Brief ⁽¹⁾

SB 377 would clarify Kansas sales tax law as it pertains to contractors who also sell property at retail. Under the bill, a contractor who maintains a dual purpose inventory of property for ordinary retail sale and for incorporation into projects would have the following sales tax obligations:

• �Ordinary Retail Sale. In the case of an ordinary retail sale, the sales tax would be due when the contractor who maintains a dual purpose inventory resells the property to the ultimate consumer. The sales tax would be based on the retail sale price and would be paid by the consumer.



• �Incorporation into a Project. In the case of incorporation of the property into a project, the sales tax would be due when the contractor who maintains a dual purpose inventory incorporates the property into a project. The sales tax would be paid by the contractor upon the basis of the total cost of the property to the contractor.

Background

SB 377 was introduced by the Special Committee on Assessment and Taxation. The Senate Committee heard testimony in support of the bill from representatives of the Kansas Department of Revenue, the Kansas Chamber of Commerce and Industry, and of several contractors who also sell items at retail.

The practical effect of the proposed exception is to delay the payment of sales tax on property purchased by a contractor who maintains a dual purpose inventory until such time as the property is incorporated into a project or sold at retail.

The Department of Revenue reports that passage of this bill would have no fiscal impact.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/bill_search.html