If you are a Kansas restaurant, there are a few sales tax exemptions you should know about. This article outlines Kansas restaurant tax exemptions and shows you how to capitalize on them. It is important to remember that these exemptions only apply to Kansas restaurants. Before pursuing any of these exemptions we recommend consulting with your accountant or tax professional.
Kansas Restaurant Tax Exemptions for Purchases
Utilities Used for Cooking
This is an often unheard of Kansas restaurant tax exemption. All electricity, gas, and water that is used to prepare meals for customers is eligible for the Utility Sales Tax Exemption. Kansas requires that an energy study be performed on the facility to identify the exact percentage of utility that qualifies for the exemption. The energy study component makes this exemption difficult to qualify for – but not to worry! SmartSave specializes in helping businesses qualify for this tax exemption. For additional information on this exemption you can visit our page Utility Sales Tax Exemptions for Kansas Businesses. If you would like to find out how much you could be saving with the Utility Sales Tax Exemption, visit our Savings Estimator!
Food and Drink Items Purchased to be Resold
This is the most common exemption that a restaurant will claim because it directly increases profit margins on meals. All food that a restaurant purchases and resells to customers is exempt from sales tax because the restaurant is not the “final consumer” of the product. To qualify for this exemption, the restaurant will need to file a ST-28A Exemption Certificate with their vendor.
Disposable Items Provided to Customers
Most disposable items that a restaurant purchases and resells to the customer as a part of their meal, are exempt from sales tax. According to the Kansas Department of Revenue, disposable items may include: plastic dinnerware (plates, cups, utensils), drinking straws, paper napkins, paper bags, and takeout boxes. As a general rule here, if the item leaves with the meal and is not returned for reuse by the restaurant, it is considered an ingredient part. To qualify for this exemption, the restaurant will need to file a ST-28D Ingredient or Component Part Exemption Certificate with their vendor.
Labor Services on Original Construction of New Building
Labor services are not taxable when performed in connection with the “original construction” of a building. “Original Construction” as defined by the Kansas Department of Revenue is the: (1) first or initial construction of a new building; (2) addition of an entire room or floor to an existing building; (3) restoration, reconstruction, or replacement of a building damaged or destroyed by fire, flood, tornado, lightning, explosion, windstorm, ice loading and attendant winds, terrorism, or earthquake; or (4) completion of any unfinished portion of an existing building. If you think that your next remodel or new building construction may qualify as “Original Construction” be sure to mention something to your contractor.
Food Served to Employees
Food served without charge to employees of the restaurant is exempt from sales tax when purchased. The food must be given only to employees whose duties are related to the furnishing of meals to the public.
Trash service for restaurants is not subject to sales tax. If you’re currently being charged, speak with your vendor.
Cleaning services for restaurants are not subject to sales tax. If you’re currently being charged, speak with your vendor.
Professional Services (i.e. Accounting or Legal)
Professional services are not subject to sales tax in Kansas.
Purchase or Lease of Real Estate
The purchase or lease of real estate is exempt from sales tax.
Obtaining a Refund on Overpaid Sales Tax
If the restaurant would like to pursue a refund for overpaid sales tax then they may complete a ST-21 Sales and Use Tax Refund Application. This application can be used for most of the exemptions listed above. The restaurant will need to compile a list of past invoices/receipts from each vendor to complete the application. For the Utility Sales Tax Exemption, a Form ST-33 must be completed for a refund. All sales tax refunds are limited to Kansas’s Statute of Limitations of 36 months.
Kansas Restaurant Tax Exemptions on Sales
Tips Freely Given by Customers
Food Given Away with a Restaurant’s Coupon
Food Sold to Another Restaurant for Resale
Charges for Party Room Rental
Coat Checking Charges
Sales to Exempt Entities
Sales to the federal government, state or political subdivisions, churches or other exempt entities if paid directly by funds belonging to the exempt entity. In order to qualify for the exemption, the restaurant must maintain a copy of the bill to the exempt entity and proof that payment was made by the exempt entity (copy of voucher, check or credit card).
The information provided in this article regarding Kansas restaurant tax exemptions, has been obtained from the following publications produced by the Kansas Department of Revenue: