Are the charges a bank or credit union bills its customers for printing and delivering checks subject to Kansas sales tax?

Plain-English summary

Kansas told banks, savings and loans, credit unions, and other thrift institutions that starting February 1, 1988, the entire amount they charged customers for printing and delivering checks was subject to the Kansas Retailers' Sales Tax.

Importantly, this included the institution's own "upcharges" — the markup a bank added on top of what the check printer charged. Those upcharges had previously been ruled exempt; this notice reversed that treatment.

To keep the institutions from each having to register as sales-tax collectors, the check-printing companies agreed to collect and remit the tax on the total charge. The amount of tax depended on the location of the institution: the 4% state sales tax, plus any county or city local sales tax in effect where the institution was located.

The notice also reminded institutions that this arrangement did not relieve them of their own obligation to remit the 4% Kansas Consumers' Use Tax on other taxable purchases where no sales or compensating tax had been charged.

What this means for you

If you ran a bank or credit union in 1988, you generally did not need to register just to handle sales tax on checks — the printer collected it for you. But you still had to collect Kansas sales tax if you made other retail sales, and you still owed consumers' use tax on taxable items you bought without tax charged.

For customers, the practical effect was that the full price of ordering checks — including any bank markup — now carried sales tax at the combined state-and-local rate for the bank's location.

Common questions

Q: What became taxable on February 1, 1988?
A: The total amount a financial institution charged its customers for printing and delivering checks, including the institution's own upcharges.

Q: Weren't the upcharges exempt before?
A: Yes — the notice states the upcharges "had previously been ruled to be exempt from the sales tax" and were now taxable.

Q: Who collected the tax?
A: The check-printing companies agreed to collect and remit it, so the banks and credit unions generally did not have to register solely for check charges.

Q: What rate applied?
A: The 4% state sales tax plus any county and/or city local sales tax based on the location of the financial institution.

Q: Did this change the institution's use-tax duties?
A: No. Institutions still had to remit the 4% Kansas Consumers' Use Tax on taxable purchases where no sales or compensating tax had been charged.

Citations and references

• Kansas Retailers' Sales Tax — 4% state rate plus applicable local sales tax (1988).
• Kansas Consumers' Use Tax — 4% (1988).

Subject

Sales Tax on Check Printing Charges

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 88-0115

Original ruling text

Notice
Notice Number: Check Printing Charges
Tax Type: Kansas Retailers' Sales Tax
Brief Description: Sales Tax on Check Printing Charges
Keywords:
Effective Date: 01/15/1988

Body:
REVENUE NOTICE

TO: Banks, Savings and Loans, Credit Unions and Other Thrift Institutions

FROM: Kansas Department of Revenue
Kansas Tax Bureau

DATE: January 15, 1988

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 for the printing and delivering of checks will be subject to the Kansas Retailers' 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.

The check printing companies have agreed to collect and remit the appropriate amount of sales tax on this total amount. This will
alleviate all of the banks, savings and loans, credit unions or other thrift institutions from having to be registered to collect and remit
the Kansas sales tax. Of course, a bank, savings and loan, credit union or other thrift institution must still be registered to collect and
remit Kansas sales tax if said institution makes other types of retail sales.

The amount of sales tax which the check printing companies will be collecting and remitting will be determined by the location of
the bank, savings and loan, credit union or other thrift institution. 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, the check printing company will be collecting and remitting
that county and/or city local sales tax in addition to the 4% state sales tax.

Likewise, the fact that the check printing companies will be collecting and remitting this sales tax for the banks, savings and loan,
credit union or other thrift institutions does not affect the obligation of the bank, savings and loan, credit union or other thrift
institution from remitting the 4% Kansas Consumers' Use Tax on taxable purchases made upon which no sales or compensating tax
has been charged by the retailer. The second enclosed notice explains the consumer's use tax in greater detail.

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: 10/10/2001

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