The Kansas Department of Revenue has issued a revenue ruling (Kansas Revenue Ruling No. 19-2010-05) that provides guidance on progress payments for contract labor services.

The parties to a construction contract can agree that payments made to a contractor as work progresses on a construction project will be made based on a percentage of work completed, the stage of work completed, the costs incurred by the contractor, a payment schedule, or some other basis.

Each contractor who issues a bill or statement for a progress payment for a period in which it performed taxable labor services must report sales tax on the taxable services.

If a contractor reports sales tax on the cash basis, it must report the taxable labor services it performed during the period covered by a progress payment on the return it files for the sales tax reporting period in which it receives the progress payment.

If a contractor reports sales tax on the accrual basis, it must report the taxable services it performed during the period covered by a progress billing statement on the return it files for the sales tax reporting period in which it recognizes the charges on its progress billing statement in its books and records as earned.

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