Kansas Sales Tax Exemption Information Booklet and Certificates

Sales Tax Exemption Information Booklet and Certificates
Exemption Certificates Pub. KS-1520 Rev. 11-15
Exemption

Certificates

NOTE: Underlying law may have changed.
See Revenue Notice 19-04 concerning nexus.
This booklet is designed to help businesses
properly use Kansas sales and use tax exemption
certificates as buyers and as sellers. It explains the
exemptions currently authorized by Kansas law and
includes the exemption certificates to use. Businesses
with a general understanding of Kansas sales tax rules
and regulations can avoid costly errors. Use this guide
as a supplement to the Kansas Department of
Revenue’s basic sales tax publication, KS-1510,
Kansas Sales and Compensating Use Tax.
As a registered retailer or consumer, you will receive
updates from the Kansas Department of Revenue
when changes are made in the laws governing sales
and use tax exemptions. Keep these notices with this
booklet for future reference. You may also obtain the
most current version of any exemption certificate or
publication from our website.

Pub KS-1520
(Rev. 11/15)

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TABLE OF CONTENTS

RETAILER RESPONSIBILITIES................................

USING EXEMPTION CERTIFICATES ....................... 13


3


Completing the Certificate
Penalties for Misuse

The Cardinal Rule
What is an Exemption Certificate?
Accepting Exemption Certificates
Blanket Exemption Certificates
Record Keeping
BUYING YOUR INVENTORY ....................................

SAMPLE EXEMPT ENTITY CERTIFICATE ............... 15

EXEMPTION CERTIFICATES
4


Agricultural (ST-28F) ......................................................................
Aircraft (ST-28L) ..............................................................................
Aviation Fuel Exemption (ST-28LA) ..........................................
Consumed in Production (ST-28C) .........................................
Designated or Generic (ST-28) ................................................
Direct Mail Sourcing (ST-31) .....................................................
Dry Cleaning & Laundry Retailer (ST-28X) .........................
Ingredient or Component Part (ST-28D) ...............................
Integrated Production Machinery & Equipment (ST-201)
Interstate Common Carrier (ST-28J) ......................................
Multi-Jurisdiction (ST-28M) ..........................................................
Project Exemption Request Exempt Entities (PR-76) .....
Project Exemption Request (PR-70b) .....................................
Project Completion Certification (PR-77) ............................
Railroad (ST-28R) ............................................................................
Resale (ST-28A) ................................................................................
Retailer/Contractor (ST-28W) .....................................................
Sales and/or Transient Guest Tax for Lodging (ST-28H)
Streamlined Sales Tax (PR-78SSTA) .........................................
Tire Retailer (ST-28T) .....................................................................
U. S. Government (ST-28G) ........................................................
Utility (ST-28B) ..................................................................................
Vehicle Lease or Rental (ST-28VL) ..........................................
Veterinarian (ST-28V) ....................................................................
Warehouse Machinery & Equipment (ST-203) ..................

Resale Exemption Certificate Requirements
Kansas Sales Tax Account Numbers
Items Purchased Must Be For Resale
Sample Completed Resale Exemption Certificate
SALES TAX EXEMPTIONS ......................................

6


Exempt Buyers
Items Exempt from Sales Tax
Uses that are Exempt
The Utility Exemption
SPECIAL SITUATIONS .............................................

9


Contractors
Project Exemption Certificates
Manufacturers and Processors
Wholesalers
Paying Tax on Personal Use of Inventory
When in Doubt…
RELATED TOPICS ................................................... 12

Audit Issues
Local Sales Tax
Out-of-State Sales
Compensating Use Taxes

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If there is a conflict between the law and information found in this publication, the law remains the final authority. Under no
circumstances should the contents of this publication be used to set or sustain a technical legal position. A library
of current policy information is also available on the Kansas Department of Revenue’s website at: ksrevenue.gov
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ACCEPTING EXEMPTION CERTIFICATES


RETAILER
RESPONSIBILITIES

An exemption certificate relieves a seller from collecting
sales tax if it has obtained the required identifying
information as determined by the director and the reason
for claiming the exemption at the time of purchase. A seller
should:

THE CARDINAL RULE


1) verify the identity of the person or entity presenting
the exemption certificate; and
2) maintain the fully completed exemption certificate in
your sales tax records for at least three years.

Kansas retailers are responsible for collecting the full
amount of sales tax due on each sale to the final user or
consumer. All Kansas retailers should follow this cardinal
rule:
All retail sales of goods and enumerated
taxable services are considered taxable
unless specifically exempt.

You should obtain the appropriate exemption certificate
from your customer at the time of the sale and no later
than 90 days subsequent to the date of sale.

Therefore, for every sale of merchandise or taxable
service in Kansas, the sales receipt, invoice, or bill MUST
either:

However, some customers claim to be exempt only after
the goods or services have been delivered, and deduct the
tax from the bill. When this happens, you are still
responsible for obtaining an exemption certificate from the
customer. If you are unable to secure an exemption
certificate the sale is considered taxable, and as the retailer,
you will be liable for the tax.

• show that the total amount of sales tax due was
collected, or
• be accompanied by a Kansas exemption
certificate or Form PR-78SSTA (Streamlined
Sales Tax Agreement Certificate of Exemption).

BLANKET EXEMPTION CERTIFICATES

WHAT IS AN EXEMPTION CERTIFICATE?


If you make recurring exempt sales of the same type to
the same customer, you are not expected to obtain an
exemption certificate for each transaction. Kansas law
provides that a seller is relieved of liability for the tax when
he obtains a blanket exemption certificate from a purchaser
with which the seller has a “recurring business relationship.”
Such certificate need not be renewed or updated when
there is a recurring business relationship between the buyer
and seller. A “recurring business relationship” exists when
a period of no more than 12 months elapses between sales.
All of the certificates in this booklet may be used as blanket
certificates.

An exemption certificate is a document that a buyer
presents to a retailer to claim exemption from Kansas sales
or use tax. It shows why sales tax was not charged on a
retail sale of goods or taxable services. The buyer completes
and furnishes the exemption certificate, and the seller keeps
the certificate on file with other sales tax records.
An exemption certificate must be completed in its
entirety, and should:
• explain why the sale is exempt,
• be dated,
• describe the property being purchased unless
using Form PR-78SSTA, and
• contain the seller’s name and address and the
buyer’s name, address, and signature.

All Tax-Exempt Entity Exemption Certificates (sample
shown on page 15) contain an expiration date. If a
Tax-Exempt Entity Exemption Certificate is obtained by the
seller it can be used for all sales made prior to the expiration
date as provided on the certificate. There is no need for
the seller to obtain multiple copies of this Tax-Exempt Entity
Certificate.

Some exemption certificates also require a buyer to
furnish the Kansas tax account number or request a
description of the buyer’s business. The exemption
certificates for nonprofit organizations require the exempt
entity’s tax ID number.

