Understanding Kansas Sales and Use Taxes
Understanding and complying with the sales tax requirements in the states in which you do business is absolutely essential. More states are taxing services, as well as retail sales, so no business owner can afford to be in the dark. In addition, you may find that you are liable for use taxes for products purchased out of state. This article answers some of the basic questions regarding sales tax in Kansas.
Kansas imposes a state-wide 6.3 percent tax on the sales of tangible property and a wide variety of services. In addition, make sure you contact your local governments in Kansas because they are allowed to assess a local sales and use tax. In Kansas, sales tax is levied upon the gross receipts from the following:
- retail sales of tangible personal property
- telephone or telegraph services
- furnishing gas, water, electricity, and heat
- sale of meals or drinks at private, or public businesses
- sale of admissions to any place providing amusement
- coin-operating devices dispensing tangible personal property, amusement, or services (except laundry services)
- rentals of rooms by hotels
- the renting or leasing of tangible personal property
- dry cleaning, pressing, dyeing, and laundry services (except laundry services rendered through coin-operated devices)
- washing and waxing vehicles
- subscriber radio and television services
- sales to contractors, subcontractors or repairmen of materials and supplies for use in building, improving, altering, or repairing property for others
- fees and charges by private and public clubs, organizations, businesses, and political subdivisions of Kansas for participation in recreational activities
- isolated or occasional sales of motor vehicles or trailers
- installing or applying tangible personal property that is not held for sale in the regular course of business
- repairing, servicing, altering, or maintaining tangible personal property associated with realty and is not held for sale in the regular course of business
- fees or charges made under service or maintenance agreement contracts
- sales of canned computer software and services of modifying, altering, updating, or maintaining computer software
- telephone answering services
- sales of electricity, gas, and water that is essential to or used in the actual qualified production process
- sales from the service of renting rooms by an accommodations broker
Leases Are Subject to Sales Tax
The total amount of each rental or lease payment for tangible personal property is subject to sales tax. Lease or rental includes all transactions under which a person secures the use of tangible personal property for a consideration. A lease that is treated as a sale for federal income tax purposes is treated as an installment sale for sales tax purposes. However, in Kansas if the transaction is treated as a loan or financing transaction for federal income tax purposes it is treated as a loan or financing transaction for sales tax purposes.
Tax Is Imposed on Purchase, But Paid by Seller
In Kansas the sales tax is imposed upon the purchaser and paid to the seller. The seller is responsible for collecting and remitting the tax. Sales tax is a debt owed to the retailer by the purchaser until paid. Either the amount of tax on a sale must be separately stated on the invoice or billing, or the invoice or billing must bear the statement, "All applicable sales tax is included." If this requirement is not met, it will be presumed that the tax was not collected by the retailer.
Retailers can not absorb sales tax for customers. In Kansas it is against the law to refund or offer to refund all or any part of the amount collected, or to absorb the amount of sales tax required to be added to the sales price and collected from the purchaser. As a seller, it is also against the law for you to advertise directly or indirectly that you will absorb the sales tax that is required to be added to the sales price.
Tax Permits Are Required
In Kansas all retailers and persons furnishing taxable services must secure certificates of registration. The certificates of registration are required for each place of business and obtained from the Kansas Director of Taxation.
Certain Items Are Exempt from Tax
Kansas has many specific items that are exempt from sales tax — for example, certain prescription medications are exempt from Kansas sales tax. You'll want to check and see if you are exempt from the sales tax.
An exemption certificate may be issued by a purchaser of a nontaxable item. The exemption certificate may be based on the type of transaction (such as a resale exemption) or on the item itself.
Sales for Resale Are Exempt from Tax
In Kansas, sales for resale are specifically excluded from the definition of a retail sale and are therefore exempt from sales and use tax. A retailer selling tangible personal property or furnishing taxable services can't assert that a sale is exempt from taxation unless the retailer possesses a properly executed exemption certificate provided by the customer claiming the exemption. If the retailer does not have the required exemption certificate, the retailer must acquire a certificate within 60 days after receiving notice from the Director that a certificate is required. If the certificate is not acquired within the 60-day period, the sale will be deemed to be taxable.
Requirements for resale exemption certificates. A retailer that accepts a resale exemption certificate in good faith is not liable for the sales tax and has no duty to collect it. The resale exemption certificate must include the following information:
- the purchaser's name and address
- the purchaser's Kansas sales or use retail registration number
- a description of the goods being purchased
- a statement that the goods are being purchased for resale
Blanket resale certificates. Blanket resale certificates are permitted. This means that a retailer making recurring exempt sales of the same type to the same purchaser need not secure a separate exemption certificate for each transaction but may accept, at the retailer's own risk, a blanket exemption certificate covering future sales. A retailer who honors a blanket exemption certificate on a taxable sale may be held responsible for the tax if the Director determines that the retailer knew or should have known the sale was not exempt.
Physical Presence Triggers Sales Tax Liability
Kansas has a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if you have physical presence within Kansas. To determine if you have physical presence, ask yourself the following:
- Do I have retail facilities, a warehouse, or any office space in Kansas? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
- Do my employees or I enter Kansas for purposes of taking and transmitting orders from Kansas? If your employee or independent contractor goes into Kansas to take or transmit orders, your business may have physical presence in Kansas. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
- Do my delivery vehicles frequently enter Kansas for purposes of delivering property? Frequent deliveries in Kansas by your trucks will give you physical presence in Kansas.
Kansas Allows Use of Sales Tax "Bracket System"
The bracket system may be followed by sellers in computing the 6.3 percent sales tax.
You Must Claim Refunds of Excess Tax Payments
In Kansas, refund claims must be filed within three years from the date the tax payment was due. Any retailer may make a claim for refund but consumers or users may not claim a refund unless tax was paid directly to the Department of Revenue. Written claims must be supported by proof that the tax was actually paid. If tax was erroneously paid by a consumer or user, a retailer will not be entitled to a refund until it proves that a refund was paid to the consumer or user.
Kansas Imposes Use Tax on Out-of-State Purchases
In Kansas the use tax supplements the sales tax. The use tax is levied upon people that are using, storing, or consuming in Kansas any article of tangible personal property that has not been subjected to sales or use tax by any state. Thus, the use tax is also referred to as the "compensating tax." The responsibility of the use tax is upon the consumer. The use tax is also a debt from the purchaser to the retailer.
If any taxable item was subjected to sales or use tax by another state at a rate lower than 6.3 percent, use tax is applied at the difference between the other rate and 6.3 percent.