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A company providing website design and consulting services would be liable for sale and use tax in Kansas if the design work were provided directly to the customer. In Kansas, website design work is considered the same as the sale of custom software, which is taxable. (Kansas Private Letter Ruling, P-2004-006, April 7, 2004)


Effective April 1, 2004, the transaction between the manufacturer and the dealer or final consumer involving the sale of modular homes will be subject to tax whereas the transaction between the dealer and the final consumer will be exempt. Here "modular home" refers to a structure that is transportable, not permanent, designed to be used on a permanent foundation when connected to utilities and certified according to building code. The tax base for modular homes is 60% of the total selling price that is paid to the manufacturer. As of April 1, 2004 the dealer is required to remit tax directly to the Department of Revenue on any inventory of previously untaxed modular homes. (Department of Revenue Ruling No. 19-2004-1, approved February 4, 2004, effective as noted above)


An optometrist building a new facility in an enterprise zone was denied a request for a Project Exemption Certificate on the grounds that the business is considered to be a retailer under the Kansas Enterprise Zone Act (KEZA). The taxpayer argued that there was another similar business in the zone, a hospital, which had been deemed by the Department of Administrative Appeals in 1997 to be a "non-manufacturer" under KEZA. The Department concluded that the Order issued in 1997 was "factually distinguishable, without authority, and was not the policy of the Department or relevant in this matter." The Department cited K.S.A. 74-50,114(i) which specifically addresses optometry as a retail business thus making it ineligible for the enterprise zone exemption. (Kansas Department of Revenue, Final Written Determination WFD-P2003-1, Decided August 25, 2003)


The document makes it clear that electricity, water, natural gas, and other fuels that are provided to residential customers for noncommercial use are only subject to local sales tax and not state sales tax. These same utilities are taxable at the state and local level for businesses unless they are being consumed in the production of or are an ingredient or component part of the products being manufactured. The exemption includes electricity if it becomes a component part of chemicals that are being manufactured for resale. Kansas has also exempted electricity or gas consumed in cooking equipment used in restaurants, pin-ball machines, pin setting machines, power tools used by mechanics, and duplicating equipment in copy centers. (Opinion Letter, O-2004-003.)


The service fee charged for the unique design of a logo or monogram design is considered exempt. This exemption is limited to the point when the design is transferred to the customer. Application fees are considered part of the merchandise and are therefore taxable. (Private Letter Ruling No. P-2003-060, December 15, 2003)



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