CHAPTER 181 HOUSE BILL No. 3016
      An Act relating to taxation; concerning treatment of sales of prepaid telephone calling cards;
      amending the Kansas estate tax act; amending K.S.A. 79-32,111, 79-3602, as amended
      by section 29 of 1998 Senate Bill No. 493, 79-3603, as amended by section 30 of 1998
      Senate Bill No. 493, and section 1 of 1998 Senate Bill No. 493 and repealing the existing
      sections; also repealing K.S.A. 79-1546.

Be it enacted by the Legislature of the State of Kansas:

Section 1. K.S.A. 79-3602, as amended by section 29 of 1998 Senate
Bill No. 493, is hereby amended to read as follows: 79-3602. (a) ``Persons''
means any individual, firm, copartnership, joint adventure, association,
corporation, estate or trust, receiver or trustee, or any group or combi-
nation acting as a unit, and the plural as well as the singular number; and
shall specifically mean any city or other political subdivision of the state
of Kansas engaging in a business or providing a service specifically taxable
under the provisions of this act.

(b) ``Director'' means the state director of taxation.

(c) ``Sale'' or ``sales'' means the exchange of tangible personal prop-
erty, as well as the sale thereof for money, and every transaction, condi-
tional or otherwise, for a consideration, constituting a sale, including the
sale or furnishing of electrical energy, gas, water, services or entertain-
ment taxable under the terms of this act and including, except as provided
in the following provision, the sale of the use of tangible personal property
by way of a lease, license to use or the rental thereof regardless of the
method by which the title, possession or right to use the tangible personal
property is transferred. The term ``sale'' or ``sales'' shall not mean the sale
of the use of any tangible personal property used as a dwelling by way of
a lease or rental thereof for a term of more than 28 consecutive days.

(d) ``Retailer'' means a person regularly engaged in the business of
selling tangible personal property at retail or furnishing electrical energy,
gas, water, services or entertainment, and selling only to the user or con-
sumer and not for resale.

(e) ``Retail sale'' or ``sale at retail'' means all sales made within the
state of tangible personal property or electrical energy, gas, water, services
or entertainment for use or consumption and not for resale.

(f) ``Tangible personal property'' means corporeal personal property.
Such term shall include any; (1) any computer software program which
is not a custom computer software program, as described by subsection
(s) of K.S.A. 79-3603, and amendments thereto; and (2) and prepaid
telephone calling card or prepaid authorization number, or recharge of
such card or number, as described by subsection (b) of K.S.A. 79-3603,
and amendments thereto.

(g) ``Selling price'' means the total cost to the consumer exclusive of
discounts allowed and credited, but including freight and transportation
charges from retailer to consumer.

(h) ``Gross receipts'' means the total selling price or the amount re-
ceived as defined in this act, in money, credits, property or other consid-
eration valued in money from sales at retail within this state; and em-
braced within the provisions of this act. The taxpayer, may take credit in
the report of gross receipts for: (1) An amount equal to the selling price
of property returned by the purchaser when the full sale price thereof,
including the tax collected, is refunded in cash or by credit; (2) an amount
equal to the allowance given for the trade-in of property.

(i) ``Taxpayer'' means any person obligated to account to the director
for taxes collected under the terms of this act.

(j) ``Isolated or occasional sale'' means the nonrecurring sale of tan-
gible personal property, or services taxable hereunder by a person not
engaged at the time of such sale in the business of selling such property
or services. Any religious organization which makes a nonrecurring sale
of tangible personal property acquired for the purpose of resale shall be
deemed to be not engaged at the time of such sale in the business of
selling such property. Such term shall include: (1) Any sale by a bank,
savings and loan institution, credit union or any finance company licensed
under the provisions of the Kansas uniform consumer credit code of tan-
gible personal property which has been repossessed by any such entity;
and (2) any sale of tangible personal property made by an auctioneer or
agent on behalf of not more than two principals or households if such
sale is nonrecurring and any such principal or household is not engaged
at the time of such sale in the business of selling tangible personal prop-
erty.

(k) ``Service'' means those services described in and taxed under the
provisions of K.S.A. 79-3603 and amendments thereto.

(l) ``Ingredient or component part'' means tangible personal property
which is necessary or essential to, and which is actually used in and be-
comes an integral and material part of tangible personal property or serv-
ices produced, manufactured or compounded for sale by the producer,
manufacturer or compounder in its regular course of business. The fol-
lowing items of tangible personal property are hereby declared to be
ingredients or component parts, but the listing of such property shall not
be deemed to be exclusive nor shall such listing be construed to be a
restriction upon, or an indication of, the type or types of property to be
included within the definition of ``ingredient or component part'' as
herein set forth:

(1) Containers, labels and shipping cases used in the distribution of
property produced, manufactured or compounded for sale which are not
to be returned to the producer, manufacturer or compounder for reuse.

