Opinion ID: 2600175
Heading Depth: 1
Heading Rank: 7

Heading: Computer Equipment

Text: In the final determination letter, the Revenue Department assessed compensating use tax on the City's purchase of computer hardware and miscellaneous equipment used to upgrade its billing services. Hernandez testified that this upgraded equipment was necessary for the establishment and implementation of the storm water utility department established in 1992, which is separate from the water department and is not a taxable entity. The upgrade was necessary to handle the increased volume and data management of the storm water utility accounts and to allow merging with the water department and sewer department billing system. Although the sewer department purchased this equipment, the storm water utility department reimbursed the sewer department for the entire purchase cost of the computer equipment. Hernandez explained that the water and sewer departments did not need this upgrade to continue their billing practices, and she concluded that the water department was not responsible for any of the cost of the upgraded equipment. However, this upgrade provides an integrated bill which reflects the charges for the storm water, sewer, and water departments on the same statement. BOTA affirmed the Revenue Department's assessment, reasoning: The Board finds that billing is an essential function in business, including the business of furnishing water. Although the water department did not need and did not purchase the subject computer upgrade and equipment, the Board finds that the computer upgrade is actually used in part by or for the water department to assist in its billing function. As a result, the Board concludes that K.S.A. 79-3606(b), and amendments thereto, does not exempt the subject computer upgrade and equipment from compensating use tax, and the Department's assessment is sustained.