Are the amounts a bank charges its customers for printing checks subject to Kansas sales tax, and who collects it?

Plain-English summary

This Kansas Department of Revenue directive, from the Business Tax Bureau, was sent to the major check-printing companies (Deluxe Check Printing Co., Deluxe Check Printers, Inc., Heart of America Forms, Inc., Rocky Mountain Bank Note, and John H. Harland Co.) to change how sales tax applies to printed checks.

Effective February 1, 1988, the directive states that "the total amount which a bank, savings and loan, credit union or other thrift institution charges to its customers of the printing and delivery of checks will be subject to the Kansas Retailer's Sales Tax." Crucially, this now "include[s] any 'upcharges' which the bank, savings and loan, credit union or other thrift institution charges to its customer" — amounts that "had previously been ruled to be exempt from the sales tax." An "upcharge" is the markup an institution adds on top of what the printer charges it for the checks.

Who collects the tax: Rather than make every bank and thrift register to collect and remit the tax on this one item, the Department "agreed that the check printing companies will collect and remit the correct amount of sales tax from the banks, savings and loans, credit unions and other thrift institutions." So the tax is collected up the chain — the printer bills the tax to the financial institution.

Which rate applies: The rate "will be determined by the location of the bank, savings and loan, credit union or other thrift institution" — not the printer's location. That means the state rate plus "various county and city local sales taxes" in effect where the institution sits. The directive quotes the then-current state rate as 4% and notes "(Effective 6/1/92 the state sales tax rate is 4.9%)"; the Kansas state rate is higher today, so treat those figures as historical.

Compliance mechanics: The printers had to change their existing "Kansas sales/compensating tax number to a statewide sales tax number" so they could remit the various local taxes, and to "file an STD-16A along with the regular monthly sales tax return." An enclosed STD-100 listed every county and city imposing a local tax and its rate.

What this means for you

Banks, savings and loans, credit unions, and thrift institutions

When you charge customers for printed checks, that full charge — including any upcharge you add — is taxable. Under this arrangement you generally do not remit the tax yourself on the printing; the check-printing company collects it from you based on your location's combined state-plus-local rate.

Check-printing companies

You are the party responsible for collecting and remitting the sales tax on check printing sold to Kansas financial institutions, at the combined state and local rate for each institution's location. That requires a statewide sales tax number and filing the STD-16A (or its modern equivalent) to account for the local taxes.

Anyone estimating the current cost

The tax treatment (charges for printed checks, including upcharges, are taxable) still describes the Department's position, but the specific rate figures in this 1987 directive are obsolete — Kansas's state sales tax rate has increased since, and local rates vary by location. Use current rates, not the 4% / 4.9% figures quoted here.

Common questions

Q: Are the charges my bank passes on for printing my checks taxable?
A: Yes. As of February 1, 1988, the total amount a bank, savings and loan, credit union, or thrift charges its customers for the printing and delivery of checks is subject to Kansas Retailers' Sales Tax.

Q: What is an "upcharge," and is it taxed?
A: An upcharge is the markup the financial institution adds over what the check printer charges it. This directive brought upcharges into the tax base — they "had previously been ruled to be exempt" but are taxable as of February 1, 1988.

Q: Does my bank collect and remit this tax?
A: Generally no. To avoid registering every institution, the Department agreed that the check-printing companies collect and remit the tax from the banks and thrifts.

Q: Which sales tax rate applies?
A: The rate is based on the location of the bank or thrift — the state rate plus any county and city local sales taxes in effect there. (The 4% / 4.9% figures in the directive are historical; the current Kansas state rate is higher.)

Citations and references

• Kansas Retailers' Sales Tax — the directive brings the total charge for printing and delivery of checks, including previously-exempt "upcharges," into the sales tax base effective February 1, 1988.
• Location-based rate — the applicable rate ("state sales tax ... but various county and city local sales taxes as well") is "determined by the location of the bank, savings and loan, credit union or other thrift institution." State-rate figures cited (4%, then 4.9% effective 6/1/1992) are historical.
• STD-100 — enclosed schedule listing the counties and cities imposing local sales tax and their rates.
• STD-16A — the form the check printers must file with their monthly sales tax return to remit the various local sales taxes collected.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: DIR-TaxofCheckPrintingCharges

Original ruling text

Directive

Body:

TO: Deluxe Check Printing Co.
Deluxe Check Printers, Inc.
Heart of America Forms, Inc.
Rocky Mountain Bank Note
John H. Harland Co.

FROM: Kansas Department of Revenue
Business Tax Bureau

DATE: January 8, 1987

SUBJECT: Check Printing Charges

Effective February 1, 1988, the total amount which a bank, savings and loan, credit union or other thrift institution charges to its customers of the printing and delivery of checks will be subject to the Kansas Retailer's Sales Tax. This will include any "upcharges" which the bank, savings and loan, credit union or other thrift institution charges to its customer. These "upcharges" had previously been ruled to be exempt from the sales tax.

Rather than having all of the banks, savings and loans, credit unions and other thrift institutions become registered to collect and remit the appropriate amount of sales tax on this particular item, it has been agreed that the check printing companies will collect and remit the correct amount of sales tax from the banks, savings and loans, credit unions and other thrift institutions. The correct rate of sales tax which the check printing companies will collect and remit will be determined by the location of the bank, savings and loan, credit union or other thrift institution. Thus, not only will the 4% state sales tax (Effective 6/1/92 the state sales tax rate is 4.9%) be collected and remitted but various county and city local sales taxes as well. If the bank, savings and loan, credit union or other thrift institution is located within a county and/or city which imposes a local sales tax, that county and/or city local sales tax must be collected and remitted along with the 4% state sales tax (Effective 6/1/92 the state sales tax rate is 4.9%). Enclosed is an STD-100 which lists all of the counties and cities which currently impose a local sales tax as well as the corresponding rates imposed.

Finally, it will be necessary to change your current Kansas sales/compensating tax number to a statewide sales tax number in order to enable you to remit the various local sales taxes collected. This change will be made after the January 1988 sales tax returns have been printed and you will be notified of the new number. Since you will be collecting and remitting various local sales taxes, it will be necessary for you to file an STD-16A along with the regular monthly sales tax return. An STD-16A as well as instructions for completing said STD-16A are enclosed. A supply of these forms will be went to you when the new number has been assigned.

Should you have any questions regarding this matter, please contact Cleo Murphy or Roy Haines Kansas Department of Revenue, Business Tax Bureau, Robert B. Docking State Office Building, Topeka, Kansas 66625-0001, telephone number (913) 296-2461.

Date Composed: 10/06/1997 Date Modified: 10/09/2001

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