(2) Containers, labels, shipping cases, paper bags, drinking straws,
paper plates, paper cups, twine and wrapping paper used in the distri-
bution and sale of property taxable under the provisions of this act by
wholesalers and retailers and which is not to be returned to such whole-
saler or retailer for reuse.

(3) Seeds and seedlings for the production of plants and plant prod-
ucts produced for resale.

(4) Paper and ink used in the publication of newspapers.

(5) Fertilizer used in the production of plants and plant products
produced for resale.

(6) Feed for animals, fowl and aquatic plants and animals, the primary
purpose of which is use in agriculture or aquaculture, as defined in K.S.A.
47-1901, and amendments thereto, the production of food for human
consumption, the production of animal, dairy, poultry or aquatic plant
and animal products, fiber, fur, or the production of offspring for use for
any such purpose or purposes.

(m) ``Property which is consumed'' means tangible personal property
which is essential or necessary to and which is used in the actual process
of and immediately consumed or dissipated in (1) the production, man-
ufacture, processing, mining, drilling, refining or compounding of tangi-
ble personal property, (2) the providing of services or (3) the irrigation
of crops, for sale in the regular course of business, and which is not
reusable for such purpose. The following items of tangible personal prop-
erty are hereby declared to be ``consumed'' but the listing of such prop-
erty shall not be deemed to be exclusive nor shall such listing be construed
to be a restriction upon or an indication of, the type or types of property
to be included within the definition of ``property which is consumed'' as
herein set forth:

(A) Insecticides, herbicides, germicides, pesticides, fungicides, fu-
migants, antibiotics, biologicals, pharmaceuticals, vitamins and chemicals
for use in commercial or agricultural production, processing or storage of
fruit, vegetables, feeds, seeds, grains, animals or animal products whether
fed, injected, applied, combined with or otherwise used; and

(B) electricity, gas and water.

(n) ``Political subdivision'' means any municipality, agency or subdi-
vision of the state which is, or shall hereafter be, authorized to levy taxes
upon tangible property within the state or which certifies a levy to a
municipality, agency or subdivision of the state which is, or shall hereafter
be, authorized to levy taxes upon tangible property within the state. Such
term also shall include any public building commission, housing, airport,
port, metropolitan transit or similar authority established pursuant to law.

(o) ``Municipal corporation'' means any city incorporated under the
laws of Kansas.

(p) ``Quasi-municipal corporation'' means any county, township,
school district, drainage district or any other governmental subdivision in
the state of Kansas having authority to receive or hold moneys or funds.

(q) ``Nonprofit blood bank'' means any nonprofit place, organization,
institution or establishment that is operated wholly or in part for the
purpose of obtaining, storing, processing, preparing for transfusing, fur-
nishing, donating or distributing human blood or parts or fractions of
single blood units or products derived from single blood units, whether
or not any remuneration is paid therefor, or whether such procedures are
done for direct therapeutic use or for storage for future use of such prod-
ucts.

(r) ``Contractor, subcontractor or repairman'' means a person who
agrees to furnish and install tangible personal property or install tangible
personal property at a specified price. A person who maintains an inven-
tory of tangible personal property which enables such person to furnish
and install the tangible personal property or install the tangible personal
property shall not be deemed a contractor, subcontractor or repairman
but shall be deemed a retailer.

(s) ``Educational institution'' means any nonprofit school, college and
university that offers education at a level above the twelfth grade, and
conducts regular classes and courses of study required for accreditation
by, or membership in, the North Central Association of Colleges and
Schools, the state board of education, or that otherwise qualify as an
``educational institution,'' as defined by K.S.A. 74-50,103, and amend-
ments thereto. Such phrase shall include: (1) A group of educational in-
stitutions that operates exclusively for an educational purpose; (2) non-
profit endowment associations and foundations organized and operated
exclusively to receive, hold, invest and administer moneys and property
as a permanent fund for the support and sole benefit of an educational
institution; (3) nonprofit trusts, foundations and other entities organized
and operated principally to hold and own receipts from intercollegiate
sporting events and to disburse such receipts, as well as grants and gifts,
in the interest of collegiate and intercollegiate athletic programs for the
support and sole benefit of an educational institution; and (4) nonprofit
trusts, foundations and other entities organized and operated for the pri-
mary purpose of encouraging, fostering and conducting scholarly inves-
tigations and industrial and other types of research for the support and
sole benefit of an educational institution.