RECORD KEEPING


The Kansas exemption certificates that begin on page
15 meet these requirements. The requirement also applies
to Form PR-78SSTA. When the appropriate certificate is
used, and all the blanks are accurately filled out, the
certificate may be accepted by a retailer.

You must keep all sales tax records, including exemption
certificates, for your current year of business and at least
three prior years. DO NOT send exemption certificates to
the Kansas Department of Revenue with your sales tax
return.

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NOTE: A completed exemption certificate must be obtained from the
customer before the sale is exempt.

BUYING
YOUR INVENTORY

Retailers from other states
As a general rule, wholesalers and buyers from other
states not registered in Kansas should use the MultiJurisdiction Exemption Certificate (ST-28M) or a PR-78SSTA
to buy items for their resale inventory. These certificates
may also be used by wholesalers to buy their inventory. If
the inventory item purchased by an out-of-state retailer is
drop shipped to a Kansas location, the out-of-state retailer
may provide to the third party vendor a Resale Exemption
Certificate from any state, or the Multi-Jurisdiction
Exemption Certificate showing registration for any state.
They may also use PR-78SSTA exemption certificate. The
law does not require that they have a Kansas registration in
order for the sale to be exempt.

Probably the most widely used sales tax exemption is
for the purchase of items intended for resale. When buying
your inventory from a wholesaler or another retailer, or
selling inventory items to another retailer, you will use a
Resale Exemption Certificate (ST-28A) or Form PR-78SSTA.
RESALE EXEMPTION CERTIFICATE REQUIREMENTS

A resale exemption certificate has two requirements:
1) the items purchased must be for resale in the usual
course of the buyer’s business; and 2) the buyer must
have a Kansas sales tax account number, except in
drop shipment situations.

Sales Tax Account Number Format
Your Kansas sales tax account number has three distinct
parts:

A retailer should make sure both requirements are
provided before accepting a Resale Exemption Certificate
from the customer. The following discussion of these
requirements will help you avoid costly errors.

004-481880059F-01

ITEMS PURCHASED MUST BE FOR RESALE


Tax Type. Each tax type administered by the Kansas
Department of Revenue has been assigned a number.
The “004” is the number assigned to Retailers’ Sales Tax.
The tax type number appears on your registration certificate
and on the sales tax return.

A buyer can use a resale exemption certificate only to
purchase the property that will be for resale and not for
personal or other nonexempt use. The property being
purchased must be of the type normally sold at retail in the
usual course of the buyer’s business. For example, a
restaurant owner cannot use an exemption certificate to
buy tires or appliances since a restaurant does not
customarily sell these items.

Account Number = EIN (Employer Identification
Number). The account number is your federal EIN,
followed by the letter “F.” The nine-digit EIN is issued by
the Internal Revenue Service to identify employers and
businesses.
If you are not required to have an EIN, the Kansas
Department of Revenue will create an account number for
you. These account numbers begin with a “K” (or an “A” if
registering online with the Kansas Business Center) followed
by eight numbers and the “F.” For example:

KANSAS SALES TAX ACCOUNT NUMBERS

The Kansas Department of Revenue assigns a sales
tax account number to you after you complete a Business
Tax Application (CR-16). The account number is printed
on your Retailers’ Sales Tax Registration Certificate and is
used to report and pay the sales tax you collect from your
customers to the Kansas Department of Revenue. It is also
the number that MUST be provided on a Resale Exemption
Certificate (ST-28A) or Form PR-78SSTA.

004-K12345678F-01
Numerical Suffix. The two-digit code at the end of
the number is for the Kansas Department of Revenue’s
use. For most taxpayers it is “01.” This code could either
denote the number of locations or number of registrations
under this EIN, “K”, or “A” number.

CAUTION: DO NOT accept a photocopy of a
customer’s sales tax registration certificate instead
of a completed exemption certificate. You cannot
exempt a sale from tax simply because the buyer is a
registered retailer.

SAMPLE COMPLETED RESALE EXEMPTION
CERTIFICATE

A common misconception is that a sales tax account
number is also a “tax-exempt” number. However, a sale is
not exempt simply because the buyer has a sales tax
number. A tax number only proves the customer is a
registered retailer; it does not certify that the item(s)
purchased are exempt (for resale or any other reason).

All the blanks on an exemption certificate should be
completed before the exemption certificate may be
accepted by a retailer (page 14). Use the Resale Exemption
Certificate illustrated in the following example as a guide.
Also, the Form PR-78SSTA may be used.

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James Adams owns a convenience store in Topeka, and buys his inventory from Wholesale Candies and Snacks.
His sales tax account number is 004-740000000F-01. The Resale Exemption Certificate he completed for his vendor
is below. He also purchased display racks from this vendor, but since he is the final consumer of the racks, they
were invoiced separately and he paid the sales tax on them.
KANSAS DEPARTMENT OF REVENUE
RESALE EXEMPTION CERTIFICATE
The undersigned purchaser certifies that the tangible personal property or service purchased from:
Seller:

Wholesale Candies
_________________________________________________________________________________________________
Business Name

Address:

123 Main Street
Topeka
KS
66612
________________________________________________________________________________________________
Street, RR, or P. O. Box

City

State

Zip

will be resold by me in the form of tangible personal property or repair service. I hereby certify that I hold valid Kansas sales

004-740000000F-01
food, gasoline, and beverages
tax registration number ____________________________
, and I am in the business of selling ___________________________
(May attach a copy of registration certificate)

_____________________________________________________________________________________________
(Description of product(s) sold; food clothing, furniture, etc.)

candy, gum, packaged snacks
Description of tangible personal property or services purchased: _________________________________________________
________________________________________________________________________________________________________
I understand and agree that if the items purchased with this certificate are used for any purpose other than retention, demonstration,
or display while being held for sale in the regular course of business, I am required to report and pay the sales tax, based upon the
purchase price of the items.

James Adams Convenience Store
Purchaser: _______________________________________________________________________________________________
Name of Kansas Retailer

2171 Southwest Blvd
Topeka,
KS
66611
Address: ________________________________________________________________________________________________
Street, RR, or P. O. Box

