CHAPTER 150 SENATE BILL No. 265 An Act concerning taxation; relating to collection and remittance of sales and compensating
tax; amending K.S.A. 2002 Supp. 79-3603, 79-3620, 79-3703 and 79-3710 and repealing
the existing sections.
Be it enacted by the Legislature of the State of Kansas:

      Section  1. K.S.A. 2002 Supp. 79-3603 is hereby amended to read as
follows: 79-3603. For the privilege of engaging in the business of selling
tangible personal property at retail in this state or rendering or furnishing
any of the services taxable under this act, there is hereby levied and there
shall be collected and paid a tax at the rate of 5.3% on and after July 1,
2002, and before July 1, 2004, 5.2% on and after July 1, 2004, and before
July 1, 2005 2006, and 5% on and after July 1, 2005 2006, and, within a
redevelopment district established pursuant to K.S.A. 74-8921, and
amendments thereto, there is hereby levied and there shall be collected
and paid an additional tax at the rate of 2% until the earlier of the date
the bonds issued to finance or refinance the redevelopment project have
been paid in full or the final scheduled maturity of the first series of bonds
issued to finance any part of the project upon:

      (a) The gross receipts received from the sale of tangible personal
property at retail within this state;

      (b)  (1) the gross receipts from intrastate telephone or telegraph serv-
ices; (2) the gross receipts received from the sale of interstate telephone
or telegraph services, which (A) originate within this state and terminate
outside the state and are billed to a customer's telephone number or
account in this state; or (B) originate outside this state and terminate
within this state and are billed to a customer's telephone number or ac-
count in this state except that the sale of interstate telephone or telegraph
service does not include: (A) Any interstate incoming or outgoing wide
area telephone service or wide area transmission type service which en-
titles the subscriber to make or receive an unlimited number of com-
munications to or from persons having telephone service in a specified
area which is outside the state in which the station provided this service
is located; (B) any interstate private communications service to the per-
sons contracting for the receipt of that service that entitles the purchaser
to exclusive or priority use of a communications channel or group of
channels between exchanges; (C) any value-added nonvoice service in
which computer processing applications are used to act on the form, con-
tent, code or protocol of the information to be transmitted; (D) any tel-
ecommunication service to a provider of telecommunication services
which will be used to render telecommunications services, including car-
rier access services; or (E) any service or transaction defined in this sec-
tion among entities classified as members of an affiliated group as pro-
vided by section 1504 of the federal internal revenue code of 1986, as in
effect on January 1, 2001. For the purposes of this subsection the term
gross receipts does not include purchases of telephone, telegraph or tel-
ecommunications using a prepaid telephone calling card or prepaid au-
thorization number. As used in this subsection, a prepaid telephone call-
ing card or prepaid authorization number means the right to exclusively
make telephone calls, paid for in advance, that enables the origination of
calls using an access number or authorization code or both, whether man-
ually or electronically dialed; and (3) the gross receipts from the provision
of services taxable under this subsection which are billed on a combined
basis with nontaxable services, shall be accounted for and the tax remitted
as follows: The taxable portion of the selling price of those combined
services shall include only those charges for taxable services if the selling
price for the taxable services can be readily distinguishable in the retailer's
books and records from the selling price for the nontaxable services. Oth-
erwise, the gross receipts from the sale of both taxable and nontaxable
services billed on a combined basis shall be deemed attributable to the
taxable services included therein. Within 90 days of billing taxable services
on a combined basis with nontaxable services, the retailer shall enter into
a written agreement with the secretary identifying the methodology to be
used in determining the taxable portion of the selling price of those com-
bined services. The burden of proving that any receipt or charge is not
taxable shall be upon the retailer. Upon request from the customer, the
retailer shall disclose to the customer the selling price for the taxable
services included in the selling price for the taxable and nontaxable serv-
ices billed on a combined basis;

      (c) the gross receipts from the sale or furnishing of gas, water, elec-
tricity and heat, which sale is not otherwise exempt from taxation under
the provisions of this act, and whether furnished by municipally or pri-
vately owned utilities but such tax shall not be levied and collected upon
the gross receipts from: (1) The sale of a rural water district benefit unit;
(2) a water system impact fee, system enhancement fee or similar fee
collected by a water supplier as a condition for establishing service; or (3)
connection or reconnection fees collected by a water supplier;