Sec. 2. K.S.A. 79-3603, as amended by section 30 of 1998 Senate Bill
No. 493, is hereby amended to read as follows: 79-3603. For the privilege
of engaging in the business of selling tangible personal property at retail
in this state or rendering or furnishing any of the services taxable under
this act, there is hereby levied and there shall be collected and paid a tax
at the rate of 4.9% upon:

(a) The gross receipts received from the sale of tangible personal
property at retail within this state;

(b) (1) the gross receipts from intrastate telephone or telegraph serv-
ices and (2) the gross receipts received from the sale of interstate tele-
phone or telegraph services, which (A) originate within this state and
terminate outside the state and are billed to a customer's telephone num-
ber or account in this state; or (B) originate outside this state and ter-
minate within this state and are billed to a customer's telephone number
or account in this state except that the sale of interstate telephone or
telegraph service does not include: (A) Any interstate incoming or out-
going wide area telephone service or wide area transmission type service
which entitles the subscriber to make or receive an unlimited number of
communications to or from persons having telephone service in a speci-
fied area which is outside the state in which the station provided this
service is located; (B) any interstate private communications service to
the persons contracting for the receipt of that service that entitles the
purchaser to exclusive or priority use of a communications channel or
group of channels between exchanges; (C) any value-added nonvoice
service in which computer processing applications are used to act on the
form, content, code or protocol of the information to be transmitted; (D)
any telecommunication service to a provider of telecommunication serv-
ices which will be used to render telecommunications services, including
carrier access services; or (E) any service or transaction defined in this
section among entities classified as members of an affiliated group as
provided by federal law (U.S.C. Section 1504). For the purposes of this
subsection the term gross receipts does not include purchases of telephone,
telegraph or telecommunications using a prepaid telephone calling card
or pre-paid authorization number. As used in this subsection, a pre-paid
telephone calling card or pre-paid authorization number means the right
to exclusively make telephone calls, paid for in advance, with the prepaid
value measured in minutes or other time units, that enables the origination
of calls using an access number or authorization code or both, whether
manually or electronically dialed;

(c) the gross receipts from the sale or furnishing of gas, water, elec-
tricity and heat, which sale is not otherwise exempt from taxation under
the provisions of this act, and whether furnished by municipally or pri-
vately owned utilities;

(d) the gross receipts from the sale of meals or drinks furnished at
any private club, drinking establishment, catered event, restaurant, eating
house, dining car, hotel, drugstore or other place where meals or drinks
are regularly sold to the public;

(e) the gross receipts from the sale of admissions to any place pro-
viding amusement, entertainment or recreation services including admis-
sions to state, county, district and local fairs, but such tax shall not be
levied and collected upon the gross receipts received from sales of ad-
missions to any cultural and historical event which occurs triennially;

(f) the gross receipts from the operation of any coin-operated device
dispensing or providing tangible personal property, amusement or other
services except laundry services, whether automatic or manually operated;

(g) the gross receipts from the service of renting of rooms by hotels,
as defined by K.S.A. 36-501 and amendments thereto, or by accommo-
dation brokers, as defined by K.S.A. 12-1692, and amendments thereto;

(h) the gross receipts from the service of renting or leasing of tangible
personal property except such tax shall not apply to the renting or leasing
of machinery, equipment or other personal property owned by a city and
purchased from the proceeds of industrial revenue bonds issued prior to
July 1, 1973, in accordance with the provisions of K.S.A. 12-1740 through
12-1749, and amendments thereto, and any city or lessee renting or leas-
ing such machinery, equipment or other personal property purchased
with the proceeds of such bonds who shall have paid a tax under the
provisions of this section upon sales made prior to July 1, 1973, shall be
entitled to a refund from the sales tax refund fund of all taxes paid
thereon;

(i) the gross receipts from the rendering of dry cleaning, pressing,
dyeing and laundry services except laundry services rendered through a
coin-operated device whether automatic or manually operated;

(j) the gross receipts from the rendering of the services of washing
and washing and waxing of vehicles;

(k) the gross receipts from cable, community antennae and other sub-
scriber radio and television services;

(l) the gross receipts received from the sales of tangible personal
property to all contractors, subcontractors or repairmen of materials and
supplies for use by them in erecting structures for others, or building on,
or otherwise improving, altering, or repairing real or personal property
of others;

