How are cereal malt beverage sales taxed at Kansas retail liquor stores after HB 2035?

Plain-English summary

Kansas Notice 19-01 explains how 2019 House Bill 2035 clarified the tax on cereal malt beverage (CMB) sold in retail liquor stores.

What's new. Effective April 1, 2019 (upon publication of the act in the Kansas Register on April 11, 2019), all retail sales of alcoholic liquor, CMB, and non-alcoholic malt beverage are subject to the liquor enforcement tax described in K.S.A. 79-4101.

Background. Per 2017 Senate Bill 13 (and prior Notice 18-04), effective April 1, 2019, retail liquor stores were allowed to sell CMB and other goods or services. As a reminder, the sale of other goods and services (excluding lottery tickets, cigarettes, and tobacco products) cannot exceed 20% of total gross receipts.

What the changes mean.

• Retail liquor stores charge liquor enforcement tax on the sale of alcoholic liquor, CMB, and non-alcoholic malt beverages.
• Retail liquor stores charge retailers' sales tax on the sale of other goods or services (excluding lottery tickets).
• A retail liquor store must apply for a Retail Cigarette/E-Cigarette Dealer's License if selling cigarettes.
• The revised Kansas Liquor Enforcement Tax Return (LE-3) was available for use beginning May 1, 2019.
• CMB retailers such as grocery stores, convenience stores, and drug stores continue to charge retailers' sales tax on the sale of CMB and beer.

What this means for you

Retail liquor stores

• Charge liquor enforcement tax on alcoholic liquor, CMB, and non-alcoholic malt beverage; charge retailers' sales tax on other goods and services (except lottery tickets).
• Keep other-goods sales within 20% of total gross receipts, and get a Retail Cigarette/E-Cigarette Dealer's License if you sell cigarettes; use the revised LE-3 return.

Grocery, convenience, and drug stores (CMB retailers)

• You continue to charge retailers' sales tax -- not liquor enforcement tax -- on your sales of CMB and beer.

Common questions

What tax applies to CMB at a retail liquor store? The liquor enforcement tax under K.S.A. 79-4101, effective April 1, 2019, on alcoholic liquor, CMB, and non-alcoholic malt beverage.

What tax applies to other goods sold at a liquor store? Retailers' sales tax (excluding lottery tickets), and those other sales cannot exceed 20% of total gross receipts.

Do grocery and convenience stores charge the liquor enforcement tax on CMB? No -- CMB retailers such as grocery, convenience, and drug stores continue to charge retailers' sales tax on CMB and beer.

What return do liquor stores use? The revised Kansas Liquor Enforcement Tax Return (LE-3), available beginning May 1, 2019.

Citations and references

• House Bill 2035 (2019) -- clarified the tax on cereal malt beverage sold in retail liquor stores, effective April 1, 2019.
• K.S.A. 79-4101 -- imposes the liquor enforcement tax on alcoholic liquor, CMB, and non-alcoholic malt beverage.
• 2017 Senate Bill 13 (and Notice 18-04) -- allowed retail liquor stores to sell CMB and other goods (capped at 20% of gross receipts).

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 19-01

Original ruling text

Division of Taxation
120 SE 10th Avenue Phone: 785-368-8222
PO Box 3506 Fax: 785-296-4993
Topeka KS 66601-3506 www.ksrevenue.org
Mark A. Burghart, Secretary Laura Kelly, Governor

                                         NOTICE 19-01

Date: April 19, 2019

To: Liquor Enforcement Tax Customer

Subject: HB 2035 - Tax Imposed on Cereal Malt Beverage by Retail Liquor Stores

The passage of House Bill 2035 during the 2019 legislative session made changes to clarify the
tax collected on the sale of Cereal Malt Beverage (CMB) in retail liquor stores.

What's New?

Effective April 1, 2019 and upon publication of the act in the Kansas Register (04/11/19), all
retail sales of alcoholic liquor, CMB and non-alcoholic malt beverage are subject to the liquor
enforcement tax as described in K.S.A. 79-4101.

What These Changes Mean

   •   Per 2017 Senate Bill 13 and as indicated in prior Notice 18-04, effective April 1, 2019,
       retail liquor stores are allowed to sell CMB and other goods or services. As a reminder,
       the sale of other goods and services (excluding the sale of lottery tickets, cigarettes and
       tobacco products) cannot exceed 20% of the total gross receipts.
   •   Retail liquor stores will charge liquor enforcement tax on the sale of alcoholic liquor,
       CMB and non-alcoholic malt beverages.
   •   Retail liquor stores will charge retailers' sales tax on the sale of other goods or services
       (excluding lottery tickets).
   •   Retail liquor stores must apply for a Retail Cigarette/E-Cigarette Dealer's License if
       selling cigarettes.
   •   The revised Kansas Liquor Enforcement Tax Return (LE-3) will be available for use
       beginning May 1, 2019.
   •   CMB retailers (such as grocery stores, convenience stores, and drug stores) will continue
       to charge retailers' sales tax on the sale of CMB and beer.

If you have questions or need assistance, please contact Division of Taxation, Miscellaneous Tax
at 785-368-8222, option 5, option 4, option 2 or by email at [email protected].