As Amended by House Committee
Session of 1999
HOUSE BILL No. 2059
By Committee on Taxation
1-20
10 AN ACT relating to sales taxation; exempting certain construction labor
11 services concerning exemptions therefrom; amending K.S.A. 1998
12 Supp. 79-3603 and 79-3606 and repealing the existing section
13 sections.
14
15 Be it enacted by the Legislature of the State of Kansas:
16 Section 1. K.S.A. 1998 Supp. 79-3603 is hereby amended to read as
17 follows: 79-3603. For the privilege of engaging in the business of selling
18 tangible personal property at retail in this state or rendering or furnishing
19 any of the services taxable under this act, there is hereby levied and there
20 shall be collected and paid a tax at the rate of 4.9% upon:
21 (a) The gross receipts received from the sale of tangible personal
22 property at retail within this state;
23 (b) (1) the gross receipts from intrastate telephone or telegraph serv-
24 ices and (2) the gross receipts received from the sale of interstate tele-
25 phone or telegraph services, which (A) originate within this state and
26 terminate outside the state and are billed to a customer's telephone num-
27 ber or account in this state; or (B) originate outside this state and ter-
28 minate within this state and are billed to a customer's telephone number
29 or account in this state except that the sale of interstate telephone or
30 telegraph service does not include: (A) Any interstate incoming or out-
31 going wide area telephone service or wide area transmission type service
32 which entitles the subscriber to make or receive an unlimited number of
33 communications to or from persons having telephone service in a speci-
34 fied area which is outside the state in which the station provided this
35 service is located; (B) any interstate private communications service to
36 the persons contracting for the receipt of that service that entitles the
37 purchaser to exclusive or priority use of a communications channel or
38 group of channels between exchanges; (C) any value-added nonvoice
39 service in which computer processing applications are used to act on the
40 form, content, code or protocol of the information to be transmitted; (D)
41 any telecommunication service to a provider of telecommunication serv-
42 ices which will be used to render telecommunications services, including
43 carrier access services; or (E) any service or transaction defined in this
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1 section among entities classified as members of an affiliated group as
2 provided by federal law (U.S.C. Section 1504). For the purposes of this
3 subsection the term gross receipts does not include purchases of tele-
4 phone, telegraph or telecommunications using a prepaid telephone call-
5 ing card or pre-paid authorization number. As used in this subsection, a
6 pre-paid telephone calling card or pre-paid authorization number means
7 the right to exclusively make telephone calls, paid for in advance, with
8 the prepaid value measured in minutes or other time units, that enables
9 the origination of calls using an access number or authorization code or
10 both, whether manually or electronically dialed;
11 (c) the gross receipts from the sale or furnishing of gas, water, elec-
12 tricity and heat, which sale is not otherwise exempt from taxation under
13 the provisions of this act, and whether furnished by municipally or pri-
14 vately owned utilities;
15 (d) the gross receipts from the sale of meals or drinks furnished at
16 any private club, drinking establishment, catered event, restaurant, eating
17 house, dining car, hotel, drugstore or other place where meals or drinks
18 are regularly sold to the public;
19 (e) the gross receipts from the sale of admissions to any place pro-
20 viding amusement, entertainment or recreation services including admis-
21 sions to state, county, district and local fairs, but such tax shall not be
22 levied and collected upon the gross receipts received from sales of ad-
23 missions to any cultural and historical event which occurs triennially;
24 (f) the gross receipts from the operation of any coin-operated device
25 dispensing or providing tangible personal property, amusement or other
26 services except laundry services, whether automatic or manually operated;
27 (g) the gross receipts from the service of renting of rooms by hotels,
28 as defined by K.S.A. 36-501 and amendments thereto, or by accommo-
29 dation brokers, as defined by K.S.A. 12-1692, and amendments thereto;
30 (h) the gross receipts from the service of renting or leasing of tangible
31 personal property except such tax shall not apply to the renting or leasing
32 of machinery, equipment or other personal property owned by a city and
33 purchased from the proceeds of industrial revenue bonds issued prior to
34 July 1, 1973, in accordance with the provisions of K.S.A. 12-1740 through
35 12-1749, and amendments thereto, and any city or lessee renting or leas-
36 ing such machinery, equipment or other personal property purchased
37 with the proceeds of such bonds who shall have paid a tax under the
38 provisions of this section upon sales made prior to July 1, 1973, shall be
39 entitled to a refund from the sales tax refund fund of all taxes paid
40 thereon;
41 (i) the gross receipts from the rendering of dry cleaning, pressing,
42 dyeing and laundry services except laundry services rendered through a
43 coin-operated device whether automatic or manually operated;
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1 (j) the gross receipts from the rendering of the services of washing
2 and washing and waxing of vehicles;
3 (k) the gross receipts from cable, community antennae and other sub-
4 scriber radio and television services;
5 (l) the gross receipts received from the sales of tangible personal
6 property to all contractors, subcontractors or repairmen of materials and
7 supplies for use by them in erecting structures for others, or building on,
8 or otherwise improving, altering, or repairing real or personal property
9 of others;
10 (m) the gross receipts received from fees and charges by public and
11 private clubs, drinking establishments, organizations and businesses for
12 participation in sports, games and other recreational activities, but such
13 tax shall not be levied and collected upon the gross receipts received from:
14 (1) Fees and charges by any political subdivision, by any organization
15 exempt from property taxation pursuant to paragraph Ninth of K.S.A. 79-
16 201, and amendments thereto, or by any youth recreation organization
17 exclusively providing services to persons 18 years of age or younger which
18 is exempt from federal income taxation pursuant to section 501(c)(3) of
19 the federal internal revenue code of 1986, for participation in sports,
20 games and other recreational activities; and (2) entry fees and charges for
21 participation in a special event or tournament sanctioned by a national
22 sporting association to which spectators are charged an admission which
23 is taxable pursuant to subsection (e);
24 (n) the gross receipts received from dues charged by public and pri-
25 vate clubs, drinking establishments, organizations and businesses, pay-