      (d) the gross receipts from the sale of meals or drinks furnished at
any private club, drinking establishment, catered event, restaurant, eating
house, dining car, hotel, drugstore or other place where meals or drinks
are regularly sold to the public;

      (e) the gross receipts from the sale of admissions to any place pro-
viding amusement, entertainment or recreation services including admis-
sions to state, county, district and local fairs, but such tax shall not be
levied and collected upon the gross receipts received from sales of ad-
missions to any cultural and historical event which occurs triennially;

      (f) the gross receipts from the operation of any coin-operated device
dispensing or providing tangible personal property, amusement or other
services except laundry services, whether automatic or manually operated;

      (g) the gross receipts from the service of renting of rooms by hotels,
as defined by K.S.A. 36-501 and amendments thereto, or by accommo-
dation brokers, as defined by K.S.A. 12-1692, and amendments thereto
but such tax shall not be levied and collected upon the gross receipts
received from sales of such service to the federal government and any
agency, officer or employee thereof in association with the performance
of official government duties;

      (h) the gross receipts from the service of renting or leasing of tangible
personal property except such tax shall not apply to the renting or leasing
of machinery, equipment or other personal property owned by a city and
purchased from the proceeds of industrial revenue bonds issued prior to
July 1, 1973, in accordance with the provisions of K.S.A. 12-1740 through
12-1749, and amendments thereto, and any city or lessee renting or leas-
ing such machinery, equipment or other personal property purchased
with the proceeds of such bonds who shall have paid a tax under the
provisions of this section upon sales made prior to July 1, 1973, shall be
entitled to a refund from the sales tax refund fund of all taxes paid
thereon;

      (i) the gross receipts from the rendering of dry cleaning, pressing,
dyeing and laundry services except laundry services rendered through a
coin-operated device whether automatic or manually operated;

      (j) the gross receipts from the rendering of the services of washing
and washing and waxing of vehicles;

      (k) the gross receipts from cable, community antennae and other sub-
scriber radio and television services;

      (l)  (1) except as otherwise provided by paragraph (2), the gross re-
ceipts received from the sales of tangible personal property to all con-
tractors, subcontractors or repairmen for use by them in erecting struc-
tures, or building on, or otherwise improving, altering, or repairing real
or personal property.

      (2) Any such contractor, subcontractor or repairman who maintains
an inventory of such property both for sale at retail and for use by them
for the purposes described by paragraph (1) shall be deemed a retailer
with respect to purchases for and sales from such inventory, except that
the gross receipts received from any such sale, other than a sale at retail,
shall be equal to the total purchase price paid for such property and the
tax imposed thereon shall be paid by the deemed retailer;

      (m) the gross receipts received from fees and charges by public and
private clubs, drinking establishments, organizations and businesses for
participation in sports, games and other recreational activities, but such
tax shall not be levied and collected upon the gross receipts received from:
(1) Fees and charges by any political subdivision, by any organization
exempt from property taxation pursuant to paragraph Ninth of K.S.A. 79-
201, and amendments thereto, or by any youth recreation organization
exclusively providing services to persons 18 years of age or younger which
is exempt from federal income taxation pursuant to section 501(c)(3) of
the federal internal revenue code of 1986, for participation in sports,
games and other recreational activities; and (2) entry fees and charges for
participation in a special event or tournament sanctioned by a national
sporting association to which spectators are charged an admission which
is taxable pursuant to subsection (e);

      (n) the gross receipts received from dues charged by public and pri-
vate clubs, drinking establishments, organizations and businesses, pay-
ment of which entitles a member to the use of facilities for recreation or
entertainment, but such tax shall not be levied and collected upon the
gross receipts received from: (1) Dues charged by any organization ex-
empt from property taxation pursuant to paragraphs Eighth and Ninth of
K.S.A. 79-201, and amendments thereto; and (2) sales of memberships
in a nonprofit organization which is exempt from federal income taxation
pursuant to section 501 (c)(3) of the federal internal revenue code of
1986, and whose purpose is to support the operation of a nonprofit zoo;

