SALT Report 1288 – An opinion letter issued by the Kansas Department of Revenue addresses the taxability of a retailers charge for the assembly of manufactured products.
K.S.A. 21010 Supp. 79-3603(p) imposes sales tax on, “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 K.S.A. 2009 Supp. 79-3603(q) imposes tax on, “the gross receipts received for the service of repairing, servicing, altering or maintaining tangible personal property.”
In Kansas, if a retailer assembles a product at its store or shop that it later resells, the retailer recoups the cost it incurs assembling the product in the “selling price” it charges for the product. Kansas law outlines the definition of “sales or selling price” to include the retailer’s labor and service costs as well as any delivery and installation charges that are billed to the buyer.
Additionally, optional charges for assembling a product are considered taxable if the sale is conditioned upon the product being assembled by the retailer. Furthermore, any charges billed by a third-party serviceman to the consumer to assemble the product are taxable even if the consumer did not buy the items from the serviceman.
Therefore, the charge for the assembly of a manufactured product from its component parts is subject to Kansas sales tax whether the charge is billed by the retailer as part of the selling price of the product or by a third-party service provider as a stand-alone service charge.
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