Session of 1998
HOUSE BILL No. 2694
By Representatives Powell, Welshimer and Mayans and Cook,
Dean, Far-
mer,
Flaharty, Gilbert, Gregory, Helgerson, Hutchins, Johnston,
Klein,
Landwehr, P. Long, Mason, Mays, Myers, Palmer, Powers,
Presta,
Samuelson, Sawyer, Sharp, Swenson, Thimesch, Vining, Wagle
and
Wells
1-22
13
AN ACT relating to sales taxation; exempting certain
sales by or to zoos;
14 amending K.S.A.
79-3603 and 79-3606 and repealing the existing
15 sections.
16
17 Be it enacted by the Legislature of the
State of Kansas:
18 Section 1. K.S.A. 79-3603 is
hereby amended to read as follows:
19 79-3603. For the privilege of engaging in
the business of selling tangible
20 personal property at retail in this state
or rendering or furnishing any of
21 the services taxable under this act, there
is hereby levied and there shall
22 be collected and paid a tax at the rate of
4.9%:
23 (a) The gross receipts
received from the sale of tangible personal
24 property at retail within this state;
25 (b) (1) the gross receipts
from intrastate telephone or telegraph serv-
26 ices and (2) the gross receipts received
from the sale of interstate tele-
27 phone or telegraph services, which (A)
originate within this state and
28 terminate outside the state and are billed
to a customer's telephone num-
29 ber or account in this state; or (B)
originate outside this state and ter-
30 minate within this state and are billed to
a customer's telephone number
31 or account in this state except that the
sale of interstate telephone or
32 telegraph service does not include: (A) Any
interstate incoming or out-
33 going wide area telephone service or wide
area transmission type service
34 which entitles the subscriber to make or
receive an unlimited number of
35 communications to or from persons having
telephone service in a speci-
36 fied area which is outside the state in
which the station provided this
37 service is located; (B) any interstate
private communications service to
38 the persons contracting for the receipt of
that service that entitles the
39 purchaser to exclusive or priority use of a
communications channel or
40 group of channels between exchanges; (C)
any value-added nonvoice
41 service in which computer processing
applications are used to act on the
42 form, content, code or protocol of the
information to be transmitted; (D)
43 any telecommunication service to a provider
of telecommunication serv-
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2
1 ices which will be used to render
telecommunications services, including
2 carrier access services; or (E) any
service or transaction defined in this
3 section among entities classified as
members of an affiliated group as
4 provided by federal law (U.S.C.
Section 1504);
5 (c) the gross receipts
from the sale or furnishing of gas, water, elec-
6 tricity and heat, which sale is not
otherwise exempt from taxation under
7 the provisions of this act, and
whether furnished by municipally or pri-
8 vately owned utilities;
9 (d) the gross receipts
from the sale of meals or drinks furnished at
10 any private club, drinking establishment,
catered event, restaurant, eating
11 house, dining car, hotel, drugstore or
other place where meals or drinks
12 are regularly sold to the public;
13 (e) the gross receipts from
the sale of admissions to any place pro-
14 viding amusement, entertainment or
recreation services including admis-
15 sions to state, county, district and local
fairs, but such tax shall not be
16 levied and collected upon the gross
receipts received from sales of ad-
17 missions to any cultural and historical
event which occurs triennially;
18 (f) the gross receipts from
the operation of any coin-operated device
19 dispensing or providing tangible personal
property, amusement or other
20 services except laundry services, whether
automatic or manually operated;
21 (g) the gross receipts from
the service of renting of rooms by hotels,
22 as defined by K.S.A. 36-501 and amendments
thereto, or by accommo-
23 dation brokers, as defined by K.S.A.
