We have compiled this comprehensive guide to help businesses understand their obligations related to sales tax in the state of Kansas. The guide covers various topics, including what items are subject to sales tax, how to register and file sales tax, and how to collect and remit sales tax.
In addition to providing information on how to calculate and collect sales tax, the guide also covers exemptions and special situations that may affect a business’s sales tax obligations. For example, certain types of transactions, such as those involving the sale of farm equipment or prescription drugs, may be exempt from sales tax.
By understanding the sales tax laws and regulations in Kansas, you can ensure your business complies with the law and avoids potential penalties and fines.
What Is Sales Tax in Kansas?
The sales tax rate in Kansas consists of two parts — the state sales tax rate and any applicable local sales tax rates. The current state sales tax rate in Kansas is 6.5%, and local sales tax rates can range up to 5% depending on the location of the sale.
One of the most important things to note about sales tax in Kansas is that it is a destination-based tax. This means that the tax rate is determined by the location where the item is being delivered rather than where the seller is located.
As a result, if a business sells a taxable item and delivers it to a buyer in a different location, they must collect the appropriate sales tax rate for that location. For example, if a business in Wichita sells an item to a customer in Kansas City, the sales tax rate will be based on the rate in Kansas City, not Wichita.
There are some exemptions to the Kansas sales tax, such as sales of food purchased with food stamps, prescription drugs and sales to nonprofit organizations. Additionally, some local jurisdictions may have additional exemptions or special rules, so businesses should consult with a tax professional at Polston Tax to ensure compliance with all applicable sales tax laws and regulations.
What Is Use Tax in Kansas?
In Kansas, use tax is a tax on the use, storage or consumption of tangible personal property in the state that was purchased tax-free or outside the state where sales tax was not collected. Tangible personal property is an item with monetary value that has a physical presence and can be moved. Use tax ensures items used or consumed in Kansas not subject to sales tax elsewhere are still subject to taxation.
Businesses or individuals must pay use tax on items they bring into Kansas for use, storage or consumption if sales tax was not previously paid on those items. For example, if a Kansas resident purchases a taxable item from an out-of-state vendor and has the item shipped to Kansas, the resident would owe Kansas use tax on the item if the vendor did not collect Kansas sales tax.
However, use tax doesn’t apply if a Kansas resident buys a product at a store in another state and transports it themselves back to Kansas, such as a souvenir bought on vacation.
The Kansas use tax rate is the same as the sales tax rate, which is currently 6.5% at the state level, plus any applicable local sales tax rates. The use tax is typically reported and paid on the Kansas sales and use tax return.
Businesses and individuals are responsible for self-reporting and paying use tax if they owe it, and failure to do so can result in penalties and interest. The Kansas Department of Revenue provides guidance on how to determine if use tax is owed and how to report and pay the tax.
Who Must Collect Kansas Sales and Use Tax?
In Kansas, any seller who engages in the sale of taxable services or the retail sale of tangible personal property or digital goods and services within the state must collect and remit sales tax. This includes all businesses with a physical presence in Kansas and remote sellers who meet the economic nexus threshold of $100,000 or more in sales in the state within the current or previous calendar year.
Sellers who make sales through online marketplaces or other third-party platforms are not required to collect and remit sales tax on sales made to buyers in Kansas if they don’t meet the $100,000 threshold. If sellers don’t collect tax, they should inform their customers that they must pay it directly.
Some sales may be exempt from Kansas sales tax, such as sales of food and prescription drugs. Sellers should consult a tax professional at Polston Tax to determine which items are subject to sales tax and which are exempt.
Any seller who engages in taxable sales in Kansas is responsible for collecting and remitting the appropriate sales and use tax to the state, regardless of whether the sale is made in person, online or through a third-party platform.
How Does a Business Establish Nexus in Kansas?
When it comes to Kansas sales tax, nexus plays a critical role. In Kansas, a business establishes nexus, or a taxable presence, in the state if it has a physical presence or meets certain sales thresholds. The physical presence could include having an office, warehouse, employees or other property in Kansas.
However, a business can also establish nexus in Kansas if its sales of tangible personal property or taxable services exceed $100,000, as noted above.
Once a business establishes nexus in Kansas, it must register for a sales tax account and collect and remit sales tax on taxable sales made within the state. The company may also be required to file other tax returns, such as income tax or withholding tax, depending on the nature of its activities in Kansas.
