Kansas Manufacturing Sales Tax Exemption: Certificates and Refunds

The Kansas manufacturing sales tax exemption removes the state’s 6.5% sales tax from most purchases tied to production, including raw materials, machinery, replacement parts, consumables, and the electricity, gas, and water used to run the line. It sits in K.S.A. 79-3606 and rests on what Kansas calls the integrated plant theory: the whole production facility counts as one operation, not a collection of separately taxed pieces.¹ Local sales tax stacks on the state rate, so getting the paperwork right matters on every invoice.

What Qualifies as Part of the Integrated Production Operation

Eligibility begins when raw materials leave storage and enter the production sequence, and it runs through every step where materials change form, composition, or character. Post-production handling, on-site warehousing, and distribution at the plant are included, along with waste and pollution control tied to the production process. Testing and quality control performed as a necessary part of the integrated operation also qualify.¹

The operation has to occur at a fixed location the manufacturer owns or controls, at one or more structures where tangible personal property is transformed into a different product for ultimate retail sale. A single company can run multiple plants that jointly produce one product and claim the exemption at each site.¹

Ingredients and Component Parts

K.S.A. 79-3606(m) exempts raw materials and components that become part of the finished product sold at retail. The property must be essential to the finished product, actually used in or on it, and become an integral and material part of it, either through physical incorporation or by being so essential the final product would be valueless without it.²

Property Consumed in Production

K.S.A. 79-3606(n) covers tangible personal property consumed during manufacturing even when nothing of it remains in the finished product. Chemicals, lubricants, and similar consumables qualify. Electricity, gas, and water used directly in production fall under the same subsection.¹

Machinery, Equipment, Parts, and Services

K.S.A. 79-3606(kk) exempts machinery and equipment used as an integral or essential part of the integrated production operation, along with repair and replacement parts, accessories, and installation or maintenance services performed on that equipment. Intra-plant transportation equipment that moves materials from the start of the line through on-site warehousing and distribution qualifies.³

R&D, Design, and Laboratory Equipment

Computers and related equipment used for engineering the finished product, research and development, or product design are exempt even when they sit outside the production line. Laboratory equipment that would otherwise qualify is exempt even when located away from the main plant.³

Safety Apparel

Employee clothing is generally taxable. Safety and protective apparel purchased by the employer and provided free to production employees is exempt. If workers buy their own gear or the employer charges them for it, the exemption does not apply.³

What Does Not Qualify

This is where manufacturers most often get caught. The exemption is broad for production, and narrow for everything else in the building. The Department of Revenue publishes the excluded categories, and auditors know them.³

Administrative and office equipment, including computers not used directly to control or measure the manufacturing process, plus office machines, furniture, and furnishings.
Equipment used for plant security, fire prevention, first aid, accounting, record keeping, advertising, marketing, sales, plant cleaning, communications, and employee scheduling.
Building systems: HVAC, plumbing, electrical, lighting, and communications fixtures not integral to the manufacturing operation, and general plant heating, cooling, and lighting.
Machinery, equipment, and tools used primarily to maintain or repair other equipment or the building itself.
Motor vehicles registered for operation on public highways. The one exception is portable plants for aggregate concrete, bulk cement, and asphalt, including cement mixing drums attached to a motor vehicle.
Pipes, pipelines, and equipment used to convey or condition natural gas, electricity, oil, or water outside the plant facility.
The building itself, except for exempt machinery permanently affixed to or physically part of it.

Some businesses are excluded outright, even if their work looks like manufacturing: contractors, construction companies, repair shops, machine shops, copying services, photo finishing services, food preparation businesses selling to consumers on or off premises, and telephone or utility transmission operations.³

Utilities on a Shared Meter

Most facilities run production and non-production areas off the same meter. When they do, you need to figure the exempt percentage of your consumption and submit that calculation to your utility company with Form ST-28B.⁴ The supporting worksheet must list every piece of taxable and exempt equipment on that meter. Kansas does not require a licensed engineer to prepare the study. The purchaser is responsible for the percentage, and a company officer must sign the form certifying accuracy. File a separate form for each meter where you’re claiming an exemption.