26 ment of which entitles a member to the use of facilities for recreation or
27 entertainment, but such tax shall not be levied and collected upon the
28 gross receipts received from: (1) Dues charged by any organization ex-
29 empt from property taxation pursuant to paragraphs Eighth and Ninth of
30 K.S.A. 79-201, and amendments thereto; and (2) sales of memberships
31 in a nonprofit organization which is exempt from federal income taxation
32 pursuant to section 501 (c)(3) of the federal internal revenue code of
33 1986, and whose purpose is to support the operation of a nonprofit zoo;
34 (o) the gross receipts received from the isolated or occasional sale of
35 motor vehicles or trailers but not including: (1) The transfer of motor
36 vehicles or trailers by a person to a corporation solely in exchange for
37 stock securities in such corporation; or (2) the transfer of motor vehicles
38 or trailers by one corporation to another when all of the assets of such
39 corporation are transferred to such other corporation; or (3) the sale of
40 motor vehicles or trailers which are subject to taxation pursuant to the
41 provisions of K.S.A. 79-5101 et seq., and amendments thereto, by an
42 immediate family member to another immediate family member. For the
43 purposes of clause (3), immediate family member means lineal ascendants
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1 or descendants, and their spouses. In determining the base for computing
2 the tax on such isolated or occasional sale, the fair market value of any
3 motor vehicle or trailer traded in by the purchaser to the seller may be
4 deducted from the selling price;
5 (p) the gross receipts received for the service of installing or applying
6 tangible personal property which when installed or applied is not being
7 held for sale in the regular course of business, and whether or not such
8 tangible personal property when installed or applied remains tangible
9 personal property or becomes a part of real estate, except that no tax shall
10 be imposed upon the service of installing or applying tangible personal
11 property in connection with the original construction of a building or
12 facility, the original construction, reconstruction, restoration, remodeling,
13 renovation, repair or replacement of a residence building or facility or
14 the construction, reconstruction, restoration, replacement or repair of a
15 bridge or highway.
16 For the purposes of this subsection:
17 (1) "Original construction" shall mean the first or initial construction
18 of a new building or facility. The term "original construction" shall include
19 the addition of an entire room or floor to any existing building or facility,
20 the completion of any unfinished portion of any existing building or fa-
21 cility and the restoration, reconstruction or replacement of a building or
22 facility damaged or destroyed by fire, flood, tornado, lightning, explosion
23 or earthquake, but such term, except with regard to a residence, shall not
24 include replacement, remodeling, restoration, renovation or reconstruc-
25 tion under any other circumstances;
26 (2) "Building" shall mean only those enclosures within which individ-
27 uals customarily live or are employed, or which are customarily live or
28 used to house machinery, equipment or other property, and including
29 the land improvements immediately surrounding such building; and
30 (3) (2) "facility" shall mean a mill, plant, refinery, oil or gas well, water
31 well, feedlot or any conveyance, transmission or distribution line of any
32 cooperative, nonprofit, membership corporation organized under or sub-
33 ject to the provisions of K.S.A. 17-4601 et seq., and amendments thereto,
34 or of any municipal or quasi-municipal corporation, including the land
35 improvements immediately surrounding such facility; and
36 (4) "residence" shall mean only those enclosures within which indi-
37 viduals customarily live;
38 (q) the gross receipts received for the service of repairing, servicing,
39 altering or maintaining tangible personal property, except computer soft-
40 ware described in subsection (s), which when such services are rendered
41 is not being held for sale in the regular course of business, and whether
42 or not any tangible personal property is transferred in connection there-
43 with. The tax imposed by this subsection shall be applicable to the services
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1 of repairing, servicing, altering or maintaining an item of tangible personal
2 property which has been and is fastened to, connected with or built into
3 real property;
4 (r) the gross receipts from fees or charges made under service or
5 maintenance agreement contracts for services, charges for the providing
6 of which are taxable under the provisions of subsection (p) or (q);
7 (s) the gross receipts received from the sale of computer software,
8 and the sale of the services of modifying, altering, updating or maintaining
9 computer software. As used in this subsection, "computer software"
10 means information and directions loaded into a computer which dictate
11 different functions to be performed by the computer. Computer software
12 includes any canned or prewritten program which is held or existing for
13 general or repeated sale, even if the program was originally developed
14 for a single end user as custom computer software. The sale of computer
15 software or services does not include: (1) The initial sale of any custom
16 computer program which is originally developed for the exclusive use of
17 a single end user; or (2) those services rendered in the modification of
18 computer software when the modification is developed exclusively for a
19 single end user only to the extent of the modification and only to the
20 extent that the actual amount charged for the modification is separately
21 stated on invoices, statements and other billing documents provided to
22 the end user. The services of modification, alteration, updating and main-
23 tenance of computer software shall only include the modification, alter-
24 ation, updating and maintenance of computer software taxable under this
25 subsection whether or not the services are actually provided; and
26 (t) the gross receipts received for telephone answering services, in-
27 cluding mobile phone services, beeper services and other similar services;
28 and
29 (u) the gross receipts received from the sale of prepaid telephone
30 calling cards or pre-paid authorization numbers and the recharge of such
31 cards or numbers. A pre-paid telephone calling card or pre-paid author-
32 ization number means the right to exclusively make telephone calls, paid
33 for in advance, with the prepaid value measured in minutes or other time
34 units, that enables the origination of calls using an access number or
35 authorization code or both, whether manually or electronically dialed. If
36 the dale or recharge of such card or number does not take place at the
37 vendor's place of business, it shall be conclusively determined to take
38 place at the customer's shipping address; if there is no item shipped then
39 it shall be the customer's billing address.
