Session of 1999
         
SENATE BILL No. 250
         
By Committee on Assessment and Taxation
          
2-4
          
  9             AN  ACT relating to sales taxation; concerning taxation of contractor and
10             subcontractor services and materials; amending K.S.A. 1998 Supp. 79-
11             3602 and 79-3603 and repealing the existing sections.
12      
13       Be it enacted by the Legislature of the State of Kansas:
14             Section  1. K.S.A. 1998 Supp. 79-3602 is hereby amended to read as
15       follows: 79-3602. (a) "Persons" means any individual, firm, copartnership,
16       joint adventure, association, corporation, estate or trust, receiver or trus-
17       tee, or any group or combination acting as a unit, and the plural as well
18       as the singular number; and shall specifically mean any city or other po-
19       litical subdivision of the state of Kansas engaging in a business or provid-
20       ing a service specifically taxable under the provisions of this act.
21             (b) "Director" means the state director of taxation.
22             (c) "Sale" or "sales" means the exchange of tangible personal prop-
23       erty, as well as the sale thereof for money, and every transaction, condi-
24       tional or otherwise, for a consideration, constituting a sale, including the
25       sale or furnishing of electrical energy, gas, water, services or entertain-
26       ment taxable under the terms of this act and including, except as provided
27       in the following provision, the sale of the use of tangible personal property
28       by way of a lease, license to use or the rental thereof regardless of the
29       method by which the title, possession or right to use the tangible personal
30       property is transferred. The term "sale" or "sales" shall not mean the sale
31       of the use of any tangible personal property used as a dwelling by way of
32       a lease or rental thereof for a term of more than 28 consecutive days.
33             (d) "Retailer" means a person regularly engaged in the business of
34       selling tangible personal property at retail or furnishing electrical energy,
35       gas, water, services or entertainment, and selling only to the user or con-
36       sumer and not for resale.
37             (e) "Retail sale" or "sale at retail" means all sales made within the
38       state of tangible personal property or electrical energy, gas, water, services
39       or entertainment for use or consumption and not for resale.
40             (f) "Tangible personal property" means corporeal personal property.
41       Such term shall include; (1) any computer software program which is not
42       a custom computer software program, as described by subsection (s) of
43       K.S.A. 79-3603, and amendments thereto; and (2) and prepaid telephone

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  1       calling card or prepaid authorization number, or recharge of such card
  2       or number, as described by subsection (b) of K.S.A. 79-3603, and amend-
  3       ments thereto.
  4             (g) "Selling price" means the total cost to the consumer exclusive of
  5       discounts allowed and credited, but including freight and transportation
  6       charges from retailer to consumer.
  7             (h) "Gross receipts" means the total selling price or the amount re-
  8       ceived amount received or the selling price, as defined in this act, in
  9       money, credits, property or other consideration valued in money from
10       sales at retail within this state; and which are embraced within the pro-
11       visions of this act. Gross receipts shall include the value of tangible per-
12       sonal property which is purchased for resale exempt from tax and is later
13       withdrawn from inventory for consumption or use by the retailer, other
14       than for sale, rental, display, demonstration, or retention in the regular
15       course of business. The taxpayer, may take credit in the report of gross
16       receipts for: (1) An amount equal to the selling price of property returned
17       by the purchaser when the full sale price thereof, including the tax col-
18       lected, selling price and the tax collected thereon is refunded in cash or
19       by credit; (2) an amount equal to the discount allowance given for the
20       trade-in of property. The gross receipts received for a contractors' or sub-
21       contractors' services that are taxable at subsection (p), (q) or (r) of K.S.A.
22       79-3603, and amendments thereto, shall be the difference between the
23       contract price and the total cost to the contractor or subcontractor of
24       materials, supplies, and subcontractors' charges, including the sales or use
25       tax paid, with no other deductions. "Contract price" means the total
26       amount billed by the contractor or subcontractor in connection with erect-
27       ing structures or buildings for others, or for otherwise improving, altering,
28       repairing, maintaining, or servicing real property of others, with no de-
29       ductions.
30             (i) "Taxpayer" means any person obligated to account to the director
31       for taxes collected under the terms of this act.
32             (j) "Isolated or occasional sale" means the nonrecurring sale of tan-
33       gible personal property, or services taxable hereunder by a person not
34       engaged at the time of such sale in the business of selling such property
35       or services. Any religious organization which makes a nonrecurring sale
36       of tangible personal property acquired for the purpose of resale shall be
37       deemed to be not engaged at the time of such sale in the business of
38       selling such property. Such term shall include: (1) Any sale by a bank,
39       savings and loan institution, credit union or any finance company licensed
40       under the provisions of the Kansas uniform consumer credit code of tan-
41       gible personal property which has been repossessed by any such entity;
42       and (2) any sale of tangible personal property made by an auctioneer or
43       agent on behalf of not more than two principals or households if such

