtained approval of such amnesty by the department

of revenue.

(d) If a taxpayer elects to participate in the amnesty program estab-

lished pursuant to this section as evidenced by full payment of the tax

due as established by the secretary of revenue, that election shall consti-

tute an express and absolute relinquishment of all administrative and ju-

dicial rights of appeal with respect to such tax liability. No tax payment

received pursuant to this section shall be eligible for refund or credit. No

payment of penalties or interest made prior to October 1, 2003, shall be

eligible for amnesty.

(e) For tax returns for which amnesty has been requested, nothing

in this section shall be interpreted to prohibit the department from ad-

justing such tax return as a result of a federal, department or other state

agency audit.

(f) Fraud or intentional misrepresentation of a material fact in con-

nection with an application for amnesty shall void such application and

any waiver of penalties and interest from amnesty.

(g) Discovery of fraud relating to the underlying tax liability shall void

the abatement of any liability as a result of any amnesty.

(h) The department may promulgate such rules and regulations or

issue administrative guidelines as are necessary to administer the provi-

sions of this section.

(i) The provisions of this section shall be effective on and after July

1, 2003.

Sec. 69. K.S.A. 74-2433 and K.S.A. 2002 Supp. 79-15,101, 79-

15,102, 79-15,103, 79-15,106, 79-15,107, 79-15,108, 79-15,109, 79-

15,114, 79-15,115 and 79-15,127 are hereby repealed.

Sec. 70. On and after July 1, 2003, K.S.A. 12-188, 12-189a, 12-191,

12-191a, 12-192, 12-198, 72-6431, 75-5151, 79-3607, 79-3608 and 79-

3651 and K.S.A. 2002 Supp. 12-187, 12-189, 79-201x, 79-3295, 79-3298,

79-3299, 79-32,100, 79-32,100a, 79-32,100b, 79-32,100c, 79-32,206, 79-

3602, 79-3603, 79-3606 and 79-3650 are hereby repealed.

Sec. 71. This act shall take effect and be in force from and after its

publication in the Kansas register.

Approved May 19, 2002.

Published in the Kansas Register May 22, 2002.


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Date Composed: 10/29/2003 Date Modified: 10/29/2003