40 Sec. 2. K.S.A. 1998 Supp. 79-3606 is hereby amended to
41 read as follows: 79-3606. The following shall be exempt from the
42 tax imposed by this act:
43 (a) All sales of motor-vehicle fuel or other articles upon which
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1 a sales or excise tax has been paid, not subject to refund, under
2 the laws of this state except cigarettes as defined by K.S.A. 79-3301
3 and amendments thereto, cereal malt beverages and malt products
4 as defined by K.S.A. 79-3817 and amendments thereto, including
5 wort, liquid malt, malt syrup and malt extract, which is not subject
6 to taxation under the provisions of K.S.A. 79-41a02 and amend-
7 ments thereto, motor vehicles taxed pursuant to K.S.A. 79-5117,
8 and amendments thereto, tires taxed pursuant to K.S.A. 1998
9 Supp. 65-3424d, and amendments thereto, and drycleaning and
10 laundry services taxed pursuant to K.S.A. 1998 Supp. 65-34,150,
11 and amendments thereto;
12 (b) all sales of tangible personal property or service, including
13 the renting and leasing of tangible personal property, purchased
14 directly by the state of Kansas, a political subdivision thereof, other
15 than a school or educational institution, or purchased by a public
16 or private nonprofit hospital or public hospital authority or non-
17 profit blood, tissue or organ bank and used exclusively for state,
18 political subdivision, hospital or public hospital authority or non-
19 profit blood, tissue or organ bank purposes, except when: (1) Such
20 state, hospital or public hospital authority is engaged or proposes
21 to engage in any business specifically taxable under the provisions
22 of this act and such items of tangible personal property or service
23 are used or proposed to be used in such business, or (2) such po-
24 litical subdivision is engaged or proposes to engage in the business
25 of furnishing gas, water, electricity or heat to others and such items
26 of personal property or service are used or proposed to be used in
27 such business;
28 (c) all sales of tangible personal property or services, including
29 the renting and leasing of tangible personal property, purchased
30 directly by a public or private elementary or secondary school or
31 public or private nonprofit educational institution and used pri-
32 marily by such school or institution for nonsectarian programs and
33 activities provided or sponsored by such school or institution or in
34 the erection, repair or enlargement of buildings to be used for
35 such purposes. The exemption herein provided shall not apply to
36 erection, construction, repair, enlargement or equipment of build-
37 ings used primarily for human habitation;
38 (d) all sales of tangible personal property or services purchased
39 by a contractor for the purpose of constructing, equipping, recon-
40 structing, maintaining, repairing, enlarging, furnishing or remod-
41 eling facilities for any public or private nonprofit hospital or public
42 hospital authority, public or private elementary or secondary
43 school or a public or private nonprofit educational institution,
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1 which would be exempt from taxation under the provisions of this
2 act if purchased directly by such hospital or public hospital au-
3 thority, school or educational institution; and all sales of tangible
4 personal property or services purchased by a contractor for the
5 purpose of constructing, equipping, reconstructing, maintaining,
6 repairing, enlarging, furnishing or remodeling facilities for any
7 political subdivision of the state, the total cost of which is paid from
8 funds of such political subdivision and which would be exempt
9 from taxation under the provisions of this act if purchased directly
10 by such political subdivision. Nothing in this subsection or in the
11 provisions of K.S.A. 12-3418 and amendments thereto, shall be
12 deemed to exempt the purchase of any construction machinery,
13 equipment or tools used in the constructing, equipping, recon-
14 structing, maintaining, repairing, enlarging, furnishing or remod-
15 eling facilities for any political subdivision of the state. As used in
16 this subsection, K.S.A. 12-3418 and 79-3640, and amendments
17 thereto, "funds of a political subdivision" shall mean general tax
18 revenues, the proceeds of any bonds and gifts or grants-in-aid.
19 Gifts shall not mean funds used for the purpose of constructing,
20 equipping, reconstructing, repairing, enlarging, furnishing or re-
21 modeling facilities which are to be leased to the donor. When any
22 political subdivision of the state, public or private nonprofit hos-
23 pital or public hospital authority, public or private elementary or
24 secondary school or public or private nonprofit educational insti-
25 tution shall contract for the purpose of constructing, equipping,
26 reconstructing, maintaining, repairing, enlarging, furnishing or
27 remodeling facilities, it shall obtain from the state and furnish to
28 the contractor an exemption certificate for the project involved,
29 and the contractor may purchase materials for incorporation in
30 such project. The contractor shall furnish the number of such cer-
31 tificate to all suppliers from whom such purchases are made, and
32 such suppliers shall execute invoices covering the same bearing
33 the number of such certificate. Upon completion of the project the
34 contractor shall furnish to the political subdivision, hospital or
35 public hospital authority, school or educational institution con-
36 cerned a sworn statement, on a form to be provided by the director
37 of taxation, that all purchases so made were entitled to exemption
38 under this subsection. As an alternative to the foregoing proce-
39 dure, any such contracting entity may apply to the secretary of
40 revenue for agent status for the sole purpose of issuing and fur-
41 nishing project exemption certificates to contractors pursuant to
42 rules and regulations adopted by the secretary establishing con-
43 ditions and standards for the granting and maintaining of such
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1 status. All invoices shall be held by the contractor for a period of
2 five years and shall be subject to audit by the director of taxation.