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  1       sale is nonrecurring and any such principal or household is not engaged
  2       at the time of such sale in the business of selling tangible personal
  3       property.
  4             (k) "Service" means those services described in and taxed under the
  5       provisions of K.S.A. 79-3603 and amendments thereto.
  6             (l) "Ingredient or component part" means tangible personal property
  7       which is necessary or essential to, and which is actually used in and be-
  8       comes an integral and material part of tangible personal property or serv-
  9       ices produced, manufactured or compounded for sale by the producer,
10       manufacturer or compounder in its regular course of business. The fol-
11       lowing items of tangible personal property are hereby declared to be
12       ingredients or component parts, but the listing of such property shall not
13       be deemed to be exclusive nor shall such listing be construed to be a
14       restriction upon, or an indication of, the type or types of property to be
15       included within the definition of "ingredient or component part" as
16       herein set forth:
17             (1) Containers, labels and shipping cases used in the distribution of
18       property produced, manufactured or compounded for sale which are not
19       to be returned to the producer, manufacturer or compounder for reuse.
20             (2) Containers, labels, shipping cases, paper bags, drinking straws,
21       paper plates, paper cups, twine and wrapping paper used in the distri-
22       bution and sale of property taxable under the provisions of this act by
23       wholesalers and retailers and which is not to be returned to such whole-
24       saler or retailer for reuse.
25             (3) Seeds and seedlings for the production of plants and plant prod-
26       ucts produced for resale.
27             (4) Paper and ink used in the publication of newspapers.
28             (5) Fertilizer used in the production of plants and plant products
29       produced for resale.
30             (6) Feed for animals, fowl and aquatic plants and animals, the primary
31       purpose of which is use in agriculture or aquaculture, as defined in K.S.A.
32       47-1901, and amendments thereto, the production of food for human
33       consumption, the production of animal, dairy, poultry or aquatic plant
34       and animal products, fiber, fur, or the production of offspring for use for
35       any such purpose or purposes.
36             (m) "Property which is consumed" means tangible personal property
37       which is essential or necessary to and which is used in the actual process
38       of and immediately consumed or dissipated in (1) the production, man-
39       ufacture, processing, mining, drilling, refining or compounding of tangi-
40       ble personal property, (2) the providing of services or (3) the irrigation
41       of crops, for sale in the regular course of business, and which is not
42       reusable for such purpose. The following items of tangible personal prop-
43       erty are hereby declared to be "consumed" but the listing of such prop-

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  1       erty shall not be deemed to be exclusive nor shall such listing be construed
  2       to be a restriction upon or an indication of, the type or types of property
  3       to be included within the definition of "property which is consumed" as
  4       herein set forth:
  5             (A) Insecticides, herbicides, germicides, pesticides, fungicides, fu-
  6       migants, antibiotics, biologicals, pharmaceuticals, vitamins and chemicals
  7       for use in commercial or agricultural production, processing or storage of
  8       fruit, vegetables, feeds, seeds, grains, animals or animal products whether
  9       fed, injected, applied, combined with or otherwise used; and
10             (B) electricity, gas and water.
11             (n) "Political subdivision" means any municipality, agency or subdi-
12       vision of the state which is, or shall hereafter be, authorized to levy taxes
13       upon tangible property within the state or which certifies a levy to a
14       municipality, agency or subdivision of the state which is, or shall hereafter
15       be, authorized to levy taxes upon tangible property within the state. Such
16       term also shall include any public building commission, housing, airport,
17       port, metropolitan transit or similar authority established pursuant to law.
18             (o) "Municipal corporation" means any city incorporated under the
19       laws of Kansas.
20             (p) "Quasi-municipal corporation" means any county, township,
21       school district, drainage district or any other governmental subdivision in
22       the state of Kansas having authority to receive or hold moneys or funds.
23             (q) "Nonprofit blood bank" means any nonprofit place, organization,
24       institution or establishment that is operated wholly or in part for the
25       purpose of obtaining, storing, processing, preparing for transfusing, fur-
26       nishing, donating or distributing human blood or parts or fractions of
27       single blood units or products derived from single blood units, whether
28       or not any remuneration is paid therefor, or whether such procedures are
29       done for direct therapeutic use or for storage for future use of such
30       products.
31             (r) "Contractor, subcontractor or repairman or subcontractor" means
32       a person who agrees to furnish and install tangible personal property or
33       install tangible personal property in or onto real property at a specified
34       price. A person who maintains an inventory of tangible personal property
35       for resale which enables such person to furnish and install the tangible
36       personal property or install the tangible personal property shall not be
37       deemed a contractor, subcontractor or repairman but shall be deemed a
38       retailer sell such property, sell and install such property or transform such
39       property into real property shall be deemed a contractor-retailer, and
40       shall be considered, as provided by rules and regulations adopted by the
41       secretary of revenue, as a contractor or retailer, as the case requires.
42             (s) "Educational institution" means any nonprofit school, college and
43       university that offers education at a level above the twelfth grade, and

