Alert
Sales Tax Exemption for Telecommunication Provider Purchases Available in Kansas
Companies that provide communications services in Kansas can effectively reduce purchase-related costs associated with the provision of communications services through Kansas House Bill No. 2106 (HB 2106) that was signed and enacted by Governor Laura Kelly.
HB 2106 is a tax-related act that provides a sales tax exemption for sales of property and services used in the provision of communications services beginning July 1, 2024. It can apply to both individuals and entities.
Gain a deeper understanding of HB 2106 and how it can benefit your telecommunications organization below.
HB 2106 Background
HB 2106’s treatment of communications providers’ purchases was passed in an effort to create fairness among Kansas’ different industries. Prior legislation exempted sales of business-to-business machinery and equipment transactions, but that treatment wasn’t extended to communications companies.
Kansas’ representatives reasoned that the passage of HB 2106 was comparable to 24 other states that have similar sales tax exemptions for equipment acquisitions by telecommunication businesses.
Key Changes
Kansas’ HB 2106 changes the tax laws related to sales and compensating use tax by providing a sales tax exemption for sales of property and services used in the provision of communications services.
The sales tax exemption applies to all sales of equipment, machinery, software, ancillary components, appurtenances, accessories, or other infrastructure purchased for use in the provision of communications services and all services purchased by a provider in the provision of the communications service used in the repair, maintenance, or installation in such communications service.
Key Terms and Eligibility
Leveraging the HB 2106 sales tax exemption requires an accurate understanding of key terms and eligibility requirements. Highlights include:
- Communications Service. Internet access service, telecommunications service, video service, or any combination thereof.
- Internet Access Service. Defined in section 1105 of the Internet Tax Freedom Act amendments of 2007, public law 110-108.
- Telecommunications Service. Defined in K.S.A. 79-3602, and amendments thereto.
- Video Service. Defined in K.S.A. 12-2022, and amendments thereto.
- Communications provider. A person or entity that sells communications service, including an affiliate or subsidiary. Communications providers’ purchase of services to provide their services are exempt.
Equipment, machinery, software, ancillary components, appurtenances, accessories, or other infrastructure includes:
It also includes other general central office or headend equipment, equipment used in successor technologies, and other infrastructure that is used in whole or in part to provide communications services.
We’re Here to Help
To learn if your business qualifies for the HB 2106 exemption or if purchases your businesses have made are exempt, please contact your Moss Adams professional.