12-1692, and amendments thereto;
24 (h) the gross receipts from
the service of renting or leasing of tangible
25 personal property except such tax shall not
apply to the renting or leasing
26 of machinery, equipment or other personal
property owned by a city and
27 purchased from the proceeds of industrial
revenue bonds issued prior to
28 July 1, 1973, in accordance with the
provisions of K.S.A. 12-1740 through
29 12-1749, and amendments thereto, and any
city or lessee renting or leas-
30 ing such machinery, equipment or other
personal property purchased
31 with the proceeds of such bonds who shall
have paid a tax under the
32 provisions of this section upon sales made
prior to July 1, 1973, shall be
33 entitled to a refund from the sales tax
refund fund of all taxes paid
34 thereon;
35 (i) the gross receipts from
the rendering of dry cleaning, pressing,
36 dyeing and laundry services except laundry
services rendered through a
37 coin-operated device whether automatic or
manually operated;
38 (j) the gross receipts from
the rendering of the services of washing
39 and washing and waxing of vehicles;
40 (k) the gross receipts from
cable, community antennae and other sub-
41 scriber radio and television services;
42 (l) the gross receipts
received from the sales of tangible personal
43 property to all contractors, subcontractors
or repairmen of materials and
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3
1 supplies for use by them in erecting
structures for others, or building on,
2 or otherwise improving, altering, or
repairing real or personal property
3 of others;
4 (m) the gross receipts
received from fees and charges by public and
5 private clubs, drinking
establishments, organizations and businesses for
6 participation in sports, games and
other recreational activities, but such
7 tax shall not be levied and collected
upon the gross receipts received from:
8 (1) Fees and charges by any political
subdivision, or any youth recreation
9 organization exclusively providing
services to persons 18 years of age or
10 younger which is exempt from federal income
taxation pursuant to section
11 501(c)(3) of the federal internal revenue
code of 1986, for participation
12 in sports, games and other recreational
activities; and (2) entry fees and
13 charges for participation in a special
event or tournament sanctioned by
14 a national sporting association to which
spectators are charged an admis-
15 sion which is taxable pursuant to
subsection (e);
16 (n) the gross receipts
received from dues charged by public and pri-
17 vate clubs, drinking establishments,
organizations and businesses, pay-
18 ment of which entitles a member to the use
of facilities for recreation or
19 entertainment, but such tax shall not be
levied and collected upon the
20 gross receipts received from sales of
memberships in a nonprofit organi-
21 zation which is exempt from federal
income taxation pursuant to section
22 501 (c)(3) of the federal internal
revenue code of 1986, and whose purpose
23 is to support the operation of a
nonprofit zoo;
24 (o) the gross receipts
received from the isolated or occasional sale of
25 motor vehicles or trailers but not
including: (1) The transfer of motor
26 vehicles or trailers by a person to a
corporation solely in exchange for
27 stock securities in such corporation; or
(2) the transfer of motor vehicles
28 or trailers by one corporation to another
when all of the assets of such
29 corporation are transferred to such other
corporation; or (3) the sale of
30 motor vehicles or trailers which are
subject to taxation pursuant to the
31 provisions of K.S.A. 79-5101 et seq., and
amendments thereto, by an
32 immediate family member to another
immediate family member. For the
33 purposes of clause (3), immediate family
member means lineal ascendants
34 or descendants, and their spouses. In
determining the base for computing
35 the tax on such isolated or occasional
sale, the fair market value of any
36 motor vehicle or trailer traded in by the
purchaser to the seller may be
37 deducted from the selling price;
38 (p) the gross receipts
received for the service of installing or applying
39 tangible personal property which when
installed or applied is not being
40 held for sale in the regular course of
business, and whether or not such
41 tangible personal property when installed
or applied remains tangible
42 personal property or becomes a part of real
estate, except that no tax shall
43 be imposed upon the service of installing
or applying tangible personal
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4
1 property in connection with the
original construction of a building or
2 facility or the construction,
reconstruction, restoration, replacement or
3 repair of a bridge or highway.
4 For the purposes of
this subsection:
5 (1) ``Original
construction'' shall mean the first or initial construction
6 of a new building or facility. The
term ``original construction'' shall include
7 the addition of an entire room or
floor to any existing building or facility,
8 the completion of any unfinished
portion of any existing building or fa-
9 cility and the restoration,
reconstruction or replacement of a building or
10 facility damaged or destroyed by fire,
flood, tornado, lightning, explosion
11 or earthquake, but such term shall not
include replacement, remodeling,
12 restoration, renovation or reconstruction
under any other circumstances;
13 (2) ``building'' shall mean
only those enclosures within which individ-
14 uals customarily live or are employed, or
which are customarily used to
15 house machinery, equipment or other
property, and including the land
16 improvements immediately surrounding such
building; and
17 (3) ``facility'' shall mean a
mill, plant, refinery, oil or gas well, water
18 well, feedlot or any conveyance,
transmission or distribution line of any
19 cooperative, nonprofit, membership
corporation organized under or sub-
20 ject to the provisions of K.S.A. 17-4601 et
seq., and amendments thereto,
21 or of any municipal or quasi-municipal
corporation, including the land
22 improvements immediately surrounding such
facility;
23 (q) the gross receipts
received for the service of repairing, servicing,
24 altering or maintaining tangible personal
property, except computer soft-
25 ware described in subsection (s), which
when such services are rendered
26 is not being held for sale in the regular
course of business, and whether
27 or not any tangible personal property is
transferred in connection there-
28 with. The tax imposed by this subsection
shall be applicable to the services
29 of repairing, servicing, altering or
maintaining an item of tangible personal
30 property which has been and is fastened to,
connected with or built into
31 real property;
32 (r) the gross receipts from
fees or charges made under service or
33 maintenance agreement contracts for
services, charges for the providing
34 of which are taxable under the provisions
of subsection (p) or (q);
35 (s) the gross receipts
received from the sale of computer software,
36 and the sale of the services of modifying,
altering, updating or maintaining
37 computer software. As used in this
subsection, ``computer software''
38 means information and directions loaded
into a computer which dictate
39 different functions to be performed by the
computer. Computer software
40 includes any canned or prewritten program
which is held or existing for
41 general or repeated sale, even if the
program was originally developed
42 for a single end user as custom computer
software. The sale of computer
43 software or services does not include: (1)
The initial sale of any custom
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5
1 computer program which is originally
developed for the exclusive use of
2 a single end user; or (2) those
services rendered in the modification of
3 computer software when the
modification is developed exclusively for a
4 single end user only to the extent of
the modification and only to the
5 extent that the actual amount charged
for the modification is separately
6 stated on invoices, statements and
other billing documents provided to
7 the end user. The services of
modification, alteration, updating and main-
8 tenance of computer software shall
only include the modification, alter-
9 ation, updating and maintenance of
computer software taxable under this
10 subsection whether or not the services are
actually provided; and
11 (t) the gross receipts
received for telephone answering services, in-
12 cluding mobile phone services, beeper
services and other similar services.