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  1       conducts regular classes and courses of study required for accreditation
  2       by, or membership in, the North Central Association of Colleges and
  3       Schools, the state board of education, or that otherwise qualify as an
  4       "educational institution," as defined by K.S.A. 74-50,103, and amend-
  5       ments thereto. Such phrase shall include: (1) A group of educational in-
  6       stitutions that operates exclusively for an educational purpose; (2) non-
  7       profit endowment associations and foundations organized and operated
  8       exclusively to receive, hold, invest and administer moneys and property
  9       as a permanent fund for the support and sole benefit of an educational
10       institution; (3) nonprofit trusts, foundations and other entities organized
11       and operated principally to hold and own receipts from intercollegiate
12       sporting events and to disburse such receipts, as well as grants and gifts,
13       in the interest of collegiate and intercollegiate athletic programs for the
14       support and sole benefit of an educational institution; and (4) nonprofit
15       trusts, foundations and other entities organized and operated for the pri-
16       mary purpose of encouraging, fostering and conducting scholarly inves-
17       tigations and industrial and other types of research for the support and
18       sole benefit of an educational institution.
19             Sec.  2. K.S.A. 1998 Supp. 79-3603 is hereby amended to read as
20       follows: 79-3603. For the privilege of engaging in the business of selling
21       tangible personal property at retail in this state or rendering or furnishing
22       any of the services taxable under this act, there is hereby levied and there
23       shall be collected and paid a tax at the rate of 4.9% upon:
24             (a) The gross receipts received from the sale of tangible personal
25       property at retail within this state;
26             (b)  (1) the gross receipts from intrastate telephone or telegraph serv-
27       ices and (2) the gross receipts received from the sale of interstate tele-
28       phone or telegraph services, which (A) originate within this state and
29       terminate outside the state and are billed to a customer's telephone num-
30       ber or account in this state; or (B) originate outside this state and ter-
31       minate within this state and are billed to a customer's telephone number
32       or account in this state except that the sale of interstate telephone or
33       telegraph service does not include: (A) Any interstate incoming or out-
34       going wide area telephone service or wide area transmission type service
35       which entitles the subscriber to make or receive an unlimited number of
36       communications to or from persons having telephone service in a speci-
37       fied area which is outside the state in which the station provided this
38       service is located; (B) any interstate private communications service to
39       the persons contracting for the receipt of that service that entitles the
40       purchaser to exclusive or priority use of a communications channel or
41       group of channels between exchanges; (C) any value-added nonvoice
42       service in which computer processing applications are used to act on the
43       form, content, code or protocol of the information to be transmitted; (D)

