Project Exemption Certificates (PEC) / Agent Status
A Project Exemption Certificate (PEC) is a numbered certificate issued by the Kansas Department or Revenue or its authorized agent. As the name implies, a PEC exempts the entire project – materials, supplies, equipment rental and labor services – from sales tax.
What purchases are exempt when using a PEC?
A Project Exemption Certificate (PEC) issued by the Kansas Department of Revenue, or its agents:
- allows contractors, subcontractors and repairmen to purchase materials exempt from Kansas retailers' sales and compensating use taxes;
- relieves contractors, subcontractors and repairmen from charging their customers Kansas retailers' sales tax on the labor services they perform to construct, reconstruct, remodel or repair buildings or facilities;
- exempts all of the machinery, equipment and furnishings installed in the project from sales and use tax; and
- exempts the rental of construction equipment for the qualified job.
In essence, when a PEC is issued for a project all of the materials, labor, equipment, machinery and furnishings which are incorporated into the project are exempt from Kansas sales and compensating taxes.
Who qualifies for a PEC?
The following exempt entities qualify for a Project Exemption Certificate under KSA 79-3606:
- Booth Theatre Foundation (xxx)
- Elementary or secondary school or educational institution (d)
- Groundwater and rural water districts paying water protection fee (s)
- Kansas Children’s Service League (uuu)
- Museum within a designated qualified hometown (ttt)
- Non-profit charitable family providers (sss)
- Non-profit food distribution center (iii)
- Non-profit zoo (501 (c) (3)) (xx)
- Political subdivisions of the state of Kansas (d)
- Primary care clinic (501 (c) (3)) (ccc)
- Public or private nonprofit hospital (d)
- Religious Organization (501 (c) (3)) (aaa)
- TLC for children and families, inc. (qqq)
- United States Government, its agencies or instrumentalities (e)
The state of Kansas and its agencies DO NOT qualify for a Project Exemption Certificate. Materials purchased by contractors for a state of Kansas project are always taxable. Only direct purchases by the state of Kansas or its agencies are exempt.
Effective July 1, 1997, Kansas law authorized the department to designate certain exempt entities as agents of the state for the sole purpose of issuing Project Exemption Certificates. The purpose of this designation was to expedite the issuance of exemption certificates.
Who qualifies for agent status?
The following exempt organizations / entities can qualify for Agent Status under KSA 79-3606:
- Agency or Instrumentality of the United States Government (e)
- Political Subdivision of the state of Kansas (d)
- Public or Private Elementary or Secondary School (d)
- Public or Private Nonprofit Educational Institution (d)
- Public or Private Nonprofit Hospital (d)