Kansas Contractor Taxes and Licensing: Residential vs. Commercial Labor

In Kansas, labor on original construction and on residential remodeling is exempt from sales tax, but labor to repair or remodel commercial property is taxable. Contractors are the final consumers of the materials they install and pay tax when buying them. The state rate is 6.5%, and local rates add 0.10% to 3%.

Is labor taxable in Kansas?

It depends on whether the building is residential and whether the work is new. The Kansas Department of Revenue's Publication KS-1525 says services to install or apply tangible personal property "are exempt from sales tax when the services involve" residential construction, remodeling and renovation, and original construction of any building. Labor on commercial remodeling and repair is taxable: the publication describes those as "projects that are not considered to be residential, original construction or exempt for another reason."

Each contractor and subcontractor is responsible for tax on its own taxable labor. So an electrical sub on an office remodel bills tax on its labor even if the general contractor handles the rest. Kansas is a useful contrast to Missouri, where labor generally isn't taxed, and to Iowa, where the line is repair vs. construction instead of residential vs. commercial.

Materials, use tax and project exemption certificates

KS-1525 says contractors "are considered to be the final user or consumer of the materials they install for others" and can't buy them tax-free with a resale certificate. Pay sales tax to your supplier, or accrue Kansas use tax if an out-of-state supplier didn't charge it. More on that: use tax for contractors and sales tax on labor vs. materials.

When the owner is an exempt entity, the state can issue a project exemption certificate. Per KS-1525, "a PEC exempts from sales tax the purchase of materials which will become part of the project," and PECs "expire upon completion of that project." Give your suppliers a copy, and don't use it for tools or for another job.

The publication says "the Kansas statewide sales (and use) tax rate is 6.5%," and "local sales tax rates currently range from .10% to 3%." Use the department's address rate locator for the job site.

Kansas contractor licensing

Kansas has one statewide contractor registration that matters for most trades businesses: roofing. Under K.S.A. 50-6,125, roofing contractors need a registration certificate from the Attorney General, and the annual fee "shall not exceed $500" under K.S.A. 50-6,128. For electrical, plumbing, HVAC and general contracting, check with the city or county where you work; Kansas City, Wichita, Topeka and other cities run their own licensing and permit programs.

If you're new to how state and local licensing interact, start with our contractor license guide.

Kansas income tax for contractors

K.S.A. 79-32,110 sets two individual brackets for tax years 2024 and later. A single filer pays 5.2% on the first $23,000 of Kansas taxable income, then "$1,196 plus 5.58% of the excess over $23,000." Married couples filing jointly pay 5.2% up to $46,000 and 5.58% above. Corporations pay a 4% normal tax plus a 3% surtax on taxable income over $50,000.

Kansas law includes revenue triggers that can lower rates. The Department of Revenue's Notice 25-06 (October 2, 2025) found revenues didn't meet the trigger, which points to unchanged rates for 2026; confirm with the department or your CPA when you file. Pass-through owners usually make quarterly estimated payments: see quarterly estimated taxes for contractors and the quarterly estimated tax calculator.

Workers' comp in Kansas

Kansas uses a payroll test instead of a headcount. K.S.A. 44-505 says the Workers Compensation Act doesn't apply to an employer with "total gross annual payroll for the preceding calendar year of not more than $20,000 for all employees" who reasonably expects to stay at or below that this year. Wages paid to family members don't count toward the $20,000. Once you're over it, you need coverage from a private insurer or approved self-insurance. The Kansas Department of Labor's workers compensation division administers the Act. Background: workers' compensation.

Local taxes in Kansas

Local sales taxes range from 0.10% to 3%, so taxable commercial labor and your material purchases can be taxed at different combined rates depending on the address. Cities can also require their own business licenses and permit fees, so check with each city you work in.