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  1       any telecommunication service to a provider of telecommunication serv-
  2       ices which will be used to render telecommunications services, including
  3       carrier access services; or (E) any service or transaction defined in this
  4       section among entities classified as members of an affiliated group as
  5       provided by federal law (U.S.C. Section 1504). For the purposes of this
  6       subsection the term gross receipts does not include purchases of tele-
  7       phone, telegraph or telecommunications using a prepaid telephone call-
  8       ing card or pre-paid authorization number. As used in this subsection, a
  9       pre-paid telephone calling card or pre-paid authorization number means
10       the right to exclusively make telephone calls, paid for in advance, with
11       the prepaid value measured in minutes or other time units, that enables
12       the origination of calls using an access number or authorization code or
13       both, whether manually or electronically dialed;
14             (c) the gross receipts from the sale or furnishing of gas, water, elec-
15       tricity and heat, which sale is not otherwise exempt from taxation under
16       the provisions of this act, and whether furnished by municipally or pri-
17       vately owned utilities;
18             (d) the gross receipts from the sale of meals or drinks furnished at
19       any private club, drinking establishment, catered event, restaurant, eating
20       house, dining car, hotel, drugstore or other place where meals or drinks
21       are regularly sold to the public;
22             (e) the gross receipts from the sale of admissions to any place pro-
23       viding amusement, entertainment or recreation services including admis-
24       sions to state, county, district and local fairs, but such tax shall not be
25       levied and collected upon the gross receipts received from sales of ad-
26       missions to any cultural and historical event which occurs triennially;
27             (f) the gross receipts from the operation of any coin-operated device
28       dispensing or providing tangible personal property, amusement or other
29       services except laundry services, whether automatic or manually operated;
30             (g) the gross receipts from the service of renting of rooms by hotels,
31       as defined by K.S.A. 36-501 and amendments thereto, or by accommo-
32       dation brokers, as defined by K.S.A. 12-1692, and amendments thereto;
33             (h) the gross receipts from the service of renting or leasing of tangible
34       personal property except such tax shall not apply to the renting or leasing
35       of machinery, equipment or other personal property owned by a city and
36       purchased from the proceeds of industrial revenue bonds issued prior to
37       July 1, 1973, in accordance with the provisions of K.S.A. 12-1740 through
38       12-1749, and amendments thereto, and any city or lessee renting or leas-
39       ing such machinery, equipment or other personal property purchased
40       with the proceeds of such bonds who shall have paid a tax under the
41       provisions of this section upon sales made prior to July 1, 1973, shall be
42       entitled to a refund from the sales tax refund fund of all taxes paid
43       thereon;

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  1             (i) the gross receipts from the rendering of dry cleaning, pressing,
  2       dyeing and laundry services except laundry services rendered through a
  3       coin-operated device whether automatic or manually operated;
  4             (j) the gross receipts from the rendering of the services of washing
  5       and washing and waxing of vehicles;
  6             (k) the gross receipts from cable, community antennae and other sub-
  7       scriber radio and television services;
  8             (l) the gross receipts received from the sales of tangible personal
  9       property and services to all contractors, subcontractors or repairmen of
10       materials and supplies for use by them in erecting structures for others,
11       or building on, or otherwise improving, altering, or repairing real or per-
12       sonal or subcontractors, including such property and services purchased
13       for use in erecting structures or buildings or for otherwise improving,
14       altering, repairing, maintaining or servicing real property of others;
15             (m) the gross receipts received from fees and charges by public and
16       private clubs, drinking establishments, organizations and businesses for
17       participation in sports, games and other recreational activities, but such
18       tax shall not be levied and collected upon the gross receipts received from:
19       (1) Fees and charges by any political subdivision, by any organization
20       exempt from property taxation pursuant to paragraph Ninth of K.S.A. 79-
21       201, and amendments thereto, or by any youth recreation organization
22       exclusively providing services to persons 18 years of age or younger which
23       is exempt from federal income taxation pursuant to section 501(c)(3) of
24       the federal internal revenue code of 1986, for participation in sports,
25       games and other recreational activities; and (2) entry fees and charges for
26       participation in a special event or tournament sanctioned by a national
27       sporting association to which spectators are charged an admission which
28       is taxable pursuant to subsection (e);
29             (n) the gross receipts received from dues charged by public and pri-
30       vate clubs, drinking establishments, organizations and businesses, pay-
31       ment of which entitles a member to the use of facilities for recreation or
32       entertainment, but such tax shall not be levied and collected upon the
33       gross receipts received from: (1) Dues charged by any organization ex-
34       empt from property taxation pursuant to paragraphs Eighth and Ninth of
35       K.S.A. 79-201, and amendments thereto; and (2) sales of memberships
36       in a nonprofit organization which is exempt from federal income taxation
37       pursuant to section 501 (c)(3) of the federal internal revenue code of
38       1986, and whose purpose is to support the operation of a nonprofit zoo;
39             (o) the gross receipts received from the isolated or occasional sale of
40       motor vehicles or trailers but not including: (1) The transfer of motor
41       vehicles or trailers by a person to a corporation solely in exchange for
42       stock securities in such corporation; or (2) the transfer of motor vehicles
43       or trailers by one corporation to another when all of the assets of such