      (o) the gross receipts received from the isolated or occasional sale of
motor vehicles or trailers but not including: (1) The transfer of motor
vehicles or trailers by a person to a corporation or limited liability com-
pany solely in exchange for stock securities or membership interest in
such corporation or limited liability company; or (2) the transfer of motor
vehicles or trailers by one corporation or limited liability company to
another when all of the assets of such corporation or limited liability
company are transferred to such other corporation or limited liability
company; or (3) the sale of motor vehicles or trailers which are subject
to taxation pursuant to the provisions of K.S.A. 79-5101 et seq., and
amendments thereto, by an immediate family member to another im-
mediate family member. For the purposes of clause (3), immediate family
member means lineal ascendants or descendants, and their spouses. In
determining the base for computing the tax on such isolated or occasional
sale, the fair market value of any motor vehicle or trailer traded in by the
purchaser to the seller may be deducted from the selling price;

      (p) the gross receipts received for the service of installing or applying
tangible personal property which when installed or applied is not being
held for sale in the regular course of business, and whether or not such
tangible personal property when installed or applied remains tangible
personal property or becomes a part of real estate, except that no tax shall
be imposed upon the service of installing or applying tangible personal
property in connection with the original construction of a building or
facility, the original construction, reconstruction, restoration, remodeling,
renovation, repair or replacement of a residence or the construction, re-
construction, restoration, replacement or repair of a bridge or highway.

      For the purposes of this subsection:

      (1) ``Original construction'' shall mean the first or initial construction
of a new building or facility. The term ``original construction'' shall include
the addition of an entire room or floor to any existing building or facility,
the completion of any unfinished portion of any existing building or fa-
cility and the restoration, reconstruction or replacement of a building or
facility damaged or destroyed by fire, flood, tornado, lightning, explosion
or earthquake, but such term, except with regard to a residence, shall not
include replacement, remodeling, restoration, renovation or reconstruc-
tion under any other circumstances;

      (2) ``building'' shall mean only those enclosures within which individ-
uals customarily are employed, or which are customarily used to house
machinery, equipment or other property, and including the land improve-
ments immediately surrounding such building;

      (3) ``facility'' shall mean a mill, plant, refinery, oil or gas well, water
well, feedlot or any conveyance, transmission or distribution line of any
cooperative, nonprofit, membership corporation organized under or sub-
ject to the provisions of K.S.A. 17-4601 et seq., and amendments thereto,
or of any municipal or quasi-municipal corporation, including the land
improvements immediately surrounding such facility; and

      (4) ``residence'' shall mean only those enclosures within which indi-
viduals customarily live;

      (q) the gross receipts received for the service of repairing, servicing,
altering or maintaining tangible personal property which when such serv-
ices are rendered is not being held for sale in the regular course of busi-
ness, and whether or not any tangible personal property is transferred in
connection therewith. The tax imposed by this subsection shall be appli-
cable to the services of repairing, servicing, altering or maintaining an
item of tangible personal property which has been and is fastened to,
connected with or built into real property;

      (r) the gross receipts from fees or charges made under service or
maintenance agreement contracts for services, charges for the providing
of which are taxable under the provisions of subsection (p) or (q);

      (s) the gross receipts received from the sale of computer software,
and the sale of the services of modifying, altering, updating or maintaining
computer software. As used in this subsection, ``computer software''
means information and directions loaded into a computer which dictate
different functions to be performed by the computer. Computer software
includes any canned or prewritten program which is held or existing for
general or repeated sale, even if the program was originally developed
for a single end user as custom computer software;

      (t) the gross receipts received for telephone answering services, mo-
bile telecommunication services, beeper services and other similar serv-
ices. On and after August 1, 2002, the provisions of the federal mobile
telecommunications sourcing act as in effect on January 1, 2002, shall be
applicable to all sales of mobile telecommunication services taxable pur-
suant to this subsection. The secretary of revenue is hereby authorized
and directed to perform any act deemed necessary to properly implement
such provisions;