3 If any materials purchased under such a certificate are found not
4 to have been incorporated in the building or other project or not
5 to have been returned for credit or the sales or compensating tax
6 otherwise imposed upon such materials which will not be so in-
7 corporated in the building or other project reported and paid by
8 such contractor to the director of taxation not later than the 20th
9 day of the month following the close of the month in which it shall
10 be determined that such materials will not be used for the purpose
11 for which such certificate was issued, the political subdivision, hos-
12 pital or public hospital authority, school or educational institution
13 concerned shall be liable for tax on all materials purchased for the
14 project, and upon payment thereof it may recover the same from
15 the contractor together with reasonable attorney fees. Any con-
16 tractor or any agent, employee or subcontractor thereof, who shall
17 use or otherwise dispose of any materials purchased under such a
18 certificate for any purpose other than that for which such a certif-
19 icate is issued without the payment of the sales or compensating
20 tax otherwise imposed upon such materials, shall be guilty of a
21 misdemeanor and, upon conviction therefor, shall be subject to the
22 penalties provided for in subsection (g) of K.S.A. 79-3615, and
23 amendments thereto;
24 (e) all sales of tangible personal property or services purchased
25 by a contractor for the erection, repair or enlargement of buildings
26 or other projects for the government of the United States, its agen-
27 cies or instrumentalities, which would be exempt from taxation if
28 purchased directly by the government of the United States, its
29 agencies or instrumentalities. When the government of the United
30 States, its agencies or instrumentalities shall contract for the erec-
31 tion, repair, or enlargement of any building or other project, it
32 shall obtain from the state and furnish to the contractor an ex-
33 emption certificate for the project involved, and the contractor
34 may purchase materials for incorporation in such project. The con-
35 tractor shall furnish the number of such certificates to all suppliers
36 from whom such purchases are made, and such suppliers shall ex-
37 ecute invoices covering the same bearing the number of such cer-
38 tificate. Upon completion of the project the contractor shall fur-
39 nish to the government of the United States, its agencies or
40 instrumentalities concerned a sworn statement, on a form to be
41 provided by the director of taxation, that all purchases so made
42 were entitled to exemption under this subsection. As an alternative
43 to the foregoing procedure, any such contracting entity may apply
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1 to the secretary of revenue for agent status for the sole purpose
2 of issuing and furnishing project exemption certificates to con-
3 tractors pursuant to rules and regulations adopted by the secretary
4 establishing conditions and standards for the granting and main-
5 taining of such status. All invoices shall be held by the contractor
6 for a period of five years and shall be subject to audit by the di-
7 rector of taxation. Any contractor or any agent, employee or sub-
8 contractor thereof, who shall use or otherwise dispose of any ma-
9 terials purchased under such a certificate for any purpose other
10 than that for which such a certificate is issued without the payment
11 of the sales or compensating tax otherwise imposed upon such ma-
12 terials, shall be guilty of a misdemeanor and, upon conviction
13 therefor, shall be subject to the penalties provided for in subsec-
14 tion (g) of K.S.A. 79-3615 and amendments thereto;
15 (f) tangible personal property purchased by a railroad or pub-
16 lic utility for consumption or movement directly and immediately
17 in interstate commerce;
18 (g) sales of aircraft including remanufactured and modified
19 aircraft, sales of aircraft repair, modification and replacement
20 parts and sales of services employed in the remanufacture, modi-
21 fication and repair of aircraft sold to persons using directly or
22 through an authorized agent such aircraft and aircraft repair,
23 modification and replacement parts as certified or licensed carri-
24 ers of persons or property in interstate or foreign commerce under
25 authority of the laws of the United States or any foreign govern-
26 ment or sold to any foreign government or agency or instrumen-
27 tality of such foreign government and all sales of aircraft, aircraft
28 parts, replacement parts and services employed in the remanufac-
29 ture, modification and repair of aircraft for use outside of the
30 United States;
31 (h) all rentals of nonsectarian textbooks by public or private
32 elementary or secondary schools;
33 (i) the lease or rental of all films, records, tapes, or any type of
34 sound or picture transcriptions used by motion picture exhibitors;
35 (j) meals served without charge or food used in the preparation
36 of such meals to employees of any restaurant, eating house, dining
37 car, hotel, drugstore or other place where meals or drinks are reg-
38 ularly sold to the public if such employees' duties are related to
39 the furnishing or sale of such meals or drinks;
40 (k) any motor vehicle, semitrailer or pole trailer, as such terms
41 are defined by K.S.A. 8-126 and amendments thereto, or aircraft
42 sold and delivered in this state to a bona fide resident of another
43 state, which motor vehicle, semitrailer, pole trailer or aircraft is
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1 not to be registered or based in this state and which vehicle, sem-
2 itrailer, pole trailer or aircraft will not remain in this state more
3 than 10 days;
4 (l) all isolated or occasional sales of tangible personal property,
5 services, substances or things, except isolated or occasional sale of
6 motor vehicles specifically taxed under the provisions of subsec-
7 tion (o) of K.S.A. 79-3603 and amendments thereto;
8 (m) all sales of tangible personal property which become an
9 ingredient or component part of tangible personal property or
10 services produced, manufactured or compounded for ultimate sale
11 at retail within or without the state of Kansas; and any such pro-
12 ducer, manufacturer or compounder may obtain from the director
13 of taxation and furnish to the supplier an exemption certificate
14 number for tangible personal property for use as an ingredient or
15 component part of the property or services produced, manufac-
16 tured or compounded;
