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Kansas Governor Kathleen Sebelius signed a bill that allows the state to maintain its status as a member of the Streamlined Sales and Use Tax (SST) Agreement. Among other changes, provisions in the bill include those regarding telecommunications services, durable medical equipment, direct mail delivery charges, and a rates and boundaries database. (H.B. 2171, Laws 2007, effective July 1, 2007)


Legislation passed in Kansas makes changes to the existing sales tax exemption for construction and restoration with respect to structures damaged or destroyed by certain disasters. The amended exemption has been broadened to include utility structures which are defined to include transmission and distribution lines owned by an electric or natural gas public utility. The expanded exemption also adds windstorms, terrorism and ice loading and attendant winds to the list of disasters covered by the exemption. (H.B. 2240, Laws 2007, effective July 1, 2007)


In a private letter ruling clarification, the Kansas Department of Revenue addressed the taxability of leases of tangible personal property other than transportation equipment. For leases in which period payments are made, “destination-based” rules apply to the first payment only. Subsequent payments are sourced to the primary property location. In addition, the State reiterated that leases were taxable with no deduction for charges related to the fulfillment of the contract, even if the charges were separately-stated. Examples of these included charges include insurance, taxes, service contracts, handling, administration, late fees and service charges, among others. (Private Letter Ruling No. P-2006-010, Kansas Department of Revenue, revised October 25, 2006)


In a recent Kansas private letter ruling, the state indicated that the purchase of the radial fatigue machine was deemed integrated production equipment and, therefore, exempt from Kansas retailers’ sales tax. The machine was used by a wheel manufacturer to test and assure the quality of small aircraft wheels. In addition, the tires, lug bolts, lug nuts, and valve stems, also used by the manufacturer to test the small aircraft wheels, but later thrown away, were also exempt as items consumed in production. (Private Letter Ruling No. P-2006-006)


Uniformity has been restored to local Kansas retailers' sales tax provisions by reducing the number of city “classes” to one. Restoring uniformity to local taxes reduces the risk that the state may be not in compliance with the Streamlined Sales and Use Tax Agreement. Cities in the one remaining class are allowed to impose a city tax at a rate of up to 2% for general purposes and up to 1% for special purposes. Thus the maximum city tax rate may not exceed 3%. A grandfather clause provides that city retailers' sales taxes that were imposed as of July 1, 2006 may remain in effect until they are repealed. (State Law, 2005 KS S 55, May 22, 2006)



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