13 Sec. 2. K.S.A. 79-3606 is
hereby amended to read as follows: 79-
14 3606. The following shall be exempt from
the tax imposed by this act:
15 (a) All sales of
motor-vehicle fuel or other articles upon which a sales
16 or excise tax has been paid, not subject to
refund, under the laws of this
17 state except cigarettes as defined by
K.S.A. 79-3301 and amendments
18 thereto, cereal malt beverages and malt
products as defined by K.S.A. 79-
19 3817 and amendments thereto, including
wort, liquid malt, malt syrup
20 and malt extract, which is not subject to
taxation under the provisions of
21 K.S.A. 79-41a02 and amendments thereto, and
motor vehicles as defined
22 by K.S.A. 79-1017 and amendments
thereto;
23 (b) all sales of tangible
personal property or service, including the
24 renting and leasing of tangible personal
property, purchased directly by
25 the state of Kansas, a political
subdivision thereof, other than a school or
26 educational institution, or purchased by a
public or private nonprofit hos-
27 pital or nonprofit blood, tissue or organ
bank and used exclusively for
28 state, political subdivision, hospital or
nonprofit blood, tissue or organ
29 bank purposes, except when: (1) Such state
or hospital is engaged or
30 proposes to engage in any business
specifically taxable under the provi-
31 sions of this act and such items of
tangible personal property or service
32 are used or proposed to be used in such
business, or (2) such political
33 subdivision is engaged or proposes to
engage in the business of furnishing
34 gas, water, electricity or heat to others
and such items of personal prop-
35 erty or service are used or proposed to be
used in such business;
36 (c) all sales of tangible
personal property or services, including the
37 renting and leasing of tangible personal
property, purchased directly by
38 a public or private elementary or secondary
school or public or private
39 nonprofit educational institution and used
primarily by such school or
40 institution for nonsectarian programs and
activities provided or sponsored
41 by such school or institution or in the
erection, repair or enlargement of
42 buildings to be used for such purposes. The
exemption herein provided
43 shall not apply to erection, construction,
repair, enlargement or equip-
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6
1 ment of buildings used primarily for
human habitation;
2 (d) all sales of
tangible personal property or services purchased by a
3 contractor for the purpose of
constructing, equipping, reconstructing,
4 maintaining, repairing, enlarging,
furnishing or remodeling facilities for
5 any public or private nonprofit
hospital, public or private elementary or
6 secondary school or a public or
private nonprofit educational institution,
7 which would be exempt from taxation
under the provisions of this act if
8 purchased directly by such hospital,
school or educational institution; and
9 all sales of tangible personal
property or services purchased by a contrac-
10 tor for the purpose of constructing,
equipping, reconstructing, maintain-
11 ing, repairing, enlarging, furnishing or
remodeling facilities for any polit-
12 ical subdivision of the state, the total
cost of which is paid from funds of
13 such political subdivision and which would
be exempt from taxation under
14 the provisions of this act if purchased
directly by such political subdivision.
15 Nothing in this subsection or in the
provisions of K.S.A. 12-3418 and
16 amendments thereto, shall be deemed to
exempt the purchase of any
17 construction machinery, equipment or tools
used in the constructing,
18 equipping, reconstructing, maintaining,
repairing, enlarging, furnishing
19 or remodeling facilities for any political
subdivision of the state. As used
20 in this subsection, K.S.A. 12-3418 and
79-3640, and amendments thereto,
21 ``funds of a political subdivision'' shall
mean general tax revenues, the
22 proceeds of any bonds and gifts or
grants-in-aid. Gifts shall not mean
23 funds used for the purpose of constructing,
equipping, reconstructing,
24 repairing, enlarging, furnishing or
remodeling facilities which are to be
25 leased to the donor. When any political
subdivision of the state, public or
26 private nonprofit hospital, public or
private elementary or secondary
27 school or public or private nonprofit
educational institution shall contract
28 for the purpose of constructing, equipping,
reconstructing, maintaining,
29 repairing, enlarging, furnishing or
remodeling facilities, it shall obtain
30 from the state and furnish to the
contractor an exemption certificate for
31 the project involved, and the contractor
may purchase materials for in-
32 corporation in such project. The contractor
shall furnish the number of
33 such certificate to all suppliers from whom
such purchases are made, and
34 such suppliers shall execute invoices
covering the same bearing the num-
35 ber of such certificate. Upon completion of
the project the contractor
36 shall furnish to the political subdivision,
hospital, school or educational
37 institution concerned a sworn statement, on
a form to be provided by the
38 director of taxation, that all purchases so
made were entitled to exemption
39 under this subsection. As an alternative to
the foregoing procedure, any
40 such contracting entity may apply to the
secretary of revenue for agent
41 status for the sole purpose of issuing and
furnishing project exemption
42 certificates to contractors pursuant to
rules and regulations adopted by
43 the secretary establishing conditions and
standards for the granting and
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1 maintaining of such status. All
invoices shall be held by the contractor for
2 a period of five years and shall be
subject to audit by the director of
3 taxation. If any materials purchased