17 (n) all sales of tangible personal property which is consumed
18 in the production, manufacture, processing, mining, drilling, re-
19 fining or compounding of tangible personal property, the treating
20 of by-products or wastes derived from any such production pro-
21 cess, the providing of services or the irrigation of crops for ulti-
22 mate sale at retail within or without the state of Kansas; and any
23 purchaser of such property may obtain from the director of taxa-
24 tion and furnish to the supplier an exemption certificate number
25 for tangible personal property for consumption in such produc-
26 tion, manufacture, processing, mining, drilling, refining, com-
27 pounding, treating, irrigation and in providing such services;
28 (o) all sales of animals, fowl and aquatic plants and animals, the
29 primary purpose of which is use in agriculture or aquaculture, as
30 defined in K.S.A. 47-1901, and amendments thereto, the produc-
31 tion of food for human consumption, the production of animal,
32 dairy, poultry or aquatic plant and animal products, fiber or fur,
33 or the production of offspring for use for any such purpose or
34 purposes;
35 (p) all sales of drugs, as defined by K.S.A. 65-1626 and amend-
36 ments thereto, dispensed pursuant to a prescription order, as de-
37 fined by K.S.A. 65-1626 and amendments thereto, by a licensed
38 practitioner;
39 (q) all sales of insulin dispensed by a person licensed by the
40 state board of pharmacy to a person for treatment of diabetes at
41 the direction of a person licensed to practice medicine by the
42 board of healing arts;
43 (r) all sales of prosthetic and orthopedic appliances prescribed
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1 in writing by a person licensed to practice the healing arts, den-
2 tistry or optometry. For the purposes of this subsection, the term
3 prosthetic and orthopedic appliances means any apparatus, instru-
4 ment, device, or equipment used to replace or substitute for any
5 missing part of the body; used to alleviate the malfunction of any
6 part of the body; or used to assist any disabled person in leading
7 a normal life by facilitating such person's mobility; such term shall
8 include accessories attached or to be attached to motor vehicles,
9 but such term shall not include motor vehicles or personal prop-
10 erty which when installed becomes a fixture to real property;
11 (s) all sales of tangible personal property or services purchased
12 directly by a groundwater management district organized or op-
13 erating under the authority of K.S.A. 82a-1020 et seq. and amend-
14 ments thereto, which property or services are used in the opera-
15 tion or maintenance of the district;
16 (t) all sales of farm machinery and equipment or aquaculture
17 machinery and equipment, repair and replacement parts therefor
18 and services performed in the repair and maintenance of such ma-
19 chinery and equipment. For the purposes of this subsection the
20 term "farm machinery and equipment or aquaculture machinery
21 and equipment" shall include machinery and equipment used in
22 the operation of Christmas tree farming but shall not include any
23 passenger vehicle, truck, truck tractor, trailer, semitrailer or pole
24 trailer, other than a farm trailer, as such terms are defined by
25 K.S.A. 8-126 and amendments thereto. Each purchaser of farm
26 machinery and equipment or aquaculture machinery and equip-
27 ment exempted herein must certify in writing on the copy of the
28 invoice or sales ticket to be retained by the seller that the farm
29 machinery and equipment or aquaculture machinery and equip-
30 ment purchased will be used only in farming, ranching or aqua-
31 culture production. Farming or ranching shall include the opera-
32 tion of a feedlot and farm and ranch work for hire and the
33 operation of a nursery;
34 (u) all leases or rentals of tangible personal property used as a
35 dwelling if such tangible personal property is leased or rented for
36 a period of more than 28 consecutive days;
37 (v) all sales of food products to any contractor for use in pre-
38 paring meals for delivery to homebound elderly persons over 60
39 years of age and to homebound disabled persons or to be served
40 at a group-sitting at a location outside of the home to otherwise
41 homebound elderly persons over 60 years of age and to otherwise
42 homebound disabled persons, as all or part of any food service
43 project funded in whole or in part by government or as part of a
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1 private nonprofit food service project available to all such elderly
2 or disabled persons residing within an area of service designated
3 by the private nonprofit organization, and all sales of food prod-
4 ucts for use in preparing meals for consumption by indigent or
5 homeless individuals whether or not such meals are consumed at
6 a place designated for such purpose;
7 (w) all sales of natural gas, electricity, heat and water delivered
8 through mains, lines or pipes: (1) To residential premises for non-
9 commercial use by the occupant of such premises; (2) for agricul-
10 tural use and also, for such use, all sales of propane gas; (3) for use
11 in the severing of oil; and (4) to any property which is exempt from
12 property taxation pursuant to K.S.A. 79-201b Second through Sixth.
13 As used in this paragraph, "severing" shall have the meaning as-
14 cribed thereto by subsection (k) of K.S.A. 79-4216, and amend-
15 ments thereto;
16 (x) all sales of propane gas, LP-gas, coal, wood and other fuel
17 sources for the production of heat or lighting for noncommercial
18 use of an occupant of residential premises;
19 (y) all sales of materials and services used in the repairing,
20 servicing, altering, maintaining, manufacturing, remanufacturing,
21 or modification of railroad rolling stock for use in interstate or
22 foreign commerce under authority of the laws of the United States;
23 (z) all sales of tangible personal property and services pur-
24 chased directly by a port authority or by a contractor therefor as
25 provided by the provisions of K.S.A. 12-3418 and amendments
26 thereto;
27 (aa) all sales of materials and services applied to equipment
28 which is transported into the state from without the state for re-
29 pair, service, alteration, maintenance, remanufacture or modifi-
30 cation and which is subsequently transported outside the state for
31 use in the transmission of liquids or natural gas by means of pipe-
32 line in interstate or foreign commerce under authority of the laws
33 of the United States;
34 (bb) all sales of used mobile homes or manufactured homes.
