How does a Kansas retailer decide which local sales tax rate to collect starting July 1, 2003?

Plain-English summary

Effective July 1, 2003, Kansas changed how retailers figure the local portion of sales tax. This was part of the multistate Streamlined Sales Tax Project (39 states plus D.C.), adopted in Kansas by 2003 House Bill 2005.

• Old rule (origin-based): the seller collected the combined state-and-local rate at its own place of business, no matter where the customer took the goods.
• New rule (destination-based): the rate is the combined rate where the customer takes delivery or possession.
  • Over-the-counter: the customer takes possession at the store, so the store's combined rate applies.
  • Shipped or delivered: the retailer collects the combined rate at the customer's shipping address. If the shipping address isn't known, use the rate at the purchaser's address kept in the normal course of business.
  • Shipped out of state: no Kansas retailers' sales tax is due on items the seller is obligated to ship, mail, or deliver to a point outside Kansas (another state's use tax may apply).

The notice's own examples: an item bought and taken at a Pittsburg store is taxed at Pittsburg's 6.8%; the same item delivered to Columbus is taxed at Columbus's 7.3%; shipped to Joplin, Missouri, no Kansas tax is due.

Retailers who now collect more than one local rate must report on Form ST-36 (or PC File) rather than Form ST-16 or TeleFile, and should use Publication KS-1700 for the correct local rates until the state's rate databases are available.

What this means for you

If you sell and ship or deliver goods to Kansas customers, you can no longer charge one flat local rate. As of July 1, 2003 you must charge the combined rate at your customer's delivery location and, if you deliver into more than one taxing jurisdiction, switch to Form ST-36. Use Publication KS-1700 to look up each jurisdiction's rate. If you only ever hand goods to customers at your counter, your own store's rate still applies.

Common questions

Q: I ship products to customers across Kansas. Which rate do I charge?
A: The combined state-and-local rate in effect at the customer's shipping address (the delivery location), effective July 1, 2003.

Q: A customer buys and takes the item at my store. Which rate?
A: Your store's combined rate — the customer took possession there.

Q: I'm obligated to ship the item to another state. Do I charge Kansas tax?
A: No. It's treated as an out-of-state sale; no Kansas retailers' sales tax is due (the destination state's use tax may apply).

Q: Do I still file on Form ST-16?
A: Only if you collect a single combined rate. If you deliver into more than one local jurisdiction, you must use Form ST-36 or PC File to report each jurisdiction.

Citations and references

• 2003 House Bill 2005 -- Streamlined Sales Tax legislation, effective July 1, 2003.
• Publication KS-1700 -- Kansas sales tax jurisdiction code booklet (local rates).
• Notice 03-04 -- fuller "destination-based" sourcing rules (referenced for situations not covered here).
• Forms ST-16 / ST-36 / PC File -- single- vs. multiple-jurisdiction sales tax returns.

Subject

Application of Local Sales Tax; Changes

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 03-01

Original ruling text

Notice
Notice Number: 03-01
Tax Type: Kansas Retailers' Sales Tax; Kansas Compensating Tax
Brief Description: Application of local sales tax; changes.
Keywords:
Approval Date: 06/06/2003

Body:
Office of Policy & Research

                                          NOTICE 03-01
                                  KANSAS RETAILERS’ SALES TAX

The 2003 Kansas legislature enacted sales and compensating use tax changes that take effect July 1, 2003. These changes are part of
a coordinated effort involving thirty-nine states and the District of Columbia referred to as the “Streamlined Sales Tax Project”.
Kansas now has legislation (2003 House Bill 2005) that makes the collection and reporting of sales and compensating use taxes more
uniform across the nation.

NEW “SOURCING” RULES. For those collecting KANSAS RETAILERS’ SALES TAX, the most noticeable difference will be in
determining the location of the sale, or “sourcing” of the transaction for the purpose of determining the correct local sales tax rate to
collect. Under current law, Kansas sellers collect the combined (state and local) sales tax rate in effect at their “place of business” –
regardless of whether the customer takes possession of the items at the seller’s place of business, or the item(s) are shipped or
delivered to the customer within the state of Kansas. This is a “origin-based” sourcing rule.

EFFECTIVE JULY 1, 2003, a “destination-based” sourcing rule will apply. The rate of sales tax due will be the sales tax rate
in effect where the customer takes delivery/possession of the purchased item(s). Under this new rule, the seller will continue to
collect the sales tax rate in effect at the seller’s “place of business” for over-the-counter transactions. HOWEVER, if the item(s) is
shipped or delivered to the purchaser, the seller will collect the combined sales tax rate in effect at the location where the
purchaser received the item(s). This will be the location where the seller delivers the items(s) to the purchaser, or if the seller ships
the items(s), it will be the “customer’s shipping address”.

If the “shipping address” is not known to the seller, then it is the sales tax rate in effect at the “purchaser’s address” as maintained by
the seller in the normal course of business. For situations not addressed herein and for more information concerning “Sourcing
Rules” (the appropriate rate of local sales tax to collect) see NOTICE 03-04 which is available from the department’s web site:
www.ksrevenue.org

EXAMPLE #1: On July 1, 2003 a customer enters Joe’s Hardware in Pittsburg, Kansas, makes a purchase and takes possession of
the item at the store. The combined rate of sales tax due is the rate in effect at Pittsburg, Kansas (where the customer took delivery)
of 6.8% (State rate of 5.3%, plus the Crawford County rate of 1% and the Pittsburg City rate of .5%).