under such a certificate are found
4 not to have been incorporated in the
building or other project or not to
5 have been returned for credit or the
sales or compensating tax otherwise
6 imposed upon such materials which
will not be so incorporated in the
7 building or other project reported
and paid by such contractor to the
8 director of taxation not later than
the 20th day of the month following
9 the close of the month in which it
shall be determined that such materials
10 will not be used for the purpose for which
such certificate was issued, the
11 political subdivision, hospital, school or
educational institution concerned
12 shall be liable for tax on all materials
purchased for the project, and upon
13 payment thereof it may recover the same
from the contractor together
14 with reasonable attorney fees. Any
contractor or any agent, employee or
15 subcontractor thereof, who shall use or
otherwise dispose of any materials
16 purchased under such a certificate for any
purpose other than that for
17 which such a certificate is issued without
the payment of the sales or
18 compensating tax otherwise imposed upon
such materials, shall be guilty
19 of a misdemeanor and, upon conviction
therefor, shall be subject to the
20 penalties provided for in subsection (g) of
K.S.A. 79-3615, and amend-
21 ments thereto;
22 (e) all sales of tangible
personal property or services purchased by a
23 contractor for the erection, repair or
enlargement of buildings or other
24 projects for the government of the United
States, its agencies or instru-
25 mentalities, which would be exempt from
taxation if purchased directly
26 by the government of the United States, its
agencies or instrumentalities.
27 When the government of the United States,
its agencies or instrumen-
28 talities shall contract for the erection,
repair, or enlargement of any build-
29 ing or other project, it shall obtain from
the state and furnish to the
30 contractor an exemption certificate for the
project involved, and the con-
31 tractor may purchase materials for
incorporation in such project. The
32 contractor shall furnish the number of such
certificates to all suppliers
33 from whom such purchases are made, and such
suppliers shall execute
34 invoices covering the same bearing the
number of such certificate. Upon
35 completion of the project the contractor
shall furnish to the government
36 of the United States, its agencies or
instrumentalities concerned a sworn
37 statement, on a form to be provided by the
director of taxation, that all
38 purchases so made were entitled to
exemption under this subsection. As
39 an alternative to the foregoing procedure,
any such contracting entity may
40 apply to the secretary of revenue for agent
status for the sole purpose of
41 issuing and furnishing project exemption
certificates to contractors pur-
42 suant to rules and regulations adopted by
the secretary establishing con-
43 ditions and standards for the granting and
maintaining of such status. All
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8
1 invoices shall be held by the
contractor for a period of five years and shall
2 be subject to audit by the director
of taxation. Any contractor or any agent,
3 employee or subcontractor thereof,
who shall use or otherwise dispose of
4 any materials purchased under such a
certificate for any purpose other
5 than that for which such a
certificate is issued without the payment of
6 the sales or compensating tax
otherwise imposed upon such materials,
7 shall be guilty of a misdemeanor and,
upon conviction therefor, shall be
8 subject to the penalties provided for
in subsection (g) of K.S.A. 79-3615
9 and amendments thereto;
10 (f) tangible personal
property purchased by a railroad or public utility
11 for consumption or movement directly and
immediately in interstate
12 commerce;
13 (g) sales of aircraft
including remanufactured and modified aircraft,
14 sales of aircraft repair, modification and
replacement parts and sales of
15 services employed in the remanufacture,
modification and repair of air-
16 craft sold to persons using such aircraft
and aircraft repair, modification
17 and replacement parts as certified or
licensed carriers of persons or prop-
18 erty in interstate or foreign commerce
under authority of the laws of the
19 United States or any foreign government or
sold to any foreign govern-
20 ment or agency or instrumentality of such
foreign government and all
21 sales of aircraft, aircraft parts,
replacement parts and services employed
22 in the remanufacture, modification and
repair of aircraft for use outside
23 of the United States;
24 (h) all rentals of
nonsectarian textbooks by public or private elemen-
25 tary or secondary schools;
26 (i) the lease or rental of
all films, records, tapes, or any type of sound
27 or picture transcriptions used by motion
picture exhibitors;
28 (j) meals served without
charge or food used in the preparation of
29 such meals to employees of any restaurant,
eating house, dining car, hotel,
30 drugstore or other place where meals or
drinks are regularly sold to the
31 public if such employees' duties are
related to the furnishing or sale of
32 such meals or drinks;
33 (k) any motor vehicle,
semitrailer or pole trailer, as such terms are
34 defined by K.S.A. 8-126 and amendments
thereto, or aircraft sold and
35 delivered in this state to a bona fide
resident of another state, which motor
36 vehicle, semitrailer, pole trailer or
aircraft is not to be registered or based
37 in this state and which vehicle,
semitrailer, pole trailer or aircraft will not
38 remain in this state more than 10 days;
39 (l) all isolated or
occasional sales of tangible personal property, serv-
40 ices, substances or things, except isolated
or occasional sale of motor
41 vehicles specifically taxed under the
provisions of subsection (o) of K.S.A.
