Soil Excavation and Disposal Services Exempt from Tax in Kansas

Monday, March 26th, 2012

 
 
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Kansas
General

The Kansas Department of Revenue recently issued a private letter ruling explaining that soil excavation and disposal services are generally not subject to Kansas sales tax. Kan. Priv. Ltr. Rul. No. P-2011-011 (Dept. of Revenue Feb. 22, 2012).

The party who sought the ruling is a business that performs soil remediation services, including soil excavation and disposal. Petroleum producers hired the soil remediation provider to remove soil contaminated by saline produced water (brine) that is brought to surface during the petroleum production process. Without this remediation process, soil contaminated with brine deteriorates and kills off surrounding plant-life. The soil remediation provider goes on-site and either (1) removes and disposes of the contaminated soil or (2) removes and transforms the soil into a slurry (a thick suspension of solids turned in a liquid) that can be pumped into decommissioned gas caverns.

The Department advised that Kansas generally does not impose its retailers' sales tax on soil excavation services. However, excavation services will be subject to tax if the charge for the service is lumped together as part of a taxable installation service. Therefore, sales tax will not apply to separately stated charges for excavating brine contaminated soil. Additionally, excavated soil that is turned into slurry will qualify as a nontaxable disposal service.


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