EXAMPLE #2: On July 1, 2003 a customer enters Joe’s Hardware in Pittsburg, Kansas, purchases an item and arranges for the item
to be delivered to him in Columbus, Kansas. The combined rate of sales tax due is the rate in effect at Columbus, Kansas (where the
customer took delivery) which is 7.3% (State rate of 5.3%, plus the Cherokee County rate of 1% and the Columbus City rate of 1%).

EXAMPLE #3: On July 1, 2003 a customer enters Joe’s Hardware in Pittsburg, Kansas, purchases an item and arranges for the item
to be shipped to him in Joplin, Missouri. No Kansas retailers’ sales tax is due. This is considered an out-of-state sale, and no Kansas
sales tax is due on the sale of item(s) that the seller is obligated, as part of the sale, to ship, mail or deliver the item(s) to a point
outside of the state of Kansas (Missouri Compensating Tax may be due).

KANSAS SALES TAX JURISDICTION CODE BOOKLET - PUBLICATION KS-1700. As noted above, the Streamlined Sales tax
legislation requires retailers who ship or deliver items to customers within Kansas to collect the combined sales tax rate in effect at
the place of delivery. All of the sales tax rates for Kansas cities and counties are found in Pub. KS-1700 which is available from the
department’s web site: http://www.ksrevenue.org/pdf/forms/pub1700.pdf or forms order line: (785) 296-4937.

The Streamlined Sales Tax legislation requires the Kansas Department of Revenue to provide and maintain a database, in
downloadable format, describing boundary changes for all local taxing jurisdictions, including a description of the change and
effective date, and the sales and use tax rates for those jurisdictions. The department must also provide and maintain a downloadable

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database that assigns each five and nine-digit zip code to the proper rates and taxing jurisdictions. The department is proceeding to
develop these databases as soon as possible, and will notify retailers when they are available for use. However, they will take some
time to develop and will not be available by July 1, 2003. Until these electronic databases become available, Publication KS-1700
should be used to identify the correct local sales tax rates and taxing jurisdictions.

ST-16 OR ST-36? Retailers who are collecting only ONE combined rate of sales tax may use Form ST-16 or TeleFile. Under the
new “destination-based” sourcing rule, many Kansas retailers filing sales tax returns on Form ST-16 or who are TeleFiling will begin
using Form ST-36 or PC File if they ship or deliver items sold to customers located outside the local taxing jurisdiction of the
retailer’s place of business. Form
ST-36 or PC File must be used if the retailer will be reporting sales and remitting sales tax for more than one local taxing
jurisdiction. As noted above, retailers who are delivering or shipping to their customers must collect the combined rate of sales tax in
effect at their customer’s “shipping address”. Kansas retailers who ship items to Kansas customers, and who are currently filing
Form ST-16s, will need to contact the Department of Revenue and request to receive Form ST-36, which allows local sales tax
to be reported for all taxing jurisdictions within Kansas. You may contact the department toll free by calling 1-877-526-7738; press
“1” for touch-tone phone (listen briefly), press “5” for Business Taxes (listen briefly); then press “2” to talk to a sales tax
representative.

PC FILE – ANYONE filing a Kansas retailers’ sales tax return and who has Internet access, may use
PC File – whether collecting one or several different local sales tax rates. Download FREE software from: www.webtax.org Use
your TeleFile PIN (Personal Identification Number) as your PC File PIN. Simply download the PC File software to your hard drive
and it does all the calculations for you, offers you the choice to pay by check or electronic transfer of funds, and allows you to print
the payment voucher. You have an electronic history of your sales tax filings and a confirmation number is automatically inserted
into your electronic return, which verifies that the department has received your return. PC FILE IS THE EASIEST WAY TO FILE
SALES TAX RETURNS.

                                               EXAMPLE AND COMPLETED FORM ST-36

All-American Furniture Company of Lawrence, Kansas is registered with the Department of Revenue to collect and remit Kansas
retailers’ sales tax on a monthly basis. During the month of July 2003, All-American Furniture Company has gross sales of
$100,000. The sales consists of:

1) $5,000 of exempt sales – sales to a qualified religious organization – the customer took possession of the purchased items at the
Lawrence store.
2) $20,000 of over-the-counter sales in which their customer took possession of the purchased items at the Lawrence store.
3) $30,000 of sales delivered to customers within the city limits of Lawrence.
4) $15,000 of sales delivered to customers outside the city limits of Lawrence, but within Douglas County.
5) $20,000 of sales delivered to customers within the city limits of Eudora.
6) $10,000 of sales delivered to customers within the city limits of De Soto.

                         A completed Form ST-36 for this fictitious company appears on the following page

NOTES:
1) The $5,000 exempt sales are counted as part of Lawrence sales – as the customer took possession at the store or the items where delivered within the city limits
of Lawrence.
2) The $20,000 over-the-counter sales and the $30,000 are also counted as part of the Lawrence sales – since both the over-the-counter sales and the delivery sales
to customers within the city of Lawrence are the same taxing jurisdiction – City of Lawrence.
3) The $15,000 sales of items delivered to customers outside of Lawrence but within Douglas County is taxed at the Douglas County rate – where the customer
took possession.

SCANNED ATTACHMENTS/DOCUMENTS

Double click the above icon to launch Acrobat Reader and view the sample return.

Date Composed: 06/05/2003 Date Modified: 06/20/2003

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