42 79-3603 and amendments thereto;
43 (m) all sales of tangible
personal property which become an ingre-
HB 2694
9
1 dient or component part of tangible
personal property or services pro-
2 duced, manufactured or compounded for
ultimate sale at retail within or
3 without the state of Kansas; and any
such producer, manufacturer or
4 compounder may obtain from the
director of taxation and furnish to the
5 supplier an exemption certificate
number for tangible personal property
6 for use as an ingredient or component
part of the property or services
7 produced, manufactured or
compounded;
8 (n) all sales of
tangible personal property which is consumed in the
9 production, manufacture, processing,
mining, drilling, refining or com-
10 pounding of tangible personal property, the
treating of by-products or
11 wastes derived from any such production
process, the providing of serv-
12 ices or the irrigation of crops for
ultimate sale at retail within or without
13 the state of Kansas; and any purchaser of
such property may obtain from
14 the director of taxation and furnish to the
supplier an exemption certifi-
15 cate number for tangible personal property
for consumption in such pro-
16 duction, manufacture, processing, mining,
drilling, refining, compound-
17 ing, treating, irrigation and in providing
such services;
18 (o) all sales of animals,
fowl and aquatic plants and animals, the pri-
19 mary purpose of which is use in agriculture
or aquaculture, as defined in
20 K.S.A. 47-1901, and amendments thereto, the
production of food for
21 human consumption, the production of
animal, dairy, poultry or aquatic
22 plant and animal products, fiber or fur, or
the production of offspring for
23 use for any such purpose or purposes;
24 (p) all sales of drugs, as
defined by K.S.A. 65-1626 and amendments
25 thereto, dispensed pursuant to a
prescription order, as defined by K.S.A.
26 65-1626 and amendments thereto, by a
licensed practitioner;
27 (q) all sales of insulin
dispensed by a person licensed by the state
28 board of pharmacy to a person for treatment
of diabetes at the direction
29 of a person licensed to practice medicine
by the board of healing arts;
30 (r) all sales of prosthetic
and orthopedic appliances prescribed in
31 writing by a person licensed to practice
the healing arts, dentistry or
32 optometry. For the purposes of this
subsection, the term prosthetic and
33 orthopedic appliances means any apparatus,
instrument, device, or equip-
34 ment used to replace or substitute for any
missing part of the body; used
35 to alleviate the malfunction of any part of
the body; or used to assist any
36 disabled person in leading a normal life by
facilitating such person's mo-
37 bility; such term shall include accessories
attached or to be attached to
38 motor vehicles, but such term shall not
include motor vehicles or personal
39 property which when installed becomes a
fixture to real property;
40 (s) all sales of tangible
personal property or services purchased di-
41 rectly by a groundwater management district
organized or operating un-
42 der the authority of K.S.A. 82a-1020 et
seq. and amendments thereto,
43 which property or services are used in the
operation or maintenance of
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10
1 the district;
2 (t) all sales of farm
machinery and equipment or aquaculture ma-
3 chinery and equipment, repair and
replacement parts therefor and serv-
4 ices performed in the repair and
maintenance of such machinery and
5 equipment. For the purposes of this
subsection the term ``farm machinery
6 and equipment or aquaculture
machinery and equipment'' shall include
7 machinery and equipment used in the
operation of Christmas tree farm-
8 ing but shall not include any
passenger vehicle, truck, truck tractor, trailer,
9 semitrailer or pole trailer, other
than a farm trailer, as such terms are
10 defined by K.S.A. 8-126 and amendments
thereto. Each purchaser of
11 farm machinery and equipment or aquaculture
machinery and equipment
12 exempted herein must certify in writing on
the copy of the invoice or
13 sales ticket to be retained by the seller
that the farm machinery and
14 equipment or aquaculture machinery and
equipment purchased will be
15 used only in farming, ranching or
aquaculture production. Farming or
16 ranching shall include the operation of a
feedlot and farm and ranch work
17 for hire and the operation of a
nursery;
18 (u) all leases or rentals of
tangible personal property used as a dwell-
19 ing if such tangible personal property is
leased or rented for a period of
20 more than 28 consecutive days;
21 (v) all sales of food
products to any contractor for use in preparing
22 meals for delivery to homebound elderly
persons over 60 years of age and
23 to homebound disabled persons or to be
served at a group-sitting at a
24 location outside of the home to otherwise
homebound elderly persons
25 over 60 years of age and to otherwise
homebound disabled persons, as
26 all or part of any food service project
funded in whole or in part by
27 government or as part of a private