Businesses should understand their nexus obligations in Kansas and other states where they may have a taxable presence, as failure to comply with state tax laws can result in penalties and interest. Consult with us at Polston Tax to ensure compliance with all applicable tax laws and regulations.
Do You Have Economic Nexus in Kansas?
Economic nexus applies to remote sellers who do not have a physical presence in Kansas. Remote sellers with a physical presence in the state, such as an office or warehouse, would establish nexus in Kansas based on their physical presence, regardless of their sales volume.
Remote sellers with more than $100,000 in sales in Kansas within the current or previous calendar year have economic nexus in the state. These remote sellers must register for a Kansas sales tax permit, collect and remit sales tax on taxable sales made to customers in Kansas, and file sales and use tax returns with the state.
Economic nexus thresholds can change over time, so businesses must stay up to date on the latest rules and regulations related to sales tax collection in Kansas and other states where they conduct business.
Do You Have Physical Nexus in Kansas?
In Kansas, physical nexus is established by having a physical presence in the state. This could include:
- Maintaining an office, warehouse or other physical location in Kansas, such as a storefront, distribution center or manufacturing facility.
- Having employees or independent contractors who work in Kansas.
- Owning or leasing tangible personal property in Kansas, such as equipment, vehicles or inventory.
- Selling in temporary locations in Kansas, such as trade shows.
- Performing labor services in Kansas, such as a non-resident contractor.
Businesses should carefully consider their activities in Kansas to determine if they have a physical presence and must register for a sales tax permit. At Polston Tax, we can help you understand your obligations and ensure compliance with Kansas sales tax laws.
Remote and Marketplace Sellers
As noted above, remote sellers and marketplace facilitators who meet the economic nexus threshold in Kansas must collect and remit sales tax on taxable sales made to customers in the state. Sellers with a physical presence in Kansas must collect sales tax regardless of their sales volume.
Types of Sales Subject to Sales Tax in Kansas
In Kansas, most retail sales of tangible personal property and taxable services are subject to sales tax. These sales include the following:
- Goods sold at retail: This category includes a wide range of tangible personal property, such as clothing, appliances, electronics and furniture.
- Taxable services: These services include repair and maintenance services, personal services like haircuts, and certain professional services like legal and accounting services.
- Rentals and leases of tangible personal property: This category includes rentals of cars, trucks, equipment and other items.
Some types of sales may be exempt from Kansas sales tax, such as sales of food purchased with food stamps and prescription drugs. Some services, like health care and educational services, may also be exempt from sales tax. Reach out to us at Polston Tax to determine which items and services are subject to sales tax and which are exempt.
Sales and Use Tax for Retail Sales
In Kansas, sales and use tax is due on most purchases. If you are unsure whether a particular sale is subject to sales tax in Kansas, or if you have questions about your company’s sales tax obligations, contact the experts at Polston Tax.
1. Hotel Room Occupancy Tax
In Kansas, hotel room occupancy is subject to a transient guest tax, which is also known as a hotel tax, lodging tax or bed tax. This type of sales tax is specifically imposed on hotel room rentals and is in addition to the state and local sales tax that may apply to the rental.
The current transient guest tax rate in Kansas varies by county or city from 1% to 9%. The hotel or other lodging establishment typically collects this tax from the guest at the time of check-in or check-out. The lodging establishment is responsible for remitting the tax to the state and for filing regular tax returns with the Kansas Department of Revenue.
Hotels and other lodging establishments should properly collect and remit the correct amount of transient guest tax, as failure to do so can result in penalties and interest. Additionally, hotels and lodging establishments should keep careful records of all guest transactions and tax collections, as these records may be subject to audit by the Kansas Department of Revenue.
2. Alcohol Tax
Alcohol sales in Kansas are subject to a specific excise tax. In addition to the excise tax, sales of alcohol in Kansas are also subject to state and local sales taxes, which vary depending on the location of the sale. The excise tax on alcohol varies depending on the type of alcohol and the alcohol content.
The excise tax rate in Kansas for liquor is 10% for drinking establishments, caterers and clubs.
Businesses that sell alcohol in Kansas are responsible for properly collecting and remitting the excise tax and sales tax and filing regular tax returns with the state. Keep careful records of all your alcohol sales and tax collections, as these records may be subject to audit by the Kansas Department of Revenue.