City

James Adams

Signature: ___________________________________________________________________

State

Zip

4/28/11

Date: ___________________

THIS CERTIFICATE MUST BE COMPLETED IN ITS ENTIRETY.
WHO MAY USE THIS CERTIFICATE? Only those businesses and organizations that are registered to collect Kansas sales tax and
provide their Kansas sales tax registration number on this form may use it to purchase inventory without tax. For additional information
see Publication KS-1520, Kansas Exemption Certificates.
Nonprofit groups or organizations exempt by law from collecting tax on their retail sales of tangible personal property (such as a
PTA or a nonprofit youth development organization) should use the exemption certificate issued to it by the Department of Revenue
when buying items for resale.
Wholesalers and buyers from other states not registered in Kansas should use the Multi-Jurisdiction Exemption Certificate,
Form ST-28M, to purchase their inventory. HOWEVER, if the inventory item purchased by an out-of-state retailer who has sales tax
nexus with Kansas is drop shipped to a Kansas location, the out-of-state retailer must provide to the third party vendor a Kansas
sales tax registration number, either on this certificate or the Multi-Jurisdiction Exemption Certificate, for the sale to be exempt. If the outof-state retailer DOES NOT have sales tax nexus with Kansas, it may provide the third party vendor a resale exemption certificate
evidencing qualification for a resale exemption, regardless of the state in which the retailer is registered for sales tax.
Contractors, subcontractors, or repairmen may not use this certificate to purchase their materials, parts, or tools. Retailer/
Contractors should use a Retailer/Contractor Exemption Certificate, Form ST-28W, to purchase their resale inventory.
WHAT PURCHASES ARE EXEMPT? Only goods or merchandise intended for resale (inventory) are exempt. Tools, equipment,
fixtures, supplies, and other items purchased for business or personal use are TAXABLE since the buyer is the final consumer of the
property.
The items purchased with this certificate must correspond to the type of business buying them. For example, a retail clothing store
may only reasonably purchase items of wearing apparel and accessories with this certificate. All other kinds of items are not usually sold
by a clothing store to their customers and, therefore, cannot be purchased with this certificate.
LABOR SERVICES. This certificate applies ONLY to items of tangible personal property. A contractor may not use an exemption
certificate to purchase the labor services of another contractor or subcontractor. Taxable labor services performed by a contractor
can ONLY be purchased without tax with a Project Exemption Certificate issued by the department or its authorized agent.
RETAINING THIS CERTIFICATE: Sellers should retain a completed copy of this certificate in their records for at least three years
from the date of sale. A seller is relieved of liability for the tax if it obtains a completed exemption certificate from a purchaser with which
the seller has a recurring business relationship. A certificate need not be renewed or updated when there is a recurring business
relationship between the buyer and seller. A recurring business relationship exists when a period of no more than 12 months elapses
between sales transactions.
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There are special rules applicable to exempt entities on
purchases for certain construction projects and repair work.
See Project Exemption Certificates (found herein).

SALES TAX EXEMPTIONS


Exception: When the state of Kansas or nonprofit
hospital operates a taxable business (such as a public
cafeteria or gift shop), or when a political subdivision
sells or furnishes utilities, “non-inventory items”
purchased for use in these taxable businesses are
taxable to the otherwise exempt group.

The sales tax exemptions authorized by Kansas law fall
into three general categories. These are: entities who are
exempt, specific items that are exempt, and uses of an
item that makes it exempt. This section explains each
category with examples and exceptions noted. Additional
information about an exemption is part of the certificate
designed for it.

A city’s gas utility must pay sales tax on office
equipment, pipe and vehicles used (even
partially) by it’s gas utility. A hospital must
pay sales tax on its restaurant equipment,
furniture, fixtures and reusable utensils purchased for its
public cafeteria.

EXEMPT ENTITIES

All of the following entities are exempt from sales tax
when making a direct purchase of goods. Most, but not all
of these entities, are also exempt when making a direct
purchase of a taxable service. The Tax-Exempt Entity
Exemption Certificate issued by the Kansas Department
of Revenue to the entity states whether its exemption is
limited to just goods or whether the exemption extends to
services as well. A direct purchase is one that is billed
directly to the exempt buyer. A retailer can require payment
by check, voucher or warrant of the exempt entity, but it is
not mandatory to do so.

Credit Cards
Many government agencies are issuing credit cards to
employees and agents who travel or make purchases while
on official business or on behalf of the agency. When the
agency is responsible for payment of credit card charges,
purchases made by employees with said credit card are
exempt from Kansas sales or use tax as a direct purchase.
When someone other than the exempt entity is responsible
for payment of the credit card charge, the purchase is not
automatically exempt. The appropriate exemption certificate
must be obtained.

• The U.S. Government, its agencies and
instrumentalities
• The state of Kansas and Kansas political subdivisions: school districts, counties, cities, etc.
• Elementary and secondary schools
• Noncommercial educational television and radio
stations
• Nonprofit blood, tissue and organ banks
• Nonprofit educational institutions
• Nonprofit 501(c)(3) historical societies
• Nonprofit hospitals
• Nonprofit 501(c)(3) museums
• Nonprofit 501(c)(3) primary care clinics
• Nonprofit 501(c)(3) religious organizations
• Nonprofit 501(c)(3) zoos
• Nonprofit youth development programs
• Parent-teacher organizations (PTA or PTO)

Exception: The rental of hotel rooms by agents or
employees of the U.S. Government while on official
business is exempt regardless of the method of payment.
Buyers who are NOT exempt
A common misconception is that all nonprofit
organizations are exempt from retailers’ sales tax. While a
nonprofit status for income tax purposes may be a
requirement for a Kansas sales tax exemption, nonprofit
organizations that have not been granted a specific sales
tax exemption must pay tax on their purchases. Groups
and organizations that are NOT EXEMPT from paying
Kansas sales tax include alumni associations, charitable
and benevolent organizations, clubs, labor unions, and
professional associations.

FOR A COMPLETE LIST OF EXEMPT ENTITIES SEE PAGE 16.

CERTIFICATES FOR TAX-EXEMPT ENTITIES


The 501(c)(3) designation refers to the section of the
Internal Revenue Code under which a nonprofit entity has
been granted an exemption from federal (and state) income
tax. Although used to define who qualifies for an exemption,
a nonprofit 501(c)(3) designation does not mean the
organization is automatically exempt from sales tax. Only
the entities listed under Kansas sales tax statutes are exempt
from paying Kansas sales tax on their direct purchases
when the appropriate exemption certificate is completed
and provided to the retailer.

Kansas law requires that all sales tax-exempt entities
obtain and utilize only exemption certificates issued by he
Kansas Department of Revenue or the SSTA exemption
certificate (PR-78SSTA). These certificates, an example
of which is on page 15, contain the exempt entity’s NAME,
ADDRESS, and TAX EXEMPTION NUMBER issued by
the Kansas Department of Revenue. Any sales tax-exempt
entity that does not have an exemption certificate may apply
online at the Kansas Department of Revenue’s website.

Although exempt by law, these entities must still support
their exemption with a completed exemption certificate. This
booklet contains exemption certificates that can be used
for each of these exempt buyers with examples and
common pitfalls to avoid or, Form PR-78SSTA can be used.

The purpose of the tax-exempt exemption certificates is
to control fraudulent tax-exempt purchases and to assist
retailers, sales people and cashiers in identifying exempt
entities and easily determining whether a claim for
exemption is valid, based on the exempt entity’s status.
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Unless the seller already has it on file, if one of the entities
listed on page 16 requests an exemption and they do not
present the Kansas Department of Revenue-issued
certificate or Form PR-78SSTA (providing the purchaser’s
Tax-Exempt Identification Number), the seller must deny
the request. The Kansas Department of Revenue asks that
you advise the purchaser to contact us for guidance.