35 As used in this subsection: (1) "Mobile homes" and "manufactured
36 homes" shall have the meanings ascribed thereto by K.S.A. 58-
37 4202 and amendments thereto; and (2) "sales of used mobile
38 homes or manufactured homes" means sales other than the orig-
39 inal retail sale thereof;
40 (cc) all sales of tangible personal property or services pur-
41 chased for the purpose of and in conjunction with constructing,
42 reconstructing, enlarging or remodeling a business or retail busi-
43 ness which meets the requirements established in K.S.A. 74-50,115
HB 2059--Am.
13
1 and amendments thereto, and the sale and installation of machin-
2 ery and equipment purchased for installation at any such business
3 or retail business. When a person shall contract for the construc-
4 tion, reconstruction, enlargement or remodeling of any such busi-
5 ness or retail business, such person shall obtain from the state and
6 furnish to the contractor an exemption certificate for the project
7 involved, and the contractor may purchase materials, machinery
8 and equipment for incorporation in such project. The contractor
9 shall furnish the number of such certificates to all suppliers from
10 whom such purchases are made, and such suppliers shall execute
11 invoices covering the same bearing the number of such certificate.
12 Upon completion of the project the contractor shall furnish to the
13 owner of the business or retail business a sworn statement, on a
14 form to be provided by the director of taxation, that all purchases
15 so made were entitled to exemption under this subsection. All in-
16 voices shall be held by the contractor for a period of five years and
17 shall be subject to audit by the director of taxation. Any contractor
18 or any agent, employee or subcontractor thereof, who shall use or
19 otherwise dispose of any materials, machinery or equipment pur-
20 chased under such a certificate for any purpose other than that for
21 which such a certificate is issued without the payment of the sales
22 or compensating tax otherwise imposed thereon, shall be guilty of
23 a misdemeanor and, upon conviction therefor, shall be subject to
24 the penalties provided for in subsection (g) of K.S.A. 79-3615 and
25 amendments thereto. As used in this subsection, "business" and
26 "retail business" have the meanings respectively ascribed thereto
27 by K.S.A. 74-50,114 and amendments thereto;
28 (dd) all sales of tangible personal property purchased with
29 food stamps issued by the United States department of agriculture;
30 (ee) all sales of lottery tickets and shares made as part of a
31 lottery operated by the state of Kansas;
32 (ff) on and after July 1, 1988, all sales of new mobile homes or
33 manufactured homes to the extent of 40% of the gross receipts,
34 determined without regard to any trade-in allowance, received
35 from such sale. As used in this subsection, "mobile homes" and
36 "manufactured homes" shall have the meanings ascribed thereto
37 by K.S.A. 58-4202 and amendments thereto;
38 (gg) all sales of tangible personal property purchased in ac-
39 cordance with vouchers issued pursuant to the federal special sup-
40 plemental food program for women, infants and children;
41 (hh) all sales of medical supplies and equipment purchased di-
42 rectly by a nonprofit skilled nursing home or nonprofit interme-
43 diate nursing care home, as defined by K.S.A. 39-923, and amend-
HB 2059--Am.
14
1 ments thereto, for the purpose of providing medical services to
2 residents thereof. This exemption shall not apply to tangible per-
3 sonal property customarily used for human habitation purposes;
4 (ii) all sales of tangible personal property purchased directly
5 by a nonprofit organization for nonsectarian comprehensive mul-
6 tidiscipline youth development programs and activities provided
7 or sponsored by such organization, and all sales of tangible per-
8 sonal property by or on behalf of any such organization and all sales
9 of tangible personal property by or on behalf of any other nonprofit or-
10 ganization the proceeds of which are solely expended for the provision or
11 sponsorship of youth development programs and activities. This exemp-
12 tion shall not apply to tangible personal property customarily used
13 for human habitation purposes;
14 (jj) all sales of tangible personal property or services, including
15 the renting and leasing of tangible personal property, purchased
16 directly on behalf of a community-based mental retardation facility
17 or mental health center organized pursuant to K.S.A. 19-4001 et
18 seq., and amendments thereto, and licensed in accordance with the
19 provisions of K.S.A. 75-3307b and amendments thereto. This ex-
20 emption shall not apply to tangible personal property customarily
21 used for human habitation purposes;
22 (kk) on and after January 1, 1989, all sales of machinery and
23 equipment used directly and primarily for the purposes of manu-
24 facturing, assembling, processing, finishing, storing, warehousing
25 or distributing articles of tangible personal property in this state
26 intended for resale by a manufacturing or processing plant or fa-
27 cility or a storage, warehousing or distribution facility, and all sales
28 of repair and replacement parts and accessories purchased for
29 such machinery and equipment:
30 (1) For purposes of this subsection, machinery and equipment
31 shall be deemed to be used directly and primarily in the manufac-
32 ture, assemblage, processing, finishing, storing, warehousing or
33 distributing of tangible personal property where such machinery
34 and equipment is used during a manufacturing, assembling, proc-
35 essing or finishing, storing, warehousing or distributing operation:
36 (A) To effect a direct and immediate physical change upon the
37 tangible personal property;
38 (B) to guide or measure a direct and immediate physical
39 change upon such property where such function is an integral and
40 essential part of tuning, verifying or aligning the component parts
41 of such property;
42 (C) to test or measure such property where such function is an
43 integral part of the production flow or function;
HB 2059--Am.
