Kansas: Sales and Use Tax on Oil and Gas Well Services
- Sales Tax News
- Dec 18, 2013 | Gail Cole
There is oil in Kansas. As a result, there are questions about the taxability of services and products related to the oil industry.
The Kansas Department of Revenue has created a self-audit fact sheet regarding sales tax and oil and gas well services. It lists as taxable or exempt numerous services and goods used in the oil and gas well industry.
Taxable tangible goods
Tangible goods subject to Kansas sales and use tax include but are not limited to:
- The purchase or rental of “drilling equipment such as cable, derricks, pumping units,” etc;
- “Oil and gas well equipment including but not limited to waling beam pumps, ... electric motors, belts, ...;”
- “Compressors used for severing or distributing natural gas;”
- “Materials that make up an oil, gas or disposable well structure such as casing, plugs, rods, cements and well heads;”
- “Tools including wrenches, screwdrivers, hammers and saws even though such tools must be replaced frequently because of loss, breakage or theft;”
- “Safety and fire-fighting equipment;” and
- “Security cameras and other security equipment.”
Services subject to Kansas sales and use tax include but are not limited to:
- “Freight charges for items purchased not for resale unless billed directly by freight company;
- “Parts and labor services for repairing, servicing, altering or maintaining tangible personal property, such as computers, printers, copiers, security equipment, etc;”
- “Office utilities, shop utilities;” and
- “Software and software upgrades and labor services to modify, alter, update or maintain software.”
Exempt tangible goods
Tangible goods exempt from Kansas sales and use tax include but are not limited to:
- “Materials consumed including drilling mud, chemicals, acids reagents and solvents that are placed in the well bore;”
- Consumables including lubricants for drilling equipment along with the electricity, diesel fuels, gasoline or gas used to power drilling equipment;”
Services exempt from Kansas sales and use tax include but are not limited to:
- “Services for refurbishing a drill bit;”
- “Freight charges for items purchased for resale;”
- “Snow removal and lawn mowing services, trimming, edging, or tree removal, etc;”
- “Purchase or lease of real estate, insurance;” and
- “Professional services such as accounting, engineering or legal services.”
A valid exemption certificate is required in order for an exemption from sales tax to apply.
Read the complete self-audit fact sheet.
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