Railroad parts, materials, and services for railroad rolling
stock used in interstate or foreign commerce
Rolling stock (trucks, buses, tractor-trailers, etc.), repair
or replacement parts, and motor fuels purchased by
ICC carriers
Warehouse machinery and equipment

Be advised that the tax-exempt entity exemption
certificate does not apply to farmers, to purchases by the
federal government, to manufacturing and processing
related exemptions, or other use-based exemptions. Also,
the tax-exempt ID number is separate and apart from a
Kansas sales tax registration number (format 004XXXXXXXXXF-0X) required of anyone (including exempt
entities) making retail sales of taxable goods, services or
admissions in Kansas.

Other items not taxed in Kansas include food stamp
purchases, Child Nutrition Act (WIC) program purchases,
lottery tickets, prescription drugs and insulin, and prosthetic
and orthopedic appliances.
Prosthetic Devices/Mobility Enhancing Equipment/
Oxygen Delivery, Kidney Dialysis Equipment and
Enteral Feeding Systems purchased by the individual
for whom prescribed in writing by a licensed physician,
chiropractor, optometrist, dentist, or podiatrist are not
taxed [K.S.A. 79-3606(r)]. Exempt prosthetic devices
include canes, crutches, eyeglasses, orthodontic braces,
prosthetic limbs and braces. Exempt mobility enhancing
equipment includes chairlifts, patient lifts, bath lifts,
stairlifts, railings; wheelchairs, and accessories attached
to motor vehicles (such as wheelchair lifts and
specialized hand or foot controls). For examples of
prosthetic devices and mobility enhancing equipment
see Appendices L and M of Governing Board rules at
streamlinedsalestax.org.
Repair and replacement parts and labor for the exempt
equipment are also not taxable if you have the original
prescription order on file. Labor charges for installation
of prescribed mobility enhancing equipment are exempt.

Sales to Exempt Entities not based in Kansas
Many of the exemptions granted under K.S.A.
79-3606 also apply to non-Kansas organizations. While a
Kansas-based organization must provide its numbered
certificate (or Form PR-78SSTA with the the Kansas
Department of Revenue-issued identification number) to
make an exempt purchase of goods or taxable services in
Kansas, many non-Kansas exempt organizations will not
have been issued an exempt entity ID number. While
encouraged to obtain a Kansas exempt entity ID number
(visit our website to apply), a non-Kansas exempt entity
(such as a school located in another state) making a direct
purchase in Kansas will simply need to complete an
exemption certificate for the retailer. The Designated or
Generic Exemption Certificate (ST-28) has been designed
for this purpose.

Sales of prosthetic and mobility enhancing equipment
to doctors for their inventory, display or use in the
performance of their duties are taxable.
NOTE: This exemption does not apply to hot tubs, whirlpools, motor
vehicles, or personal property which when installed becomes a fixture
to real property (except for stairlifts or railings).

ITEMS EXEMPT FROM SALES TAX

These items are enumerated in the law as exempt from
sales tax:

USES THAT ARE EXEMPT


Aircraft sales, parts, and repair services for carriers in
interstate or foreign commerce; and repair, replacement
and modification parts and service on all aircraft
Broadcasting equipment purchased by over-the-air free
access radio and television stations to generate their
broadcast signals
Drill bits & explosives used in the exploration of oil & gas
Drugs and pharmaceuticals sold to veterinarians
Farm machinery and equipment
Food sold to groups providing meals to the elderly and
homebound, or sold by a nonprofit 501(c)(3)
organization under a food distribution program that sells
food below cost in exchange for community service
Integrated production machinery and equipment
Materials purchased by a community action group to repair
or weatherize low-income housing
Medical supplies and equipment purchased by a nonprofit
nursing home
Public health educational materials purchased by a
nonprofit corporation for free distribution to the public

Items may also be exempt from sales tax because of
how they are used. Items that are ingredient or component
parts or are consumed in the production of property or
services that are later sold to the final consumer are exempt.
These two exemptions are applicable to many types of
businesses.
IMPORTANT: Contractors may NOT use the
Consumed in Production or the Ingredient or
Component Part exemptions to buy their materials.
Ingredient or Component Part
Items that become a part of a finished product to be
sold to the final consumer are exempt as ingredient or
component parts. In order to qualify the item must:
•
•
•
•
7

be necessary and essential to the finished product,
be used in or on the finished product,
become a physical part of the finished product, and
become an ingredient or compound part of property
or service for retail sale.

As a general rule, if the item leaves with the product and
is not returned for reuse by the manufacturer or retailer, it is
an ingredient part. Examples include, but are not limited to:

THE UTILITY EXEMPTION

Utilities may be exempt from sales tax in much the same
way as goods or services — certain buyers are exempt,
and certain uses are exempt. As used here, “utilities” are
electricity, gas, water or heat.

• paper and ink for publishing newspapers and
magazines;
• containers, labels, shipping cases, twine, and
wrapping paper which are not returned to the
manufacturer;
• food that will be prepared and sold as meals;
• paper bags, drinking straws, and paper plates used
in food sales;
• feed for commercial livestock, and
• fertilizer used in the production of plants and plant
products produced for resale.

Buyers Who Are Exempt
The exempt buyers listed on page 6 do not pay sales
tax on their utilities. However, when the state of Kansas, a
political subdivision, or a nonprofit hospital is also engaged
in a taxable business, utilities used in that business are
TAXABLE, unless the use itself qualifies for exemption.
Exempt and taxable uses for political subdivisions and
nonprofit hospitals are as follows.

To use the Ingredient or Component Part Exemption
Certificate (ST-28D) or Form PR-78SSTA, the buyer must
have a Kansas sales tax account number OR a Kansas
manufacturers’ or processors’ exemption number (see
Manufacturers and Processors herein).

City Electric Departments. Exempt: Utilities used to
generate the electricity. Taxable: Utilities used to heat, cool
and/or light the generating plant and/or administrative
offices.

Consumed in Production

Nonprofit Hospitals. Exempt: Utilities used to provide
medical services and nonprofit hospital administration;
electricity/gas to operate grills and ovens in the public
cafeteria. Taxable: Utilities used by a gift shop; water to
clean a cafeteria open to the general public.

Like ingredient or component parts, items that are
“consumed in production” must meet certain qualifications
to be exempt. The item must be:
• necessary and essential to the process,
• used in the actual process,
• consumed or dissipated by the process within one
year,
• used in the process of producing, manufacturing,
processing, mining, drilling, refining or compounding
of tangible personal property; the treatment of byproducts or wastes from any such production
process; the providing of services; the irrigation of
crops; or the storage and processing of grain; and,
• not reusable for such purposes.

Nonprofit corporations who provide nursing or foster
care for children, the elderly, or disabled may also be
exempt from paying sales tax on their utilities. To qualify,
the Board of Tax Appeals (BOTA) must first have granted
the nonprofit corporation an exemption from real estate
property tax.
Exempt Utility Uses
Electricity, gas, water and heat used as an ingredient
or component partl; consumed in production; in the irrigation
of crops; for movement in interstate commerce; for
providing taxable services; and, in the severing of oil are
exempt from sales tax.