If you have questions about your company’s alcohol tax obligations or need assistance with tax compliance and reporting, consult us at Polston Tax.
3. Vehicle Rental Excise Tax
In Kansas, the vehicle rental excise tax is 3.5% for the lease or rental of a motor vehicle for up to 28 consecutive days. If you rent or lease a motor vehicle, you must also pay local and state retailers’ sales tax on top of the vehicle rental excise tax.
Vehicle lessees must properly pay the motor vehicle excise tax, as failure to do so can result in penalties and interest. Additionally, vehicle dealers and lessors should keep careful records of all transactions and tax collections, as these records may be subject to audit by the Kansas Department of Revenue.
If you are a vehicle lessee, dealer or lessor and you have questions about the vehicle rental excise tax, reach out to a tax professional at Polston Tax.
4. Tobacco Taxes
In Kansas, tobacco products are subject to excise taxes in addition to the state and local sales taxes that may apply. The excise tax rates on tobacco products vary depending on the product type and the quantity sold.
The excise tax rates in Kansas for various types of tobacco products are as follows:
- Cigarettes: $1.29 per pack of 20 cigarettes purchased
- Other tobacco products, such as cigars, pipe tobacco and chewing tobacco: 10% of the wholesale sales price
Businesses that sell tobacco products in Kansas are responsible for properly collecting and remitting the excise tax and sales tax to the state and for filing regular tax returns. Keep careful records of all tobacco product sales and tax collections, as these records may be subject to audit.
5. Food Taxes
On January 1, 2023, state food taxes dropped from 6.5% to 4%. In 2024, it will drop again to 2%. By 2025, food will no longer be subject to state sales tax.
6. Local Discretionary Taxes
In addition to the sales and excise taxes, some localities also impose some discretionary taxes. These taxes are typically used to fund specific projects or services in the community and are subject to voter approval.
Some examples of discretionary taxes in Kansas include:
- Local Option Budget (LOB) property tax: This tax is levied by school districts to fund local education expenses, such as teacher salaries, textbooks and technology. The LOB property tax is subject to voter approval and is capped at a percentage of the district’s total budget.
- City and county sales taxes: Many cities and counties in Kansas have the authority to impose additional sales taxes to fund local projects, such as parks and recreation facilities, public safety services and infrastructure improvements. These taxes are subject to voter approval and are typically collected in addition to the state sales tax.
Businesses and individuals in Kansas should be aware of these discretionary taxes, as they can impact the overall tax burden in the community. If you have questions about discretionary taxes in Kansas, contact us at Polston Tax.
Kansas Sales Tax Exemptions
Kansas provides several sales tax exemptions for some types of purchases. Some common examples of exemptions include:
- Food and groceries: Sales of food to organizations that provide meals for the elderly or homebound are exempt from sales tax in Kansas. Nonprofits under a distribution program that sells food below cost for community service are also exempt.
- Prescription drugs and medical equipment: Sales of prescription drugs, prosthetic devices and durable medical equipment are exempt from sales tax in Kansas.
- Agricultural and farm equipment: Sales of agricultural and farm equipment, such as tractors, plows and combines, are exempt from sales tax in Kansas.
- Manufacturing and production equipment: Sales of equipment and machinery used in manufacturing or production processes are exempt from sales tax in Kansas.
- Education and training services: Sales of some education and training services, such as textbooks and online courses, are exempt from sales tax in Kansas.
- Nonprofit organizations: Sales by certain nonprofit organizations, such as charities and religious organizations, may be exempt from sales tax in Kansas.
Each exemption has specific requirements and limitations, and it’s up to the buyer to provide documentation and demonstrate eligibility for the exemption. Additionally, some exemptions may require the buyer to obtain an exemption certificate from the Kansas Department of Revenue.
If you have questions about sales tax exemptions in Kansas, Polston Tax can help.
What Happens if You Don’t Collect Kansas Sales Tax?
If a business is required to collect Kansas sales tax but fails to do so, it may face penalties and interest charges for the unpaid taxes. In severe cases, the Kansas Department of Revenue may also pursue legal action to collect the unpaid taxes, including liens on the business’s assets or even criminal charges in severe cases.
If a business knowingly or intentionally fails to collect and remit Kansas sales tax, it may be subject to additional penalties and fines, including:
- A penalty for the unpaid tax amount.
- Interest on the unpaid tax amount, which is calculated at a rate of 1% per month with a maximum penalty of 24%.
