Revenue Ruling

Ruling Number:19-2010-05
Tax Type:Kansas Retailers' Sales Tax
Brief Description:Reporting Sales Tax on Contractor Labor Services Paid for with Progress Payments
Keywords:
Approval Date:09/09/2010


Body:
KANSAS DEPARTMENT OF REVENUE
OFFICE OF THE SECRETARY

Revenue Ruling 19-2010-05

September 9, 2010

Reporting Sales Tax on Contractor Labor Services Paid for with Progress Payments

Subsections (p) and (q) of K.S.A. 2009 Supp. 79-3603 impose sales tax on labor services performed by a contractor, unless the services either are performed as part of "original construction" or "residential construction" as defined in Subsection (p) or are paid for by an entity or business that can claim a sales tax exemption on its purchases. Unless one of these exceptions or exemptions applies, nearly all labor services performed by contractors during the construction of a building or structure, or to otherwise improve real property, are subject to Kansas sales tax. For purposes of this ruling, "contractor" includes general contractors, subcontractors, repairmen, contractor-retailers, and other service providers.

A progress payment is a payment made to a contractor as work progresses on a construction project. The parties to a construction contract may agree that progress payments will be made based on a percentage of work completed, the stage of work completed, the costs incurred by the contractor, a payment schedule, or some other basis. Each contractor who issues a bill or statement for a progress payment for a period in which it performed taxable labor services shall report sales tax on the taxable services.

If a contractor reports sales tax on the cash-basis, it shall report the taxable labor services it performed during the period covered by a progress payment on the return it files for the sales-tax reporting period in which it receives the progress payment. If a contractor reports sales tax on the accrual basis, it shall report the taxable services it performed during the period covered by a progress-billing statement on the return it files for the sales-tax reporting period in which it recognizes the charges on its progress-billing statement in its books and records as earned.

This ruling clarifies the department's interpretation as to the sales tax reporting and remitting obligations concerning progress payments for construction contracts.

Secretary of Revenue



Joan Wagnon


Date Composed: 09/17/2010 Date Modified: 09/17/2010