(m) the gross receipts received from fees and charges by public and
private clubs, drinking establishments, organizations and businesses for
participation in sports, games and other recreational activities, but such
tax shall not be levied and collected upon the gross receipts received from:
(1) Fees and charges by any political subdivision, by any organization
exempt from property taxation pursuant to paragraph Ninth of K.S.A. 79-
201, and amendments thereto, or by any youth recreation organization
exclusively providing services to persons 18 years of age or younger which
is exempt from federal income taxation pursuant to section 501(c)(3) of
the federal internal revenue code of 1986, for participation in sports,
games and other recreational activities; and (2) entry fees and charges for
participation in a special event or tournament sanctioned by a national
sporting association to which spectators are charged an admission which
is taxable pursuant to subsection (e);

(n) the gross receipts received from dues charged by public and pri-
vate clubs, drinking establishments, organizations and businesses, pay-
ment of which entitles a member to the use of facilities for recreation or
entertainment, but such tax shall not be levied and collected upon the
gross receipts received from: (1) Dues charged by any organization ex-
empt from property taxation pursuant to paragraphs Eighth and Ninth of
K.S.A. 79-201, and amendments thereto; and (2) sales of memberships
in a nonprofit organization which is exempt from federal income taxation
pursuant to section 501 (c)(3) of the federal internal revenue code of
1986, and whose purpose is to support the operation of a nonprofit zoo;

(o) the gross receipts received from the isolated or occasional sale of
motor vehicles or trailers but not including: (1) The transfer of motor
vehicles or trailers by a person to a corporation solely in exchange for
stock securities in such corporation; or (2) the transfer of motor vehicles
or trailers by one corporation to another when all of the assets of such
corporation are transferred to such other corporation; or (3) the sale of
motor vehicles or trailers which are subject to taxation pursuant to the
provisions of K.S.A. 79-5101 et seq., and amendments thereto, by an
immediate family member to another immediate family member. For the
purposes of clause (3), immediate family member means lineal ascendants
or descendants, and their spouses. In determining the base for computing
the tax on such isolated or occasional sale, the fair market value of any
motor vehicle or trailer traded in by the purchaser to the seller may be
deducted from the selling price;

(p) the gross receipts received for the service of installing or applying
tangible personal property which when installed or applied is not being
held for sale in the regular course of business, and whether or not such
tangible personal property when installed or applied remains tangible
personal property or becomes a part of real estate, except that no tax shall
be imposed upon the service of installing or applying tangible personal
property in connection with the original construction of a building or
facility, the original construction, reconstruction, restoration, remodeling,
renovation, repair or replacement of a residence or the construction, re-
construction, restoration, replacement or repair of a bridge or highway.

For the purposes of this subsection:

(1) ``Original construction'' shall mean the first or initial construction
of a new building or facility. The term ``original construction'' shall include
the addition of an entire room or floor to any existing building or facility,
the completion of any unfinished portion of any existing building or fa-
cility and the restoration, reconstruction or replacement of a building or
facility damaged or destroyed by fire, flood, tornado, lightning, explosion
or earthquake, but such term, except with regard to a residence, shall not
include replacement, remodeling, restoration, renovation or reconstruc-
tion under any other circumstances;

(2) ``building'' shall mean only those enclosures within which individ-
uals customarily are employed, or which are customarily used to house
machinery, equipment or other property, and including the land improve-
ments immediately surrounding such building;

(3) ``facility'' shall mean a mill, plant, refinery, oil or gas well, water
well, feedlot or any conveyance, transmission or distribution line of any
cooperative, nonprofit, membership corporation organized under or sub-
ject to the provisions of K.S.A. 17-4601 et seq., and amendments thereto,
or of any municipal or quasi-municipal corporation, including the land
improvements immediately surrounding such facility; and

(4) ``residence'' shall mean only those enclosures within which indi-
viduals customarily live;

(q) the gross receipts received for the service of repairing, servicing,
altering or maintaining tangible personal property, except computer soft-
ware described in subsection (s), which when such services are rendered
is not being held for sale in the regular course of business, and whether
or not any tangible personal property is transferred in connection there-
with. The tax imposed by this subsection shall be applicable to the services
of repairing, servicing, altering or maintaining an item of tangible personal
property which has been and is fastened to, connected with or built into
real property;

(r) the gross receipts from fees or charges made under service or
maintenance agreement contracts for services, charges for the providing
of which are taxable under the provisions of subsection (p) or (q);