Examples include utilities to power manufacturing
machinery, or fertilizers and insecticides used in growing
crops. Additional examples are in the Consumed in
Production Exemption Certificate (ST-28C).

NOTE: Agricultural and noncommercial residential use of electricity,
gas or heat are exempt from the state sales tax, but are subject to
any applicable local (city and/or county) sales tax in effect at the
customer’s location. Agricultural and noncommercial residential use
of water is exempt from both sale and local sales tax.

Exempt Agricultural Uses
Since many items used in agriculture are exempt either
as ingredient or component parts or are consumed in
production, these two exemptions are part of the Agricultural
Exemption Certificate (ST-28F). Form PR-78SSTA may also
be used. Other exempt agricultural uses include:

Use these general guidelines and illustrations to
determine if a portion of the utilities used by your business
is exempt. Unless part of an integrated production operation,
utilities used to light, heat, cool, clean, or maintain
equipment, buildings, or business facilities are TAXABLE.

Agricultural animal (cattle, hogs, sheep, chickens,
ostriches, etc.) and aquatic animals and plants when
used in 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 the above purposes. The purchase of
pleasure animals or pets is taxable.

Agricultural. State Exemption: Gas and electricity use
related to farming or ranching, such as the electricity
needed to operate milking machines or to run a grain auger.
(Local sales tax applies.) Water use related to farming and
ranching is exempt from both state and local sales tax.

Seeds, tree seedlings, chemicals, and services purchased
and used for the purpose of producing plants to prevent
soil erosion on land devoted to agricultural use.

Consumed in Production. The utility use must meet
the consumed in production criteria on page 8. Exempt:
Utilities used to operate tools and manufacturing
machinery. Taxable: Utilities to light, heat or cool a
nonproduction area.

Propane used for an agricultural purposes (i.e., propane
to power farm implements or to provide heat for brooder
or farrowing houses). Propane for recreational use, such
as RVs and barbecue grills, is taxable.
8

Ingredient or Component Part. The utility use must
meet the definition of an ingredient or component part as

described on page 8. Exempt: Water to make soft drinks
or other beverages. Taxable: Water used to clean vats
and brewing equipment.

IMPORTANT: When there is a change in your
“Exempt Percent,” it is your responsibility to
immediately file a revised utility exemption form with your
utility provider.

Irrigation of Crops. Exempt: Electricity or other power
sources to run an irrigation pump or water applied to
growing crops.

SPECIAL SITUATIONS

Movement in Interstate Commerce by Railroad or
Public Utility. Exempt: Electricity or gas used to pump or
push oil or gas through an interstate pipeline, provided the
pipeline is registered with the Federal Energy Regulatory
Commission. Taxable: Utilities used by non-interstate
pipelines. Utilities used to operate railroad signal lights and
switches.

CONTRACTORS
A contractor, subcontractor, or repairman (hereafter
referred to as contractor ) is any person who agrees to
furnish and install parts or materials, or performs the labor
service of installing the parts or materials for a specified
price. Contractors are considered to be the final user or
consumer of their materials and must; therefore, pay sales
tax on them when purchased from their vendors.

Noncommercial Residential. State Exempt: Gas and
electricity used in your home for nonbusiness purposes.
(Local sales tax applies). State and Local Exempt: Water
used in your home for nonbusiness purposes.
Gas and electricity used in an apartment or
condominium for nonbusiness residential
purposes are exempt from state sales tax but
local sales tax still applies. Water used in the
apartment or condominium for non-business residential
purposes is exempt from both state and local sales tax.

A retailer/contractor is a contractor who maintains an
inventory of materials. Examples of retailer/contractors
are building, electrical, and plumbing supply houses that
not only sell to the final consumer but also perform
construction or installation work.

Providing Taxable Services. To qualify, the service must
be subject to sales tax. Utilities used by those who provide
nontaxable services, such as a doctor, lawyer, accountant,
or childcare center are TAXABLE.

This distinction between a contractor and a retailer/
contractor only determines when sales tax is paid on
materials. Materials are always taxable unless purchased
with a Project Exemption Certificate (PEC).

Utilities used in hotel rooms that are occupied
by hotel guests are exempt. Utilities for
lobbies, conference rooms, hallways,
administrative offices, swimming pools, and
parking lots are taxable.

A contractor must pay sales tax on supplies and
materials when buying from the supplier. If the supplier is
an out-of-state retailer, a contractor will pay consumers’
use tax on the supplies and materials (see Compensating
Use Taxes herein). Contractors cannot use a Resale
Exemption Certificate to buy materials and supplies without
sales tax.

Severing of Oil. Exempt: Electricity or gas to power
pumps that remove oil or gas from the ground. Taxable:
Electricity or gas for lighting and other nonextraction
purposes at the pump station.

A retailer/contractor must either collect sales tax
when the merchandise is sold at retail or self-accrue
the tax due when materials are removed from its taxexempt resale inventory for a contract job (see Paying
Tax on Personal Use of Inventory herein). Retailers/
contractors will use the Contractor-Retailer Exemption
Certificate (ST-28W) to purchase their inventory (may
also use Form PR-78SSTA ).

Obtaining a Utility Exemption
To request an exemption for electricity, gas or water
used in your business you must complete Statement for
Sales Tax Exemption on Electricity, Gas or Water Furnished
Through One Meter (ST-28B). You will need to complete a
form for each utility meter on which you are requesting an
exemption. Follow these steps to obtain an exemption on
your utility.

Labor Services
The services of installing, applying, servicing,
repairing, altering, or maintaining tangible personal
property are subject to sales tax. This includes work
performed on tangible personal property that, once installed
or applied, becomes a part of real property. However, the
labor services of installing or applying are not taxable when
performed in connection with the “original construction” of a
building or facility. “Original construction” is defined as the:

1) Using the instructions and examples that accompany
the form, determine your exempt percentage. You
may need the assistance of a plumber or electrician
to complete the formula.
2) Give the original completed form to your utility
company along with all the workpapers and
documents used to compute your “Exempt Percent.”
Be sure to keep a copy of the form and your work
papers for your records.
3) The utility company may forward your exemption
request to the Kansas Department of Revenue for
review before granting the exemption.
4) Once approved, the utility will grant the exemption.

• first or initial construction of a new building or facility1,
• addition of an entire room or floor to an existing
building or facility,
• construction, reconstruction, repair, replacement,
remodeling or renovation of a residence2,
9

1

2

3

• restoration, reconstruction, or replacement of a
building, facility or utility structure damaged or
destroyed by fire, flood, tornado, lightning,
explosion, windstorm, ice loading and attendant
winds, terrorism or earthquake3,
• completion of any unfinished portion of an existing
building or facility, or
• construction, reconstruction, restoration,
replacement, or repair of a bridge or highway.

economic development project. The qualifications are
outlined in the request form PR-70b (found herein).

