What rate of Kansas retailers' compensating use tax must an out-of-state retailer collect on goods delivered into Kansas after July 1, 2003?

Plain-English summary

Retailers' compensating use tax is the tax an out-of-state retailer collects from Kansas customers on goods it delivers into Kansas for use here. Under the 2003 Streamlined Sales Tax legislation (2003 House Bill 2005), the rate changed effective July 1, 2003:

• Before July 1, 2003: the rate was the state rate only (then 5.3%).
• On and after July 1, 2003: the rate equals the combined state-and-local rate in effect where the customer takes delivery/possession — the customer's Kansas shipping address. If the shipping address isn't known, use the rate at the purchaser's address kept in the normal course of business.

The notice's example: a Kansas resident buys a $1,000 desk from Nebraska Office Mart in Omaha, delivered to Topeka. The store collects Kansas retailers' compensating use tax at Topeka's 7.2% rate — $72.00.

Retailers report the tax on Form CT-9U and use Publication KS-1700 for local rates (and KS-1510 for general guidance). Businesses already registered for retailers' compensating use tax automatically begin receiving Form CT-9U.

What this means for you

If you're an out-of-state retailer registered to collect Kansas use tax, from July 1, 2003 you must charge the combined rate at your Kansas customer's delivery address rather than the flat state rate. Look up each delivery jurisdiction's rate in Publication KS-1700 and report on Form CT-9U.

Common questions

Q: I'm an out-of-state seller shipping into Kansas. What rate do I collect now?
A: The combined state-and-local rate at the customer's Kansas shipping address, effective July 1, 2003.

Q: What if I don't have the customer's shipping address?
A: Use the rate at the purchaser's address you keep in the normal course of business.

Q: Which form reports this tax?
A: Form CT-9U, the retailers' compensating use tax return.

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).
• Publication KS-1510 -- Kansas Sales and Compensating Use Tax guide.
• Notice 03-04 -- fuller sourcing rules.
• Form CT-9U -- retailers' compensating use tax return.

Subject

Kansas Retailers' Compensating Tax

Source

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

Original ruling text

Notice
Notice Number: 03-03
Tax Type: Kansas Compensating Tax
Brief Description: Kansas Retailers' Compensating Tax
Keywords:
Approval Date: 06/06/2003

Body:
Office of Policy & Research

                                    NOTICE 03-03
                        KANSAS RETAILERS’ COMPENSATING TAX

The 2003 Kansas legislature has enacted compensating use tax changes that take effect July 1, 2003.

For those remitting KANSAS RETAILERS’ COMPENSATING USE TAX, the most noticeable difference will be the rate of
compensating tax due. BEFORE JULY 1, 2003, the Kansas compensating use tax rate was the state sales tax rate only – currently
5.3%. ON AND AFTER JULY 1, 2003, the Kansas compensating use tax rate will be equal to the combined (state and local) sales
tax rate on ALL purchases of tangible personal property used, stored or consumed in the state of Kansas.

EXAMPLE: On July 1, 2003 a Kansas resident purchases a $1,000 Desk from Nebraska Office Mart in Omaha and arranges to have
it delivered to his home in Topeka. Nebraska Office Mart will collect Kansas retailers’ compensating use tax at a rate equal to the
Topeka sales tax rate (7.2%) - ($1,000 X .072 = $72.00 Kansas retailers’ compensating use tax due).

EFFECTIVE JULY 1, 2003, the rate of Kansas retailers’ compensating use tax due will be the rate in effect where the customer
takes delivery/possession of the purchased item(s). Under this new rule, the seller will collect Kansas retailers’ compensating use tax
equal to the combined sales tax rate in effect at the “customer’s shipping address” in Kansas.

If the “shipping address” is not known to the seller, then it is the tax rate in effect at the “purchaser’s address” as maintained by the
seller in the normal course of business. For more information concerning “Sourcing Rules” (the appropriate rate of tax to collect) see
NOTICE 03-04.

KANSAS SALES TAX JURISDICTION CODE BOOKLET - PUBLICATION KS-1700. As noted, the new law requires Kansas
retailers’ compensating tax to be equal to the combined sales tax rate. All of the sales/compensating 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
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.

FORM CT-9U – Retailers who remit Kansas retailers’ compensating use tax will report the tax due on Form CT-9U, which is
available from the department’s web site: www.ksrevenue.org or forms order line: (785) 296-4937. Taxpayers who are currently
registered to remit Retailers’ Compensating Use tax will automatically begin receiving Form CT-9U.

ADDITIONAL INFORMATION – Consult the “Kansas Sales And Compensating Use Tax” Information Guide, Publication KS-
1510, which is available from the department’s web site: http://www.ksrevenue.org/pdf/forms/pub1510.pdf or forms order line: (785)
296-4937.

You may also 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 retailers’ compensating tax representative.

Page 2

                                              EXAMPLE AND COMPLETED FORM CT-9U

ABC Office Supply of Kansas City, Missouri is registered with the Department of Revenue to collect and remit Kansas retailers’
compensating tax on a monthly basis. During the month of July 2003, ABC Office Supply has Kansas gross sales of $100,000. The
sales consists of:

1) $5,000 of exempt sales – sales to a qualified religious organization – the purchased items where delivered to the customer in
Overland Park, Kansas.
2) $30,000 of sales delivered to customers within the city limits of Overland Park, Kansas.
3) $15,000 of sales delivered to customers outside the city limits of any city but, within Johnson County.
4) $20,000 of sales delivered to customers within the city limits of Prairie Village, Kansas.
5) $10,000 of sales delivered to customers within the city limits of Leawood, Kansas.
6) $20,000 of sales delivered to customers within the city limits of Kansas City, Kansas.

                         A completed Form CT-9U for this fictitious company appears on the following page

NOTES:
1) The $5,000 exempt sales are counted as part of Overland Park sales – as the items where delivered within the city limits of Overland Park.

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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