Which Exemption Certificate to Use

Kansas has three forms in this area, and they are commonly confused. Use the right one:

Form ST-201, the Integrated Production Machinery and Equipment Exemption Certificate, is the primary document for buying, installing, or repairing production machinery and equipment tax-free. Contractors and repair workers can also use it to buy parts and materials needed to service qualifying equipment. Use of the form is limited to businesses engaged in integrated production operations at a Kansas plant or facility.⁵
Form ST-28B is the utility exemption statement described above, submitted to your utility company.⁴
Form ST-28M is the Multi-Jurisdiction Exemption Certificate, meant for businesses claiming exemptions across state lines. It is not the Kansas manufacturing exemption certificate, and sources that identify it that way are wrong.⁶

Each form requires your Kansas tax registration number and a specific description of the property or services being purchased. Explain how the item fits within your integrated production operation and tie it to a stage of production. Vague descriptions invite audit scrutiny.

Giving Certificates to Vendors and Keeping Records

Present the completed certificate to your vendor at the time of purchase. The seller must keep a fully completed copy on file for at least three years from the date of the transaction, and must verify the identity of the buyer presenting it.⁷ Keep your own copies too. If the vendor’s file is lost or an audit question comes up, your duplicate is what protects you from an assessment.

Getting a Refund If You Paid Tax in Error

When sales tax is charged on a purchase that should have been exempt, file Form ST-21, the Sales and Use Tax Refund Application, directly with the Kansas Department of Revenue.⁸ You’ll need documentation showing the purchase met all exemption criteria at the time of the transaction. The burden of proof sits with you.

Refund claims must be filed within three years from the due date of the return for the reporting period in which the tax was paid.⁹ If you first asked the retailer for the refund and the retailer delayed, the director of taxation can extend the deadline by the time attributable to that delay. An incomplete application does not stop the clock; if required documentation is missing, the filing won’t count as a valid claim for purposes of the three-year limit.¹⁰ Mail applications to the Kansas Department of Revenue’s Audit Services Bureau at PO Box 3506, Topeka, KS 66601-3506.¹¹

Penalties for Misusing an Exemption Certificate

Issuing an exemption certificate to avoid tax for business or personal gain carries both criminal and civil consequences under K.S.A. 79-3651.¹²

Criminal: misuse is a misdemeanor punishable by a fine of up to $1,000, imprisonment for up to one year, or both.
Civil: the director of taxation will increase the standard penalty under K.S.A. 79-3615 by $250 or ten times the tax due, whichever is greater, on each transaction where the misuse occurred.

The civil penalty applies per transaction, not per audit. A manufacturer who hands certificates to vendors for non-qualifying office furniture or administrative supplies can rack up steep cumulative penalties fast. Willfully refusing to pay sales tax to a retailer is a separate misdemeanor offense.¹²

1
Kansas Office of Revisor of Statutes. Kansas Code 79-3606 – Exempt Sales
2
Legal Information Institute. Kansas Administrative Regulations 92-19-54 – Ingredient or Component Part
3
Kansas Department of Revenue. Manufacturing Machinery and Equipment Sales Tax Exemption
4
Kansas Department of Revenue. Statement for Sales Tax Exemption on Electricity, Gas, or Water Furnished Through One Meter
5
Kansas Department of Revenue. Integrated Production Machinery and Equipment Exemption Certificate
6
Kansas Department of Revenue. Multi-Jurisdiction Exemption Certificate
7
Kansas Department of Revenue. Kansas Sales and Use Tax Exemption Certificates – Pub KS-1520
8
Kansas Department of Revenue. Kansas Sales and Use Tax Refund Application
9
Kansas Office of Revisor of Statutes. Kansas Code 79-3650
10
Legal Information Institute. Kansas Administrative Regulations 92-19-49d – Review of Refund Applications
11
Kansas Department of Revenue. Pub KS-1220 Sales and Use Tax Refund
12
Kansas State Legislature. Kansas Statutes 79-3651 – Presumptions Relating to Exemption Certificates