(s) the gross receipts received from the sale of computer software,
and the sale of the services of modifying, altering, updating or maintaining
computer software. As used in this subsection, ``computer software''
means information and directions loaded into a computer which dictate
different functions to be performed by the computer. Computer software
includes any canned or prewritten program which is held or existing for
general or repeated sale, even if the program was originally developed
for a single end user as custom computer software. The sale of computer
software or services does not include: (1) The initial sale of any custom
computer program which is originally developed for the exclusive use of
a single end user; or (2) those services rendered in the modification of
computer software when the modification is developed exclusively for a
single end user only to the extent of the modification and only to the
extent that the actual amount charged for the modification is separately
stated on invoices, statements and other billing documents provided to
the end user. The services of modification, alteration, updating and main-
tenance of computer software shall only include the modification, alter-
ation, updating and maintenance of computer software taxable under this
subsection whether or not the services are actually provided; and

(t) the gross receipts received for telephone answering services, in-
cluding mobile phone services, beeper services and other similar services.;
and

(u) the gross receipts received from the sale of prepaid telephone call-
ing cards or pre-paid authorization numbers and the recharge of such
cards or numbers. A pre-paid telephone calling card or pre-paid author-
ization number means the right to exclusively make telephone calls, paid
for in advance, with the prepaid value measured in minutes or other time
units, that enables the origination of calls using an access number or
authorization code or both, whether manually or electronically dialed. If
the dale or recharge of such card or number does not take place at the
vendor's place of business, it shall be conclusively determined to take place
at the customer's shipping address; if there is no item shipped then it shall
be the customer's billing address.

Sec. 3. Section 1 of 1998 Senate Bill No. 493 is hereby amended to
read as follows: Section 1. (a) A tax is hereby imposed on the estate of
every resident decedent, and every nonresident decedent who died hold-
ing an interest in property with a Kansas tax situs, whose estate is required
by federal law to file a return for federal state estate taxes. The amount
of such tax shall be equal to the amount of the maximum credit allowed
by section 2011 of the internal revenue code against the tax that would
otherwise be imposed on the transfer of the estate of the decedent by
section 2001 of the internal revenue code.

(b) When the estate of a resident decedent shall consist of property
within and without the state, or in the case of the estate of a nonresident
decedent who died holding an interest in property with a Kansas tax situs,
the tax imposed under subsection (a) shall be the percentage thereof that
the gross estate for federal estate tax purposes less the value of all property
included therein having a tax situs which is not within the jurisdiction of
the state of Kansas, bears to the total gross estate for federal estate tax
purposes.

Sec. 4. K.S.A. 79-32,111 is hereby amended to read as follows: 79-
32,111. (a) The amount of income tax paid to another state by a resident
individual, resident estate or resident trust on income derived from
sources in another state shall be allowed as a credit against the tax com-
puted under the provisions of this act. Such credit shall not be greater in
proportion to the tax computed under this act than the adjusted gross
income for such year derived in another state while such taxpayer is a
resident of this state is to the total Kansas adjusted gross income of the
taxpayer. As used in this subsection, state shall have the meaning ascribed
thereto by subsection (h) of K.S.A. 79-3271, and amendments thereto.
The credit allowable hereunder for income tax paid to a foreign country
or political subdivision thereof shall not exceed the difference of such
income tax paid less the credit allowable for such income tax paid by the
federal internal revenue code. No redetermination of income tax paid for
the purposes of determining the credit allowed by this subsection shall be
required for the taxable year for which an income tax refund payment
pursuant to the provisions of section 18 of article 10 of the Missouri con-
stitution is made, but the income tax paid allowable for credit in the next
following taxable year shall be reduced by the amount of such refund
amount, except that, for tax year 1998, the income tax paid allowable for
credit shall be reduced by the amount of such refunds made for all taxable
years prior to tax year 1998.

(b) There shall be allowed as a credit against the tax computed under
the provisions of the Kansas income tax act, and acts amendatory thereof
and supplemental thereto, on the Kansas taxable income of an individual,
corporation or fiduciary the amount determined under the provisions of
K.S.A. 79-32,153 to 79-32,158, and amendments thereto.

Sec. 5. K.S.A. 79-1546, 79-32,111, 79-3602, as amended by section
29 of 1998 Senate Bill No. 493, 79-3603, as amended by section 30 of
1998 Senate Bill No. 493, and section 1 of 1998 Senate Bill No. 493 are
hereby repealed.

Sec. 6. This act shall take effect and be in force from and after its
publication in the statute book.

Approved May 14, 1998

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