nonprofit food service project available
28 to all such elderly or disabled persons
residing within an area of service
29 designated by the private nonprofit
organization, and all sales of food
30 products for use in preparing meals for
consumption by indigent or home-
31 less individuals whether or not such meals
are consumed at a place des-
32 ignated for such purpose;
33 (w) all sales of natural gas,
electricity, heat and water delivered
34 through mains, lines or pipes: (1) To
residential premises for noncom-
35 mercial use by the occupant of such
premises; (2) for agricultural use and
36 also, for such use, all sales of propane
gas; (3) for use in the severing of
37 oil; and (4) to any property which is
exempt from property taxation pur-
38 suant to K.S.A. 79-201b Second
through Sixth. As used in this paragraph,
39 ``severing'' shall have the meaning
ascribed thereto by subsection (k) of
40 K.S.A. 79-4216, and amendments thereto;
41 (x) all sales of propane gas,
LP-gas, coal, wood and other fuel sources
42 for the production of heat or lighting for
noncommercial use of an oc-
43 cupant of residential premises;
HB 2694
11
1 (y) all sales of
materials and services used in the repairing, servicing,
2 altering, maintaining, manufacturing,
remanufacturing, or modification of
3 railroad rolling stock for use in
interstate or foreign commerce under
4 authority of the laws of the United
States;
5 (z) all sales of
tangible personal property and services purchased di-
6 rectly by a port authority or by a
contractor therefor as provided by the
7 provisions of K.S.A. 12-3418 and
amendments thereto;
8 (aa) all sales of
materials and services applied to equipment which is
9 transported into the state from
without the state for repair, service, al-
10 teration, maintenance, remanufacture or
modification and which is sub-
11 sequently transported outside the state for
use in the transmission of
12 liquids or natural gas by means of pipeline
in interstate or foreign com-
13 merce under authority of the laws of the
United States;
14 (bb) all sales of used mobile
homes or manufactured homes. As used
15 in this subsection: (1) ``Mobile homes''
and ``manufactured homes'' shall
16 have the meanings ascribed thereto by
K.S.A. 58-4202 and amendments
17 thereto; and (2) ``sales of used mobile
homes or manufactured homes''
18 means sales other than the original retail
sale thereof;
19 (cc) all sales of tangible
personal property or services purchased for
20 the purpose of and in conjunction with
constructing, reconstructing, en-
21 larging or remodeling a business or retail
business which meets the
22 requirements established in K.S.A.
74-50,115 and amendments thereto,
23 and the sale and installation of machinery
and equipment purchased for
24 installation at any such business or retail
business. When a person shall
25 contract for the construction,
reconstruction, enlargement or remodeling
26 of any such business or retail business,
such person shall obtain from the
27 state and furnish to the contractor an
exemption certificate for the project
28 involved, and the contractor may purchase
materials, machinery and
29 equipment for incorporation in such
project. The contractor shall furnish
30 the number of such certificates to all
suppliers from whom such purchases
31 are made, and such suppliers shall execute
invoices covering the same
32 bearing the number of such certificate.
Upon completion of the project
33 the contractor shall furnish to the owner
of the business or retail business
34 a sworn statement, on a form to be provided
by the director of taxation,
35 that all purchases so made were entitled to
exemption under this subsec-
36 tion. All invoices shall be held by the
contractor for a period of five years
37 and shall be subject to audit by the
director of taxation. Any contractor
38 or any agent, employee or subcontractor
thereof, who shall use or oth-
39 erwise dispose of any materials, machinery
or equipment purchased un-
40 der such a certificate for any purpose
other than that for which such a
41 certificate is issued without the payment
of the sales or compensating tax
42 otherwise imposed thereon, shall be guilty
of a misdemeanor and, upon
43 conviction therefor, shall be subject to
the penalties provided for in sub-
HB 2694
12
1 section (g) of K.S.A. 79-3615 and
amendments thereto. As used in this
2 subsection, ``business'' and ``retail
business'' have the meanings respec-
3 tively ascribed thereto by K.S.A.
74-50,114 and amendments thereto;
4 (dd) all sales of
tangible personal property purchased with food
5 stamps issued by the United States
department of agriculture;
6 (ee) all sales of
lottery tickets and shares made as part of a lottery
7 operated by the state of Kansas;
8 (ff) on and after July
1, 1988, all sales of new mobile homes or man-
9 ufactured homes to the extent of 40%
of the gross receipts, determined
10 without regard to any trade-in allowance,
received from such sale. As used
11 in this subsection, ``mobile homes'' and
``manufactured homes'' shall have
12 the meanings ascribed thereto by K.S.A.