A facility is a mill, plant, or refinery; oil, gas, or water well; feedlot;
and a transmission and distribution line owned by a REA or municipality.
A residence includes all types of dwellings where individuals
customarily live — homes, apartments, nursing homes, etc.
A utility structure shall mean transmission and distribution lines owned
by an independent transmission company or cooperative, the Kansas
electric transmission authority or natural gas or electric public utility. A
windstorm shall mean straight line winds of at least 80 miles per hour
as determined by a recognized meteorological reporting agency or
organization.

Agent Status for Project Exemption Certificates

IMPORTANT: PECs are dated and are not
retroactive. All materials purchased and all taxable
labor services performed prior to the effective date of the
PEC or after the expiration date are taxable. Project
exemptions apply only to one specific project and expire
upon completion of that project.

Certain exempt entities may request “Agent Status” when
applying online for PECs. Agent Status, once granted, will
allow the following entities to complete the application online
and be immediately approved for a PEC. The applicant
can then print the PEC and supply it to contractors working
for them. This Agent Status authority is limited to: State of
Kansas Correctional Institutions, Kansas Political
Subdivisions, Nonprofit Hospitals and Nonprofit Schools,
and Education Institutions.

When a subcontractor is performing taxable labor
services for a general contractor, the subcontractor must
charge sales tax to the general contractor. A contractor
may NOT use a Resale Exemption Certificate to purchase
the labor services of another contractor without tax.

Project Exemption Steps
The following chronological steps illustrate how a PEC
is requested, issued and used by the project’s owner,
contractors and suppliers.

PROJECT EXEMPTION CERTIFICATES (PECs)

1) A qualifying entity (petitioner) completes a request
for project exemption by completing a paper
application (found herein) or by applying online at
ksrevenue.gov. Agent Status PECs must be
completed online in order that the petitioning authority
be able to immediately print a PEC.
2) The Kansas Department of Revenue receives and
approves or denies the request (Agent Status online
applications are approved automatically).
3) If approved, the Kansas Department of Revenue
issues a numbered PEC to the petitioner. Agent Status
– able to immediately print a PEC once the online
application is completed.
4) The petitioner furnishes the numbered PEC (or Form
PR-78SSTA that contains the PEC number issued by
the Kansas Department of Revenue) to contractors
and subcontractors for the job.
5) Contractors and Subcontractors furnish the numbers
certificate (or Form PR-78SSTA including the PEC
Number issued by the Kansas Department of
Revenue) to their suppliers.
6) Suppliers should put the certificate number on all
project invoices to verify the sale of materials and/or
labor is exempt.
7) When the project is complete, contractor(s) must
furnish the Project Completion Certification (found
herein) to the petitioner with a copy to the Kansas
Department of Revenue.
8) Contractor(s) keep all project invoices for five years.

A Project Exemption Certificate (PEC) is a numbered
document issued only by the Kansas Department of
Revenue or its authorized agent (See Agent Status herein).
As the name implies, a PEC exempts the entire project
(materials and labor) from sales tax. Two types of projects
may receive a project exemption. Projects for entities who
are exempt, and certain economic development projects.
The following exempt entities qualify to use Form
PR-76 to request a PEC or apply online for most
construction, remodel, or repair projects:
•
•
•
•
•
•
•

Kansas political subdivisions
Nonprofit hospitals
Nonprofit schools & educational institutions
Nonprofit zoos
Primary care clinics and health centers
Religious organizations
U.S. Government and its agencies

Form PR-78SSTA may also be used; however, the
purchaser must provide a the Kansas Department of
Revenue-issued PEC Number on that form.
CAUTION: The state of Kansas and its agencies
DO NOT qualify for PECs (except state of Kansas
correctional institutions including a privately
constructed correctional institution contracted for state use
and ownership). Materials purchased by contractors for a
state of Kansas project are taxable. Only direct purchases
by the state of Kansas or its agencies are sales tax exempt
– using their the Kansas Department of Revenue issued
Tax-Exempt Entity Exemption Certificate (or Form PR78SSTA containing the Tax-Exempt Entity Identification
Number issued by the Kansas Department of Revenue).

MANUFACTURERS AND PROCESSORS

Manufacturers and processors are eligible to purchase
their raw materials or parts exempt from sales tax. However,

A project may also qualify for a PEC because it is an
10

if they do not also sell to the final consumer and have a tax
account number, they will not be able to provide a Kansas
retailers’ sales tax account number that is required in order
to use the Ingredient or Component Part Exemption
Certificate (ST-28D).

When you remove merchandise from your inventory to
use personally or as a gift, you become the final consumer
or user of the item(s) and must pay sales tax. The sales tax
is based upon your cost for the item, not its retail price.
To report and pay the tax on tax exempt inventory used
for a taxable purpose, use the line or column of your sales
tax filing entitled Merchandise Consumed. Retailer/
contractors will also use this line or column to report the
cost of materials removed from a tax exempt inventory for
use on a contract job.

To remedy this situation, the Kansas Department of
Revenue issues a manufacturers’ or processors’ sales tax
exemption number to those manufacturers and processors
that never make a retail sale, and therefore do not have a
sales tax account number. Use this number on the
Ingredient or Component Part Exemption Certificate (ST28D) or Form PR-78SSTA when buying raw materials. To
obtain a manufacturers’ or processors’ sales tax exemption
number, apply online at the Kansas Department of
Revenue’s website.

WHEN IN DOUBT ...

When there is a question that is not answered in this
booklet, contact the Kansas Department of Revenue. DO
NOT GUESS. Clarification of whether a sale is taxable or
exempt will save you time in dealing with the issue in the
future and could also save you money by avoiding costly
sales tax deficiencies.

CAUTION: Manufacturers and processors who
make sales to the final user or consumer must be
registered to collect sales tax on these sales. Often
these sales are to their employees – a the sale of factory
seconds or first-quality products at discount.

Many questions can be answered by the customer
representatives in our office, or by consulting the Kansas
Department of Revenue’s Policy Information Library on our
website. However, there are unique situations that may require
an interpretation or clarification based upon the law,
regulations, and specific facts of the case. When this
happens, document the problem or question in writing and
request a Private Letter Ruling or an Opinion Letter from the
Kansas Department of Revenue. Mail or fax your request to:

WHOLESALERS

A wholesaler is a company that sells only to other
wholesalers or to retailers registered for sales tax.
A wholesaler by definition never sells to the final consumer
(retail sale). Kansas wholesalers are not required to register
with the Kansas Department of Revenue to collect sales tax.
An exemption certificate must accompany wholesale
sales. When a wholesaler sells to a Kansas retailer for
resale, the Resale Exemption Certificate (ST-28A) or
PR-78SSTA should be used. The Multi-Jurisdiction
Exemption Certificate (ST-28M) is used when a wholesaler
is buying inventory, selling to another wholesaler, or selling
to a retailer from another state (may also use Form
PR-78SSTA).

