Kansas Sales Tax Equipment rental charges includable in gross receipts

The Kansas Court of Appeals determined that rental charges and tax on such rental charges the taxpayer paid are includable in its gross receipts. Any cost of doing business that is recovered from a customer must be part of the tax base of its retail charges, as supported by the plain language of Kan. Stat. Ann. § 79-3601 and Kan. Stat. Ann. § 79-3602. Even though the taxpayer’s equipment rentals were not for resale, they were used to perform the services for which the taxpayer charged its customers, and it is that transaction which is treated as a separate taxable transaction from the transaction between the taxpayer and the equipment rental companies. This was distinguished from prior case law in which employees’ meals and lodging were not used to perform computer upgrade services and thus did not add value to the service transaction at issue. Here, the taxpayer failed to consider how other charges were treated in its transactions or why owned equipment charges should be treated differently from rental equipment charges. The taxpayer could not have performed its services without renting the equipment for its employees to use when performing the services, and therefore, it should charge sales tax on charges for both its owned equipment and rented equipment. (In the Matter of the Appeal of Capital Electric Line Builders, Inc. from an order of the Division of Taxation on Assessment of Retailer’s Sales Tax, Kan. Ct. App., Dkt. No. 122,804, 05/06/2022.)