58-4202 and amendments
13 thereto;
14 (gg) all sales of tangible
personal property purchased in accordance
15 with vouchers issued pursuant to the
federal special supplemental food
16 program for women, infants and
children;
17 (hh) all sales of medical
supplies and equipment purchased directly
18 by a nonprofit skilled nursing home or
nonprofit intermediate nursing
19 care home, as defined by K.S.A. 39-923, and
amendments thereto, for
20 the purpose of providing medical services
to residents thereof. This ex-
21 emption shall not apply to tangible
personal property customarily used
22 for human habitation purposes;
23 (ii) all sales of tangible
personal property purchased directly by a non-
24 profit organization for nonsectarian
comprehensive multidiscipline youth
25 development programs and activities
provided or sponsored by such or-
26 ganization. This exemption shall not apply
to tangible personal property
27 customarily used for human habitation
purposes;
28 (jj) all sales of tangible
personal property or services, including the
29 renting and leasing of tangible personal
property, purchased directly on
30 behalf of a community-based mental
retardation facility or mental health
31 center organized pursuant to K.S.A. 19-4001
et seq., and amendments
32 thereto, and licensed in accordance with
the provisions of K.S.A. 75-
33 3307b and amendments thereto. This
exemption shall not apply to tan-
34 gible personal property customarily used
for human habitation purposes;
35 (kk) on and after January 1,
1989, all sales of machinery and equip-
36 ment used directly and primarily for the
purposes of manufacturing, as-
37 sembling, processing, finishing, storing,
warehousing or distributing ar-
38 ticles of tangible personal property in
this state intended for resale by a
39 manufacturing or processing plant or
facility or a storage, warehousing or
40 distribution facility:
41 (1) For purposes of this
subsection, machinery and equipment shall
42 be deemed to be used directly and primarily
in the manufacture, assem-
43 blage, processing, finishing, storing,
warehousing or distributing of tan-
HB 2694
13
1 gible personal property where such
machinery and equipment is used
2 during a manufacturing, assembling,
processing or finishing, storing,
3 warehousing or distributing
operation:
4 (A) To effect a direct
and immediate physical change upon the tangible
5 personal property;
6 (B) to guide or measure
a direct and immediate physical change upon
7 such property where such function is
an integral and essential part of
8 tuning, verifying or aligning the
component parts of such property;
9 (C) to test or measure
such property where such function is an in-
10 tegral part of the production flow or
function;
11 (D) to transport, convey or
handle such property during the manu-
12 facturing, processing, storing, warehousing
or distribution operation at
13 the plant or facility; or
14 (E) to place such property in
the container, package or wrapping in
15 which such property is normally sold or
transported.
16 (2) For purposes of this
subsection ``machinery and equipment used
17 directly and primarily'' shall include, but
not be limited to:
18 (A) Mechanical machines or
major components thereof contributing
19 to a manufacturing, assembling or finishing
process;
20 (B) molds and dies that
determine the physical characteristics of the
21 finished product or its packaging
material;
22 (C) testing equipment to
determine the quality of the finished prod-
23 uct;
24 (D) computers and related
peripheral equipment that directly control
25 or measure the manufacturing process or
which are utilized for engi-
26 neering of the finished product; and
27 (E) computers and related
peripheral equipment utilized for research
28 and development and product design.
29 (3) ``Machinery and equipment
used directly and primarily'' shall not
30 include:
31 (A) Hand tools;
32 (B) machinery, equipment and
tools used in maintaining and repair-
33 ing any type of machinery and
equipment;
34 (C) transportation equipment
not used in the manufacturing, assem-
35 bling, processing, furnishing, storing,
warehousing or distributing process
36 at the plant or facility;
37 (D) office machines and
equipment including computers and related
38 peripheral equipment not directly and
primarily used in controlling or
39 measuring the manufacturing process;
40 (E) furniture and buildings;
and
41 (F) machinery and equipment
used in administrative, accounting,
42 sales or other such activities of the
business;
43 (ll) all sales of educational
materials purchased for distribution to the
HB 2694
14
1 public at no charge by a nonprofit
corporation organized for the purpose
2 of encouraging, fostering and
conducting programs for the improvement
3 of public health;
4 (mm) all sales of seeds
and tree seedlings; fertilizers, insecticides,
5 herbicides, germicides, pesticides
and fungicides; and services, purchased
6 and used for the purpose of producing
plants in order to prevent soil
7 erosion on land devoted to
agricultural use;
8 (nn) except as
otherwise provided in this act, all sales of services ren-
9 dered by an advertising agency or
licensed broadcast station or any mem-
10 ber, agent or employee thereof;
11 (oo) all sales of tangible
personal property purchased by a community
12 action group or agency for the exclusive
purpose of repairing or weath-
13 erizing housing occupied by low income
individuals;
14 (pp) all sales of drill bits
and explosives actually utilized in the explo-
15 ration and production of oil or gas;
16 (qq) all sales of tangible
personal property and services purchased by
17 a nonprofit museum or historical society or
any combination thereof, in-
18 cluding a nonprofit organization which is
organized for the purpose of
19 stimulating public interest in the
exploration of space by providing edu-
20 cational information, exhibits and
experiences, which is exempt from fed-
21 eral income taxation pursuant to section
501(c)(3) of the federal internal
22 revenue code of 1986;
23 (rr) all sales of tangible
personal property which will admit the pur-
24 chaser thereof to any annual event
sponsored by a nonprofit organization
25 which is exempt from federal income
taxation pursuant to section
