Sales Tax State Activity Update - February 2004

Some Rendering Equipment Exempt in Kansas

The Kansas Department of Revenue recently issued a Private Letter Ruling that stated rendering activities qualified as “processing” under Kansas law. Therefore, equipment used in rendering may qualify for an exemption for tangible personal property essential to the processing of tangible personal property for sale. The ruling discussed the taxability of various purchases as follows:

• Hoses used on trucks registered to operate on public highways were taxable but those used at the plant to receive and handle raw materials prior to processing qualified for the exemption. Hoses used in cleaning and plant maintenance were subject to sales tax.
• Pipes used to pump animal fat to the cooking tanks and used to discharge waste-water from the production process were exempt. In order to qualify for the exemption, the waste-water pipes must be located on the plant grounds.
• Shrink-wrap used to package boxes on pallets was an exempt ingredient or component part so long as it was not returned to the wholesaler or retailer.
• Waste-water chemicals used to reduce bacterial growth and dissolve food particles were exempt tangible personal property used to treat by-products or waste derived from the production process.
• Boiler chemicals used in operation of a boiler that creates steam for the production process were exempt, but those used to clean and maintain the boiler when it was not in operation were taxable.
• Hydrochloric acid used to disinfect equipment was subject to tax.
• Grease storage tanks were exempt property used to store raw materials.
• A blast freezer, its repair parts and labor to repair the freezer were exempt because the freezer was necessary and essential to the process. The freezer was used to flash freeze the product during the production process and to maintain a temperature necessary for processing.

(Kansas Department of Revenue, Private Letter Ruling P-2003-057, 12/9/2003) 2/04

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