Office of Policy and Research

Kansas Department of Revenue

915 SW Harrison St., Room 230

Topeka, KS 66612-1588

Fax: 785-296-7928

You will receive a written ruling within 30 days after
your request (and any additional information necessary
for the ruling) is received.

A wholesale company that only occasionally makes retail
sales must still register to collect sales tax. To simplify sales
tax reporting in this situation, it is suggested that a separate
retail division be established within the organization from
which all retail sales are made.

IMPORTANT: Although they are published in our
Policy Information Library, Opinion Letters and
Private Letter Rulings are limited ONLY to the requesting
taxpayer and that taxpayer’s specific factual situation. They
cannot be relied upon or cited by any other person.

Sharon Jones purchases the inventory for
her clothing store without tax using a Resale
Exemption Certificate. When she takes a
blouse out of inventory for a gift and a suit
for herself, she reports her cost in these items ($70.00)
under Merchandise Consumed (line 2) of her sales tax
filing. The amount becomes a part of the net sales total on
which sales tax is due.

Policy Information Library
As a service to taxpayers our website contains a
library of policy information for all taxes administered by
the Kansas Department of Revenue. This policy library
contains the Kansas Statutes and Regulations, Revenue
Notices, Revenue Rulings and other written advice issued
by the Kansas Department of Revenue. Opinion Letters
and Private Letter Rulings are also included, but are
“scrubbed” to protect the privacy of the taxpayer — any
information that would identify the taxpayer, such as name,
address, product, etc., is blanked out.

PAYING TAX ON PERSONAL USE OF INVENTORY

All of the exemption certificates in this booklet have this
statement above the buyer’s signature:

Key Statutes and Regulations

“The undersigned purchaser understands and agrees that
if the property or services are used other than as stated
above or for any other purpose that is not exempt from sales
or compensating tax, the undersigned purchaser becomes
liable for the tax.”

The information in this guide is based on these statutes
and regulations and others cited are in the text. They are a
part of the policy library on our website.
11

K.S.A. 79-3602 – Sales tax definitions
K.S.A. 79-3603 – Taxing statute
K.S.A. 79-3606 – Exempting statute
K.S.A. 79-3651 – Exemption certificates
K.A.R. 92-19-25b – Exemption certificates
K.A.R. 92-19-66e – Project Exemption certificates

the customer provides a Kansas sales tax number or a
copy of a certificate of registration. A completed resale
exemption certificate (or Form PR-78SSTA) must also be
obtained. See Resale Exemption Certificate Requirements
on page 4.
A retailer fails to remit sales tax to the state
because the customer crossed the tax off the
bill without providing a completed exemption
certificate.

RELATED TOPICS


A retailer is still responsible for obtaining an exemption
certificate even when the customer refuses to pay the tax.
In the absence of a completed exemption certificate, the
sale is taxable, and the sales tax is due.

AUDIT ISSUES


Failure of contractors to pay tax on materials
used in a project for an exempt entity (such as a
school, nonprofit hospital, religious organization,
the federal government) that did not obtain a PEC.

Your sales tax records, including exemption certificates,
are subject to audit by the Kansas Department of Revenue.
If your exemption certificates are found to be missing or
incomplete during an audit, you have only 120 days from
notice by the Director of Taxation to obtain completed
exemption certificates for these sales. [K.S.A. 79-3609(a)].

A contractor is responsible for paying the sales tax on
all materials used in performing labor services, unless
working under a PEC-issued by the Kansas Department
of Revenue or its authorized agents (see pages 10-11).
When the exempt entity has not obtained a project
exemption number, materials purchased or furnished by
its contractor(s) are taxable.

Since our audits usually cover a three-year period, this
task can be very time-consuming. If you cannot locate the
customer or the customer refuses to comply, you may
become liable for the sales or use tax due on that sale,
plus penalty and interest.
Avoiding Common Errors. Here are some of the
most common exemption certificate errors we find
during an audit with tips on how to correct or avoid
making these mistakes.

LOCAL SALES TAX
Each Kansas county or city has the authority to levy a
local sales tax. When levied, a local sales tax rate is added
to the statewide sales tax. The resulting total is collected
from the consumer and then sent by the retailer to the
Kansas Department of Revenue. Unless otherwise noted,
a sales tax exemption exempts the sale from the state, city,
county and special taxing district sales taxes. A list of all
the combined state and local tax rates, Sales Tax Jurisdiction
Code Booklet (Pub. KS-1700) can be found on our website.

An exemption certificate is incomplete.
Completing every blank on the certificate designed for
that exemption will help to avoid most errors. All exemption
certificates must have the name of the seller, the name
and address of the purchaser, the reason it is exempt, and
be signed and dated by the purchaser.
The resale, retailer/contractor, tire excise, and dry
cleaning exemption certificates must also show a Kansas
tax registration number for that tax type. Exemption
certificates for nonprofit organizations require the exempt
entity’s tax identification number.

OUT OF STATE SALES

Kansas sales tax law applies only within the boundaries
of Kansas. When goods or merchandise are shipped or
delivered outside of Kansas (and not returned to a point in
Kansas), Kansas sales tax is not due. Out-of-state delivery
may be made by the seller, a common carrier, or through
the mail.

A resale exemption certificate was accepted that
does not show a Kansas sales tax registration
number.
A resale exemption certificate that is missing the
purchaser’s Kansas registration number is incomplete and,
therefore, not acceptable. Furthermore, a retailer cannot
accept an exemption certificate from a purchaser who does
not provide a Kansas sales tax registration number except
when the out-of-state purchaser for resale is having the
item drop shipped to a customer in Kansas. Wholesalers
and out-of-state retailers should use the Multi-Jurisdiction
Exemption Certificate (ST-28M) or Form PR-78SSTA, when
buying their resale inventory in Kansas.

Since these sales are a deduction on your sales tax
return like an exempt sale, your books and records must
show the merchandise was delivered outside Kansas.
Acceptable proof of an out-of-state sale is a:
• Waybill or bill of lading, showing delivery to another
state,
• Post office, insurance, or registry receipt,
• Trip sheet signed by the seller’s delivery agent,
showing the address and signature of the person
outside Kansas who received the merchandise.

Tax-free sales are made to a buyer that provides
only a Kansas sales tax number.

When goods or merchandise are delivered to a buyer
in Kansas, Kansas sales tax is due even though the buyer

A retailer cannot exempt a sale from tax simply because
12

• Operation of mobile stores in Kansas (example:
trucks with driver salespersons).
• Stocking inventory in a Kansas warehouse or on
consignment.
• Providing tangible personal property for lease or
rental in Kansas.
• Delivering merchandise to Kansas customers using
company vehicles or contract carriers, rather than
interstate common carriers.
• Providing or contracting for installation, repair,
construction, or other services in Kansas.
(Maintenance contracts require a Kansas retailers’
sales tax registration).

may later transport the property out of Kansas. See page
4 for a discussion of drop shipments.
NOTE: If you have established a physical presence or “nexus” in
another state, you may be required to register for that state’s sales
or use tax. See What is Nexus? herein.