- Other penalties as prescribed by statute.
- Potential criminal charges for tax evasion or fraud, which can carry hefty fines and even imprisonment.
Businesses should understand their sales tax obligations and comply with all applicable tax laws to avoid potential penalties and legal issues. If you are unsure about your sales tax obligations in Kansas or need assistance with tax compliance and reporting, discuss with a tax professional at Polston Tax.
What Should You Do if You Receive a Sales Tax Audit Notice?
Respond promptly if you receive a sales tax audit notice from the Kansas Department of Revenue, respond promptly. Here are some steps you should consider taking:
- Review the audit notice carefully: Read the notice thoroughly and ensure you understand the scope of the audit, the time period being audited and any particular issues or areas of concern that the auditor will be examining.
- Gather your records: Collect all relevant business and tax records for the audit period, including sales and use tax returns, purchase invoices, receipts and other financial documents. Be prepared to provide copies of these records to the auditor.
- Consult with a tax professional: If you don’t already have a tax professional, consider hiring one at Polston Tax to help you prepare for the audit and represent you during the audit process. We can help you understand your rights and responsibilities, provide guidance on responding to the auditor’s requests, and help you negotiate any adjustments or disputes that may arise during the audit.
- Cooperate with the auditor: Be courteous and cooperative with the auditor during the audit process. Provide prompt and complete responses to all requests for information, and be prepared to explain any discrepancies or errors in your records. If you cannot provide certain information or documents, be honest and upfront about why.
- Respond to the audit findings: After completing the audit, the auditor issues a report outlining any adjustments or findings. If you agree with the findings, you will pay any additional taxes, penalties and interest owed. If you disagree with the findings, you may have the right to appeal the decision or request a hearing.
Be proactive and professional in your response to a sales tax audit notice. By being well-prepared and working with us at Polston Tax, you can help ensure a smoother and more successful audit process.
What Should You Expect From a Sales Tax Auditor in Kansas?
If you are subject to a sales tax audit by the Kansas Department of Revenue, you can expect the auditor to conduct a thorough review of your business records and financial information. The auditor checks that you have properly collected and remitted sales and use taxes in compliance with state laws and regulations.
Here are some things you can expect from a sales tax auditor in Kansas:
- A request for information: The auditor typically starts by requesting specific information and documents related to your sales and use tax reporting, such as sales and purchase invoices, bank statements, and tax returns. You should provide this information promptly.
- An examination of your business operations: The auditor may also visit your place of business to observe your operations and review your books and records in person. During this visit, the auditor may ask questions and seek clarification on some aspects of your business.
- Communication and collaboration: Throughout the audit process, the auditor communicates with you to provide updates on the audit status, request additional information or clarification, and answer any questions you may have. It’s important to be responsive and cooperative throughout this process.
Registering for and Filing Kansas Business Taxes
If your business is required to collect and remit sales and use taxes in Kansas, you need to register with the Kansas Department of Revenue. After you receive your permit, you can begin collecting sales tax on taxable sales made in Kansas. You must file regular sales tax returns and remit collected tax to the state according to the schedule determined by your estimated tax liability.
How to Register for Your Kansas Sales Tax Permit
To register for a sales tax permit in Kansas, you can follow these steps:
- Determine if you need to register: If you have a physical or economic nexus in Kansas, you are likely required to register for a sales tax permit. You can review the Kansas Department of Revenue’s guidelines to determine if you meet the threshold for registration.
- Gather necessary information: Before registering, you must gather information, such as your business name and address, federal tax ID number and other relevant business information.
- Register online or by mail: You can register for a Kansas sales tax permit online at the Kansas Department of Revenue Customer Service Center. Alternatively, you can fill out a paper registration form and submit it by mail or register in person.
- Wait for confirmation: Once you have submitted your registration application, you will receive a confirmation from the Kansas Department of Revenue indicating that your permit has been issued.
Once you receive your sales tax permit, you should display it in a prominent location at your business. You may also need to provide a copy of your permit to your vendors, suppliers and other relevant parties.
Make sure to keep your permit in a safe place and stay updated on any changes in Kansas sales tax regulations that may affect your business.
