Kansas – Taxability of Aviation Gasoline and Jet Fuel

SALT Report 1287 – The Kansas Department of Revenue issued an opinion letter addressing the taxability of sales of aviation gasoline and jet fuel to a private fixed-base operator (FBO) on a military base that resells the fuel to the final consumer. The Department addresses two issues in this letter 1) the taxability of the fuel, and 2) sales made on federally owned land.

1) K.S.A. 2009 Supp. 79-3606(a) states that, “fuel is subject to sales tax unless the motor fuel excise tax has been paid.”  Therefore, if Kansas motor-fuel tax does not apply, as in the case of dyed-diesel fuel or aviation fuel, then Kansas sales tax applies. The only exceptions are if the purchaser or final consumer provides the retailer with a sales-tax exemption certificate. Examples of exempt fuel sales to a final consumer are:
  • Dyed-diesel consumed by farmers in their field work
  • Dyed-diesel consumed by rock crushing equipment in quarry operations
  • Aviation fuel consumed by scheduled airlines; and
  • Dyed-diesel stored in a separate tank that powers an interstate motor carrier’s refrigeration unit
2) The belief held by the FBO that his sales of aviation fuel are exempt because the business is located on a military base has no basis under Kansas law, specifically the Buck Act, which permits “states to extend their Sales, Use and Income taxes to person[s] residing or carrying on business or to transactions occurring in Federal areas.”  Sec. 105 of the Buck Act specifically authorizes a State to collect sales and use tax: “. . . in any Federal area within such State to the same extent and with the same effect as though such area was not a Federal area.”
Based on the above facts, the Department ruled that the FBO is required to register to collect, report, and remit Kansas retailers’ sales tax on its sales of aviation fuel.
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