COMPENSATING USE TAXES

Sales tax exemption certificates may also be used to
claim exemption from compensating use tax. This use tax
applies to purchases of goods from businesses in other
states and its purpose is to protect Kansas businesses
from unfair competition from businesses in other states
that may not charge tax. The use tax rate is the same as
the state and local sales tax rate in effect where the item is
used, stored or consumed. There are two types of use
tax: Consumers’ Compensating Use Tax and Retailers’
Compensating Use Tax.

If you are a retailer in another state, and any of the
above describes your business activity in Kansas or the
activities of your agents, you are required to register and
collect the appropriate tetailers’ dales or compensating use
tax from your Kansas customers.
A Kansas resident orders a personal
computer from an Illinois retailer, which is
shipped to him from its warehouse in St.
Louis. The Illinois retailer also maintains a
retail outlet in Kansas. This out-of-state retailer is required
to collect and remit Kansas retailers’ compensating use
tax on this sale.

Consumers’ Compensating Use Tax
Consumers’ Compensating Use Tax is due when goods
or merchandise are purchased outside Kansas for use,
storage, or consumption (not resale) in Kansas, and a
sales tax equal to the state and local sales tax rate in effect
where the item is used, stored or consumed, has not been
paid. The tax applies whether the item is shipped into
Kansas or purchased outside of Kansas and brought back
into Kansas. For Kansas businesses, use tax is due when
equipment, fixtures and supplies are purchased from
another state without tax. An alphabetical listing of all
combined state and local tax rates, see our Sales Tax
Jurisdiction Code Booklet (Pub. KS-1700) for an
alphabetical listing of all combined state and local tax rates.
Tax rates for specific addresses may be found in the online
tax rate locator. Both can be found on our website.

A Kansas resident orders furniture from a
Nebraska retailer. The retailer delivers the
furniture to her home in Kansas using its own
delivery vehicle. This Nebraska retailer is
required to register with the Kansas Department of
Revenue to collect Kansas Retailers’ Compensating Use
tax, since the delivery of the furniture into Kansas with a
company vehicle has established nexus.
Similarly, a Kansas retailer may establish “nexus” in
another state in these same ways. If any of the nexus
activities listed on the previous page describe your business
activity in another state, you should contact that state to
register to collect the sales/use tax from your customers in
those states. If you fail to register in those states, you may
become liable for the taxes that were not collected.

A Topeka Kansas hotel needs to replace its
worn out linens and room furniture. The hotel
buys them from a Texas company; sales tax
is not charged on the invoice. This hotel will
owe the compensating use tax rate in effect where the
hotel is located (Topeka) on the total delivered price
(including shipping, handling, freight or delivery charges)
of the linens and furniture.

Additional information about Kansas use taxes, including
sample completed returns for individuals and businesses
is in our Publication KS-1510, Kansas Sales and
Compensating Use Tax. All retailers operating in Kansas
should obtain a copy of this publication — available on our
website.

Retailers’ Compensating Use Tax
Out-of-state retailers collect this use tax on merchandise
they deliver or ship to their Kansas customers. Retailers in
other states are required to register and collect the Kansas
Retailers’ Compensating Use Tax from their Kansas
customers if they have a physical presence in Kansas or
have established “nexus.”

USING EXEMPTION
CERTIFICATES

What is Nexus?
Nexus is defined as a “means of connection” or a “link;”
it means you have a business presence for tax purposes.
What constitutes nexus varies from situation to situation.
Some of the ways that a business may establish nexus in
Kansas are listed below.

On the pages that follow, in alphabetical order, are the
exemption certificates currently provided by the Kansas
Department of Revenue for the specific exemptions in
Kansas sales tax law. The certificates are designed to be
reproduced directly from this book or, if you prefer, you
may download them from our website.

• Kansas business location, including an office.
• The presence in Kansas of sales or service
representatives.
13

BEFORE ACCEPTING ANY CERTIFICATE, carefully

read the exemption statement and the accompanying
explanation and instructions. Most certificates contain a
restatement of the Kansas law (K.S.A. — Kansas Statutes
Annotated), or regulation (K.A.R. — Kansas Administrative
Regulations) that established the exemption.

exemption certificate is also not complete unless the
customer supplies the appropriate tax account
numbers required by the certificate. On the resale
exemption certificate, the seller may request a copy
of the buyer’s sales tax certificate of registration.
3) Give specific descriptions.

IMPORTANT: If your customer or the purchase
does not fit the definition or the exempt examples
given in the certificate, the sale is most likely not exempt.

Be as precise as possible when describing the
property or services purchased. You may use an
itemized list, refer to an itemized invoice number, or
at the very least provide a general description of the
items. When describing a business activity, include
the principal product(s) sold or manufactured.

COMPLETING THE CERTIFICATE

Follow these three guidelines when completing any
exemption certificate.

PENALTIES FOR MISUSE


1) Print or type all information, except for the
authorized signature.

A buyer who issues an exemption certificate in order to
unlawfully avoid payment of the sales tax for business or
personal gain is guilty of a misdemeanor, and upon
conviction may be fined up to $1,000 or imprisoned for up
to a year, or both. When a buyer is found to have used a
Resale Exemption Certificate to avoid payment of the tax,
the director may also increase any penalty due on the tax
by $250 or 10 times the tax due, whichever is greater, for
each transaction where the misuse of a resale exemption
certificate occurred. [K.S.A. 79-3651(g)]

The information on the certificate must be legible
both to you and to our auditors. Do not print a
signature, although it is often helpful to print or type
the name below the signature.
2) Fill in all the blanks.
A certificate is complete only when all the requested
information is provided. Addresses must include the
street or PO box, city, state, and zip code. An

14

Kansas Department of Revenue


Sales and Use Tax Entity Exemption Certificate

The Kansas Department of Revenue certifies this entity is exempt from paying Kansas sales and/or compensating use tax as stated below.

Kansas Exemption Number: <Cert_Number>

Expiration Date: <Expire_Dt>

The tax-exempt entity understands and agrees that if the tangible personal property and/or service are used other than as stated, or for any purpose
that is not exempt from the tax, the tax exempt entity is liable for the state and local sales or use tax. The unlawful or unauthorized use of this
certificate is expressly prohibited, punishable by fine and/or imprisonment. The certificate is issued for the sole use of the exempt entity as named.

<Pet_Auth_Name>
<Address1>
<Address2>
<City_St_Zip>

EXEMPT ENTITY INFORMATION:
Authorization and scope:
•
K.S.A 79-3606(c) & (d) - Public or Private Elementary or Secondary Schools or Nonprofit Educational Institutions.
•
Exemption applies to all direct purchase, rental or lease of tangible personal property and services, except purchases of goods for human
habitation and indirect purchases by a contractor for a real property project.
Limitations:
•
Only direct purchases are exempt through the use of this certificate.
•
This entity qualifies for exemption on indirect purchases by a contractor through the issuance of a Project Exemption Certif