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1 (D) to transport, convey or handle such property during the
2 manufacturing, processing, storing, warehousing or distribution
3 operation at the plant or facility; or
4 (E) to place such property in the container, package or wrap-
5 ping in which such property is normally sold or transported.
6 (2) For purposes of this subsection "machinery and equipment
7 used directly and primarily" shall include, but not be limited to:
8 (A) Mechanical machines or components thereof contributing
9 to a manufacturing, assembling or finishing process;
10 (B) molds and dies that determine the physical characteristics
11 of the finished product or its packaging material;
12 (C) testing equipment to determine the quality of the finished
13 product;
14 (D) computers and related peripheral equipment that directly
15 control or measure the manufacturing process or which are util-
16 ized for engineering of the finished product; and
17 (E) computers and related peripheral equipment utilized for
18 research and development and product design.
19 (3) "Machinery and equipment used directly and primarily"
20 shall not include:
21 (A) Hand tools;
22 (B) machinery, equipment and tools used in maintaining and
23 repairing any type of machinery and equipment;
24 (C) transportation equipment not used in the manufacturing,
25 assembling, processing, furnishing, storing, warehousing or dis-
26 tributing process at the plant or facility;
27 (D) office machines and equipment including computers and
28 related peripheral equipment not directly and primarily used in
29 controlling or measuring the manufacturing process;
30 (E) furniture and buildings; and
31 (F) machinery and equipment used in administrative, account-
32 ing, sales or other such activities of the business;
33 (4) for purposes of this subsection, "repair and replacement
34 parts and accessories" means all parts and accessories for exempt
35 machinery and equipment, including but not limited to dies, jigs,
36 molds, and patterns which are attached to exempt machinery or
37 which are otherwise used in production, short-lived replaceable
38 parts that can be readily detached from exempt machinery or
39 equipment, such as belts, drill bits, grinding wheels, cutting bars
40 and saws, and other replacement parts for production equipment,
41 including refractory brick and other refractory items for kiln
42 equipment used in production operations;
43 (ll) all sales of educational materials purchased for distribution
HB 2059--Am.
16
1 to the public at no charge by a nonprofit corporation organized
2 for the purpose of encouraging, fostering and conducting pro-
3 grams for the improvement of public health;
4 (mm) all sales of seeds and tree seedlings; fertilizers, insecti-
5 cides, herbicides, germicides, pesticides and fungicides; and serv-
6 ices, purchased and used for the purpose of producing plants in
7 order to prevent soil erosion on land devoted to agricultural use;
8 (nn) except as otherwise provided in this act, all sales of serv-
9 ices rendered by an advertising agency or licensed broadcast sta-
10 tion or any member, agent or employee thereof;
11 (oo) all sales of tangible personal property purchased by a com-
12 munity action group or agency for the exclusive purpose of re-
13 pairing or weatherizing housing occupied by low income
14 individuals;
15 (pp) all sales of drill bits and explosives actually utilized in the
16 exploration and production of oil or gas;
17 (qq) all sales of tangible personal property and services pur-
18 chased by a nonprofit museum or historical society or any combi-
19 nation thereof, including a nonprofit organization which is organ-
20 ized for the purpose of stimulating public interest in the
21 exploration of space by providing educational information, exhib-
22 its and experiences, which is exempt from federal income taxation
23 pursuant to section 501(c)(3) of the federal internal revenue code
24 of 1986;
25 (rr) all sales of tangible personal property which will admit the
26 purchaser thereof to any annual event sponsored by a nonprofit
27 organization which is exempt from federal income taxation pur-
28 suant to section 501(c)(3) of the federal internal revenue code of
29 1986;
30 (ss) all sales of tangible personal property and services pur-
31 chased by a public broadcasting station licensed by the federal
32 communications commission as a noncommercial educational tel-
33 evision or radio station;
34 (tt) all sales of tangible personal property and services pur-
35 chased by or on behalf of a not-for-profit corporation which is ex-
36 empt from federal income taxation pursuant to section 501(c)(3)
37 of the federal internal revenue code of 1986, for the sole purpose
38 of constructing a Kansas Korean War memorial;
39 (uu) all sales of tangible personal property and services pur-
40 chased by or on behalf of any rural volunteer fire-fighting organ-
41 ization for use exclusively in the performance of its duties and
42 functions;
43 (vv) all sales of tangible personal property purchased by any of
HB 2059--Am.
