(a) For purchases
of tangible personal property to qualify for exemption under K.S.A. 1986 Supp.
79-3606(m) as
amended by L. 1987, Ch. 292, Sec. 32, as further amended by L. 1987, Ch. 64,
Sec. 1 and amendments, the following requirements must be met:
(1) The tangible personal property shall be
essential or necessary to the tangible personal property or service produced,
manufactured or compounded;
(2)
the tangible personal property shall be actually used in or on the tangible
personal property or service produced, manufactured or compound-ed;
(3) the tangible personal property shall
become an integral and material part of the tangible personal property or
service produced, manufactured or compounded; and
(4) the tangible personal property must
become an ingredient or compound part of tangible personal property or service
for ultimate sale at retail.
The identity of the buyer, seller or the item is immaterial.
Whether the purchase qualifies for exemption shall be determined by how the
item is used in the production or processing activity. An item may be taxable
for one use and exempt for another use, even though purchased by the same
consumer. Each transaction shall be separately measured against the statutes
and regulations to determine the taxability of the transaction.
(b) For the
purpose of determining whether tangible personal property is an ingredient or
component part of a service, the term "service" refers only to taxable services
enumerated under the sales tax act. Each person providing a nontaxable service
shall pay sales tax on all articles of tangible personal property and services
purchased to provide the nontaxable service, and may not claim an exemption
from sales tax.
(c) "Integral and
material" means:
(1) The physical
incorporation of two or more parts or elements by chemical or mechanical
process in a manufacturing, production or compounding process, the result of
which renders a third item or product separate and distinct from the
constituent parts or elements; or
(2) an attachment or part that is so
necessary and essential to the final product that, if omitted, would render the
final product valueless for its intended purpose.
Except as provided in paragraph (d), tangible personal property
that is important to the production process but does not become an integral and
material or physical part of the tangible personal property for sale at retail
is not exempt from sales tax.
(d) Each container, wrapper or other shipping
or handling material actually accompanying the product sold is not subject to
sales tax.
(e) Each retailer
purchasing a container or other shipping or handling material for consumption
which is not for resale as described in paragraph (d) is subject to sales tax.
Each purchase by a retailer of a container or other shipping or handling
material in which title remains with the retailer when the tangible personal
property contained therein is sold by the retailer, or where the container or
other shipping or handling materials are to be returned to the retailer by the
consumer of the tangible personal property, is subject to sales tax.
(f) Each purchase of a container, wrapper or
other shipping or handling material by a retailer using the container, wrapper
or other handling material to provide nontaxable services is deemed to be
consumed by the service provider and is subject to tax.
Notes
Kan. Admin. Regs. §
92-19-54
Authorized by
K.S.A. 79-3618; implementing K.S.A. 1986 Supp.
79-3602, K.S.A. 1986 Supp.
79-3606 as amended by L. 1987, Ch.
292, Sec. 32, as further amended by L. 1987, Ch. 64, Sec. 1; effective May 1,
1988.