      (u) the gross receipts received from the sale of prepaid telephone
calling cards or prepaid authorization numbers and the recharge of such
cards or numbers. A prepaid telephone calling card or prepaid authori-
zation number means the right to exclusively make telephone calls, paid
for in advance, that enables the origination of calls using an access number
or authorization code or both, whether manually or electronically dialed.
If the sale or recharge of such card or number does not take place at the
vendor's place of business, it shall be conclusively determined to take
place at the customer's shipping address; if there is no item shipped then
it shall be the customer's billing address; and

      (v) the gross receipts received from the sales of bingo cards, bingo
faces and instant bingo tickets by licensees under K.S.A. 79-4701, et seq.,
and amendments thereto, shall be taxed at a rate of: (1) 4.9% on July 1,
2000, and before July 1, 2001; and (2) 2.5% on July 1, 2001, and before
July 1, 2002. From and after July 1, 2002, all sales of bingo cards, bingo
faces and instant bingo tickets by licensees under K.S.A. 79-4701 et seq.,
and amendments thereto, shall be exempt from taxes imposed pursuant
to this section.

      Sec.  2. K.S.A. 2002 Supp. 79-3620 is hereby amended to read as
follows: 79-3620. (a) All revenue collected or received by the director of
taxation from the taxes imposed by this act shall be remitted to the state
treasurer in accordance with the provisions of K.S.A. 75-4215, and
amendments thereto. Upon receipt of each such remittance, the state
treasurer shall deposit the entire amount in the state treasury, less
amounts withheld as provided in subsection (b) and amounts credited as
provided in subsection (c) and (d), to the credit of the state general fund.

      (b) A refund fund, designated as ``sales tax refund fund'' not to exceed
$100,000 shall be set apart and maintained by the director from sales tax
collections and estimated tax collections and held by the state treasurer
for prompt payment of all sales tax refunds including refunds authorized
under the provisions of K.S.A. 79-3635, and amendments thereto. Such
fund shall be in such amount, within the limit set by this section, as the
director shall determine is necessary to meet current refunding require-
ments under this act. In the event such fund as established by this section
is, at any time, insufficient to provide for the payment of refunds due
claimants thereof, the director shall certify the amount of additional funds
required to the director of accounts and reports who shall promptly trans-
fer the required amount from the state general fund to the sales tax refund
fund, and notify the state treasurer, who shall make proper entry in the
records.

      (c)  (1) The state treasurer shall credit 5/98 of the revenue collected
or received from the tax imposed by K.S.A. 79-3603, and amendments
thereto, at the rate of 4.9%, and deposited as provided in subsection (a),
exclusive of amounts credited pursuant to subsection (d), in the state
highway fund.

      (2) The state treasurer shall credit 5/104 of the revenue collected or
received from the tax imposed by K.S.A. 79-3603, and amendments
thereto, at the rate of 5.2%, and deposited as provided in subsection (a),
exclusive of amounts credited pursuant to subsection (d), in the state
highway fund.

      (3) The state treasurer shall credit 5/106 of the revenue collected or
received from the tax imposed by K.S.A. 79-3603, and amendments
thereto, at the rate of 5.3%, and deposited as provided in subsection (a),
exclusive of amounts credited pursuant to subsection (d), in the state
highway fund.

      (4) (3) The state treasurer shall credit 1/20 of the revenue collected
and received from the tax imposed by K.S.A. 79-3603, and amendments
thereto, at the rate of 5%, and deposited as provided by subsection (a),
exclusive of amounts credited pursuant to subsection (d), in the state
highway fund.

      (d) The state treasurer shall credit all revenue collected or received
from the tax imposed by K.S.A. 79-3603, and amendments thereto, as
certified by the director, from taxpayers doing business within that por-
tion of a redevelopment district occupied by a redevelopment project that
was determined by the secretary of commerce and housing to be of state-
wide as well as local importance or will create a major tourism area for
the state as defined in K.S.A. 12-1770a, and amendments thereto, to the
city bond finance fund, which fund is hereby created. The provisions of
this subsection shall expire when the total of all amounts credited here-
under and under subsection (d) of K.S.A. 79-3710, and amendments
thereto, is sufficient to retire the special obligation bonds issued for the
purpose of financing all or a portion of the costs of such redevelopment
project.