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1 the following organizations which are exempt from federal income
2 taxation pursuant to section 501 (c)(3) of the federal internal rev-
3 enue code of 1986, for the following purposes, and all sales of any
4 such property by or on behalf of any such organization for any
5 such purpose:
6 (1) The American Heart Association, Kansas Affiliate, Inc. for
7 the purposes of providing education, training, certification in
8 emergency cardiac care, research and other related services to
9 reduce disability and death from cardiovascular diseases and
10 stroke;
11 (2) the Kansas Alliance for the Mentally Ill, Inc. for the purpose
12 of advocacy for persons with mental illness and to education, re-
13 search and support for their families;
14 (3) the Kansas Mental Illness Awareness Council for the pur-
15 poses of advocacy for persons who are mentally ill and to educa-
16 tion, research and support for them and their families;
17 (4) the American Diabetes Association Kansas Affiliate, Inc. for
18 the purpose of eliminating diabetes through medical research,
19 public education focusing on disease prevention and education,
20 patient education including information on coping with diabetes,
21 and professional education and training;
22 (5) the American Lung Association of Kansas, Inc. for the pur-
23 pose of eliminating all lung diseases through medical research,
24 public education including information on coping with lung dis-
25 eases, professional education and training related to lung disease
26 and other related services to reduce the incidence of disability and
27 death due to lung disease;
28 (6) the Kansas chapters of the Alzheimer's Disease and Related
29 Disorders Association, Inc. for the purpose of providing assistance
30 and support to persons in Kansas with Alzheimer's disease, and
31 their families and caregivers; and
32 (ww) all sales of tangible personal property purchased by the
33 Habitat for Humanity for the exclusive use of being incorporated
34 within a housing project constructed by such organization.
35 (xx) all sales of tangible personal property and services pur-
36 chased by a nonprofit zoo which is exempt from federal income
37 taxation pursuant to section 501(c)(3) of the federal internal rev-
38 enue code of 1986, or on behalf of such zoo by an entity itself
39 exempt from federal income taxation pursuant to section 50 501
40 (c)(3) of the federal internal revenue code of 1986 contracted with
41 to operate such zoo and all sales of tangible personal property or
42 services purchased by a contractor for the purpose of constructing,
43 equipping, reconstructing, maintaining, repairing, enlarging, fur-
HB 2059--Am.
18
1 nishing or remodeling facilities for any nonprofit zoo which would
2 be exempt from taxation under the provisions of this section if
3 purchased directly by such nonprofit zoo or the entity operating
4 such zoo. Nothing in this subsection shall be deemed to exempt
5 the purchase of any construction machinery, equipment or tools
6 used in the constructing, equipping, reconstructing, maintaining,
7 repairing, enlarging, furnishing or remodeling facilities for any
8 nonprofit zoo. When any nonprofit zoo shall contract for the pur-
9 pose of constructing, equipping, reconstructing, maintaining, re-
10 pairing, enlarging, furnishing or remodeling facilities, it shall ob-
11 tain from the state and furnish to the contractor an exemption
12 certificate for the project involved, and the contractor may pur-
13 chase materials for incorporation in such project. The contractor
14 shall furnish the number of such certificate to all suppliers from
15 whom such purchases are made, and such suppliers shall execute
16 invoices covering the same bearing the number of such certificate.
17 Upon completion of the project the contractor shall furnish to the
18 nonprofit zoo concerned a sworn statement, on a form to be pro-
19 vided by the director of taxation, that all purchases so made were
20 entitled to exemption under this subsection. All invoices shall be
21 held by the contractor for a period of five years and shall be subject
22 to audit by the director of taxation. If any materials purchased
23 under such a certificate are found not to have been incorporated
24 in the building or other project or not to have been returned for
25 credit or the sales or compensating tax otherwise imposed upon
26 such materials which will not be so incorporated in the building
27 or other project reported and paid by such contractor to the di-
28 rector of taxation not later than the 20th day of the month follow-
29 ing the close of the month in which it shall be determined that
30 such materials will not be used for the purpose for which such
31 certificate was issued, the nonprofit zoo concerned shall be liable
32 for tax on all materials purchased for the project, and upon pay-
33 ment thereof it may recover the same from the contractor together
34 with reasonable attorney fees. Any contractor or any agent, em-
35 ployee or subcontractor thereof, who shall use or otherwise dis-
36 pose of any materials purchased under such a certificate for any
37 purpose other than that for which such a certificate is issued with-
38 out the payment of the sales or compensating tax otherwise im-
39 posed upon such materials, shall be guilty of a misdemeanor and,
40 upon conviction therefor, shall be subject to the penalties provided
41 for in subsection (g) of K.S.A. 79-3615, and amendments thereto;
42 (yy) all sales of tangible personal property and services pur-
43 chased by a parent-teacher association or organization, and all
HB 2059--Am.
19
1 sales of tangible personal property by or on behalf of such asso-
2 ciation or organization;
3 (zz) all sales of machinery and equipment purchased by over-
4 the-air, free access radio or television station which is used directly
5 and primarily for the purpose of producing a broadcast signal or
6 is such that the failure of the machinery or equipment to operate
7 would cause broadcasting to cease. For purposes of this subsec-
8 tion, machinery and equipment shall include, but not be limited
9 to, that required by rules and regulations of the federal commu-
10 nications commission, and all sales of electricity which are essential
11 or necessary for the purpose of producing a broadcast signal or is
12 such that the failure of the electricity would cause broadcasting to
13 cease;
14 (aaa) all sales of tangible personal property and services pur-
15 chased by a religious organization which is exempt from federal
16 income taxation pursuant to section 501 (c)(3) of the federal inter-
17 nal revenue code, and used exclusively for religious purposes; and
18 (bbb) all sales of food for human consumption by an organi-
19 zation which is exempt from federal income taxation pursuant to
20 section 501 (c)(3) of the federal internal revenue code of 1986,
21 pursuant to a food distribution program which offers such food at
22 a price below cost in exchange for the performance of community
23 service by the purchaser thereof.
24 Sec. \ fs\ 2. 3. K.S.A. 1998 Supp. 79-3603 is and 79-3606 are hereby
25 repealed.
26 Sec. \ fs\ 3. 4. This act shall take effect and be in force from and after its
27 publication in the statute book.