26 501(c)(3) of the federal internal revenue
code of 1986;
27 (ss) all sales of tangible
personal property and services purchased by
28 a public broadcasting station licensed by
the federal communications
29 commission as a noncommercial educational
television or radio station;
30 (tt) all sales of tangible
personal property and services purchased by
31 or on behalf of a not-for-profit
corporation which is exempt from federal
32 income taxation pursuant to section
501(c)(3) of the federal internal rev-
33 enue code of 1986, for the sole purpose of
constructing a Kansas Korean
34 War memorial;
35 (uu) all sales of tangible
personal property and services purchased by
36 or on behalf of any rural volunteer
fire-fighting organization for use ex-
37 clusively in the performance of its duties
and functions;
38 (vv) all sales of tangible
personal property purchased by any of the
39 following organizations which are exempt
from federal income taxation
40 pursuant to section 501 (c)(3) of the
federal internal revenue code of
41 1986, for the following purposes, and all
sales of any such property by or
42 on behalf of any such organization for any
such purpose:
43 (1) The American Heart
Association, Kansas Affiliate, Inc. for the
HB 2694
15
1 purposes of providing education,
training, certification in emergency car-
2 diac care, research and other related
services to reduce disability and
3 death from cardiovascular diseases
and stroke;
4 (2) the Kansas Alliance
for the Mentally Ill, Inc. for the purpose of
5 advocacy for persons with mental
illness and to education, research and
6 support for their families;
7 (3) the Kansas Mental
Illness Awareness Council for the purposes of
8 advocacy for persons who are mentally
ill and to education, research and
9 support for them and their
families;
10 (4) the American Diabetes
Association Kansas Affiliate, Inc. for the
11 purpose of eliminating diabetes through
medical research, public edu-
12 cation focusing on disease prevention and
education, patient education
13 including information on coping with
diabetes, and professional education
14 and training;
15 (5) the American Lung
Association of Kansas, Inc. for the purpose of
16 eliminating all lung diseases through
medical research, public education
17 including information on coping with lung
diseases, professional educa-
18 tion and training related to lung disease
and other related services to
19 reduce the incidence of disability and
death due to lung disease;
20 (6) the Kansas chapters of
the Alzheimer's Disease and Related Dis-
21 orders Association, Inc. for the purpose of
providing assistance and sup-
22 port to persons in Kansas with Alzheimer's
disease, and their families and
23 caregivers; and
24 (ww) all sales of tangible
personal property purchased by the Habitat
25 for Humanities
Humanity for the exclusive use of being incorporated
26 within a housing project constructed by
such organization; and
27 (xx) all sales of tangible
personal property and services purchased by
28 a nonprofit zoo which is exempt from
federal income taxation pursuant
29 to section 501 (c)(3) of the federal
internal revenue code of 1986, and all
30 sales of tangible personal property or
services purchased by a contractor
31 for the purpose of constructing,
equipping, reconstructing, maintaining,
32 repairing, enlarging, furnishing or
remodeling facilities for any nonprofit
33 zoo which would be exempt from taxation
under the provisions of this
34 section if purchased directly by such
nonprofit zoo. Nothing in this sub-
35 section shall be deemed to exempt the
purchase of any construction ma-
36 chinery, equipment or tools used in the
constructing, equipping, recon-
37 structing, maintaining, repairing,
enlarging, furnishing or remodeling
38 facilities for any nonprofit zoo. When
any nonprofit zoo shall contract for
39 the purpose of constructing, equipping,
reconstructing, maintaining, re-
40 pairing, enlarging, furnishing or
remodeling facilities, it shall obtain from
41 the state and furnish to the contractor
an exemption certificate for the
42 project involved, and the contractor may
purchase materials for incor-
43 poration in such project. The contractor
shall furnish the number of such
HB 2694
16
1 certificate to all suppliers from
whom such purchases are made, and such
2 suppliers shall execute invoices
covering the same bearing the number of
3 such certificate. Upon completion
of the project the contractor shall fur-
4 nish to the nonprofit zoo
concerned a sworn statement, on a form to be
5 provided by the director of
taxation, that all purchases so made were
6 entitled to exemption under this
subsection. All invoices shall be held by
7 the contractor for a period of
five years and shall be subject to audit by
8 the director of taxation. If any
materials purchased under such a certifi-
9 cate are found not to have been
incorporated in the building or other
10 project or not to have been returned for
credit or the sales or compensating
11 tax otherwise imposed upon such
materials which will not be so incor-
12 porated in the building or other project
reported and paid by such con-
13 tractor to the director of taxation not
later than the 20th day of the month
14 following the close of the month in
which it shall be determined that such
15 materials will not be used for the
purpose for which such certificate was
16 issued, the nonprofit zoo concerned
shall be liable for tax on all materials
17 purchased for for the project, and upon
payment thereof it may recover
18 the same from the contractor together
with reasonable attorney fees. Any
19 contractor or any agent, employee or
subcontractor thereof, who shall use
20 or otherwise dispose of any materials
purchased under such a certificate
21 for any purpose other than that for
which such a certificate is issued
22 without the payment of the sales or
compensating tax otherwise imposed
23 upon such materials, shall be guilty of
a misdemeanor and, upon convic-
24 tion therefor, shall be subject to the
penalties provided for in subsection
25 (g) of K.S.A. 79-3615, and amendments
thereto.
26 Sec. 3. K.S.A. 79-3603 and
79-3606 are hereby repealed.
27 Sec. 4. This act shall take
effect and be in force from and after its
28 publication in the statute book.
29