      Sec.  3. K.S.A. 2002 Supp. 79-3703 is hereby amended to read as
follows: 79-3703. There is hereby levied and there shall be collected from
every person in this state a tax or excise for the privilege of using, storing,
or consuming within this state any article of tangible personal property.
Such tax shall be levied and collected in an amount equal to the consid-
eration paid by the taxpayer multiplied by the rate of 5.3% on and after
July 1, 2002, and before July 1, 2004, 5.2% on and after July 1, 2004, and
before July 1, 2005 2006, and 5% on and after July 1, 2005 2006. Within
a redevelopment district established pursuant to K.S.A. 74-8921, and
amendments thereto, there is hereby levied and there shall be collected
and paid an additional tax of 2% until the earlier of: (1) The date the
bonds issued to finance or refinance the redevelopment project under-
taken in the district have been paid in full; or (2) the final scheduled
maturity of the first series of bonds issued to finance the redevelopment
project. All property purchased or leased within or without this state and
subsequently used, stored or consumed in this state shall be subject to
the compensating tax if the same property or transaction would have been
subject to the Kansas retailers' sales tax had the transaction been wholly
within this state.

      Sec.  4. K.S.A. 2002 Supp. 79-3710 is hereby amended to read as
follows: 79-3710. (a) All revenue collected or received by the director
under the provisions of this act shall be remitted to the state treasurer in
accordance with the provisions of K.S.A. 75-4215, and amendments
thereto. Upon receipt of each such remittance, the state treasurer shall
deposit the entire amount in the state treasury, less amounts set apart as
provided in subsection (b) and amounts credited as provided in subsection
(c) and (d), to the credit of the state general fund.

      (b) A revolving fund, designated as ``compensating tax refund fund''
not to exceed $10,000 shall be set apart and maintained by the director
from compensating tax collections and estimated tax collections and held
by the state treasurer for prompt payment of all compensating tax refunds.
Such fund shall be in such amount, within the limit set by this section,
as the director shall determine is necessary to meet current refunding
requirements under this act.

      (c)  (1) The state treasurer shall credit 5/98 of the revenue collected
or received from the tax imposed by K.S.A. 79-3703, and amendments
thereto, at the rate of 4.9%, and deposited as provided in subsection (a),
exclusive of amounts credited pursuant to subsection (d), in the state
highway fund.

      (2) The state treasurer shall credit 5/104 of the revenue collected or
received from the tax imposed by K.S.A. 79-3703, and amendments
thereto, at the rate of 5.2%, and deposited as provided in subsection (a),
exclusive of amounts credited pursuant to subsection (d), in the state
highway fund.

      (3) The state treasurer shall credit 5/106 of the revenue collected or
received from the tax imposed by K.S.A. 79-3703, and amendments
thereto, at the rate of 5.3%, and deposited as provided in subsection (a),
exclusive of amounts credited pursuant to subsection (d), in the state
highway fund.

      (4) (3) The state treasurer shall credit 1/20 of the revenue collected or
received from the tax imposed by K.S.A. 79-3703, and amendments
thereto, at the rate of 5%, and deposited as provided by subsection (a),
exclusive of amounts credited pursuant to subsection (d), in the state
highway fund.

      (d) The state treasurer shall credit all revenue collected or received
from the tax imposed by K.S.A. 79-3703, and amendments thereto, as
certified by the director, from taxpayers doing business within that por-
tion of a redevelopment district occupied by a redevelopment project that
was determined by the secretary of commerce and housing to be of state-
wide as well as local importance or will create a major tourism area for
the state as defined in K.S.A. 12-1770a, and amendments thereto, to the
city bond finance fund created by subsection (d) of K.S.A. 79-3620, and
amendments thereto. The provisions of this subsection shall expire when
the total of all amounts credited hereunder and under subsection (d) of
K.S.A. 79-3620, and amendments thereto, is sufficient to retire the special
obligation bonds issued for the purpose of financing all or a portion of
the costs of such redevelopment project.

 Sec.  5. K.S.A. 2002 Supp. 79-3603, 79-3620, 79-3703 and 79-3710
are hereby repealed.

 Sec.  6. This act shall take effect and be in force from and after its
publication in the statute book.

Approved May 19, 2003.
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