How to File Sales Tax
To file your Kansas sales tax return, you can follow these steps:
- Determine your filing frequency: Once registered, you must determine your filing frequency. In Kansas, the frequency of filing sales and use tax returns is based on the amount of tax you owe each year. If you owe up to $400 in sales and use tax annually, you file returns annually. You file quarterly if your annual tax owed is between $400 and $4,000. If you owe more than $4,000 in sales and use tax annually, you file returns monthly.
- Gather necessary information: Before filing your return, you must gather information, such as your total sales and use tax collected, any exempt sales and any tax you have already remitted.
- Complete the appropriate form: You must complete the appropriate sales tax return form for your filing frequency. You can find these forms on the Kansas Department of Revenue website.
- File your returns and remit tax payments: Once you have completed the appropriate form, you can submit it and any payment owed to the Kansas Department of Revenue. You can file your return and make ACH payments online through the Kansas Department of Revenue Customer Service Center or by mailing in a paper return and payment. You can also pay with a credit card through a third-party vendor online or by phone.
- Maintain proper records: Maintain accurate and complete records of all sales and use tax transactions, including sales invoices, purchase invoices and receipts. These records will be essential in the event of a sales tax audit.
Sales and use tax laws and regulations can change frequently. Stay informed about any changes affecting your business and update your tax compliance procedures accordingly.
Due Dates for Kansas’s Sales Taxes
The due dates for Kansas sales tax returns vary depending on your filing frequency. Here are the due dates for each filing option:
- Monthly filers: Sales tax returns and payments are due on the 25th day of the month following the reporting period. For example, the return and payment for sales made in January are due on February 25.
- Quarterly filers: Sales tax returns and payments are due on the 25th day of the month following the end of the reporting period or calendar quarter. For example, the return and payment for the first quarter — January to March — are due on April 25. Other quarterly due dates are July 25, October 25 and January 25.
- Annual filers: Sales tax returns and payments are due on January 25 of the following year.
If you fail to file or pay your sales tax on time, you may be subject to penalties and interest.
How to Collect Sales Tax
To collect sales tax in Kansas, follow these steps:
- Determine the correct sales tax rate: The sales tax rate in Kansas varies by location, so be sure to determine the correct rate for where you make sales. You can find the current rates on the Kansas Department of Revenue’s website or reach out to Polston Tax.
- Determine what is subject to sales tax: In Kansas, most tangible personal property, such as goods or products, is subject to sales tax. However, there are some exemptions and special rules, so it’s important to review the Kansas Department of Revenue’s guidelines to determine what is subject to sales tax.
- Collect sales tax on taxable transactions: Once you have determined the correct sales tax rate and what sales are subject to sales tax, you need to collect the appropriate amount of sales tax from your customers on taxable transactions. This can be done by adding the sales tax amount to the sales price of the product or service.
- Keep accurate records: Maintain records of all sales tax collected, including the date of the sale, the amount of the sale and the amount of sales tax collected. You will need this information for reporting and remitting sales tax to the state.
- Remit sales tax to the state: Depending on your filing frequency, you must file sales tax returns and remit sales tax to the state monthly, quarterly or annually. You can do this online through the Kansas Department of Revenue’s Customer Service Center.
By following these steps, you can ensure that you properly collect sales tax in Kansas and meet your obligations as a seller.
How to Collect Taxes on Shipping and Handling
In Kansas, sales tax is generally applied to the total sales price, including any charges for shipping and handling. If you charge your customers for shipping and handling, you must include those charges in the total sales price used to calculate the sales tax owed.
Review the Kansas Department of Revenue’s guidelines to determine the specific rules that apply to your business and ensure you properly collect sales tax on shipping and handling charges. If you have any questions or concerns, you can contact Polston Tax for guidance.
Contact Polston Tax About Kansas Sales Tax Rules
You can enjoy several benefits when you work with us at Polston Tax:
- Expertise: The tax professionals at Polston Tax have the knowledge and experience to help you navigate complex tax laws and regulations. We can provide guidance on how to minimize tax liabilities, avoid penalties and maximize deductions.
- Representation: We can represent you before the IRS or state tax authorities. This can be especially helpful if you are facing an audit or other tax issue.
- Time-saving: Working with a tax professional can save you time and effort. We can handle tasks like preparing tax returns, responding to tax notices and communicating with tax authorities, freeing up your time for other important activities.
- Peace of mind: Knowing that your tax matters are in the hands of a trusted professional can provide peace of mind and alleviate stress related to tax issues.
Contact us at Polston Tax to learn more about the services we offer.
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