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  1       corporation are transferred to such other corporation; or (3) the sale of
  2       motor vehicles or trailers which are subject to taxation pursuant to the
  3       provisions of K.S.A. 79-5101 et seq., and amendments thereto, by an
  4       immediate family member to another immediate family member. For the
  5       purposes of clause (3), immediate family member means lineal ascendants
  6       or descendants, and their spouses. In determining the base for computing
  7       the tax on such isolated or occasional sale, the fair market value of any
  8       motor vehicle or trailer traded in by the purchaser to the seller may be
  9       deducted from the selling price;
10             (p) the gross receipts received for the service of installing or applying
11       tangible personal property which when installed or applied is not being
12       held for sale in the regular course of business, and whether or not such
13       tangible personal property when installed or applied remains tangible
14       personal property or becomes a part of real estate, except that no tax shall
15       be imposed upon the service of installing or applying tangible personal
16       property in connection with the original construction of a building or
17       facility, the original construction, reconstruction, restoration, remodeling,
18       renovation, repair or replacement of a residence or the construction, re-
19       construction, restoration, replacement or repair of a bridge or highway.
20             For the purposes of this subsection:
21             (1) "Original construction" shall mean the first or initial construction
22       of a new building or facility. The term "original construction" shall include
23       the addition of an entire room or floor to any existing building or facility,
24       the completion of any unfinished portion of any existing building or fa-
25       cility and the restoration, reconstruction or replacement of a building or
26       facility damaged or destroyed by fire, flood, tornado, lightning, explosion
27       or earthquake, but such term, except with regard to a residence, shall not
28       include replacement, remodeling, restoration, renovation or reconstruc-
29       tion under any other circumstances;
30             (2) "building" shall mean only those enclosures within which individ-
31       uals customarily are employed, or which are customarily used to house
32       machinery, equipment or other property, and including the land improve-
33       ments immediately surrounding such building;
34             (3) "facility" shall mean a mill, plant, refinery, oil or gas well, water
35       well, feedlot or any conveyance, transmission or distribution line of any
36       cooperative, nonprofit, membership corporation organized under or sub-
37       ject to the provisions of K.S.A. 17-4601 et seq., and amendments thereto,
38       or of any municipal or quasi-municipal corporation, including the land
39       improvements immediately surrounding such facility; and
40             (4) "residence" shall mean only those enclosures within which indi-
41       viduals customarily live;
42             (q) the gross receipts received for the service of repairing, servicing,
43       altering or maintaining tangible personal property, except computer soft-

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  1       ware described in subsection (s), which when such services are rendered
  2       is not being held for sale in the regular course of business, and whether
  3       or not any tangible personal property is transferred in connection there-
  4       with. The tax imposed by this subsection shall be applicable to the services
  5       of repairing, servicing, altering or maintaining an item of tangible personal
  6       property which has been and is fastened to, connected with or built into
  7       real property;
  8             (r) the gross receipts from fees or charges made under service or
  9       maintenance agreement contracts for services, charges for the providing
10       of which are taxable under the provisions of subsection (p) or (q);
11             (s) the gross receipts received from the sale of computer software,
12       and the sale of the services of modifying, altering, updating or maintaining
13       computer software. As used in this subsection, "computer software"
14       means information and directions loaded into a computer which dictate
15       different functions to be performed by the computer. Computer software
16       includes any canned or prewritten program which is held or existing for
17       general or repeated sale, even if the program was originally developed
18       for a single end user as custom computer software. The sale of computer
19       software or services does not include: (1) The initial sale of any custom
20       computer program which is originally developed for the exclusive use of
21       a single end user; or (2) those services rendered in the modification of
22       computer software when the modification is developed exclusively for a
23       single end user only to the extent of the modification and only to the
24       extent that the actual amount charged for the modification is separately
25       stated on invoices, statements and other billing documents provided to
26       the end user. The services of modification, alteration, updating and main-
27       tenance of computer software shall only include the modification, alter-
28       ation, updating and maintenance of computer software taxable under this
29       subsection whether or not the services are actually provided; and
30             (t) the gross receipts received for telephone answering services, in-
31       cluding mobile phone services, beeper services and other similar services;
32       and
33             (u) the gross receipts received from the sale of prepaid telephone
34       calling cards or pre-paid authorization numbers and the recharge of such
35       cards or numbers. A pre-paid telephone calling card or pre-paid author-
36       ization number means the right to exclusively make telephone calls, paid
37       for in advance, with the prepaid value measured in minutes or other time
38       units, that enables the origination of calls using an access number or
39       authorization code or both, whether manually or electronically dialed. If
40       the dale or recharge of such card or number does not take place at the
41       vendor's place of business, it shall be conclusively determined to take
42       place at the customer's shipping address; if there is no item shipped then
43       it shall be the customer's billing address. 

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  1       Sec.  3. K.S.A. 1998 Supp. 79-3602 and 79-3603 are hereby repealed.
  2        Sec.  4. This act shall take effect and be in force from and after its
  3       publication in the statute book.