How did Kansas's 3.5% short-term vehicle rental excise tax work beginning July 1, 1991?

Plain-English summary

1991 Senate Bill 14 imposed a 3.5% vehicle rental excise tax beginning July 1, 1991.

The tax applied to motor-vehicle rentals or leases lasting 28 days or less and was collected from the customer in addition to Kansas state and local sales tax. Long-term leasing businesses were not affected.

The tax generally covered automobiles, buses, trucks, truck tractors, recreational vehicles, and motorcycles. It did not cover farm machinery and equipment, trailers, road rollers, forklifts, mining equipment, or non-highway construction equipment.

The excise-tax base matched the sales-tax base: the total rental charge without deductions for insurance, taxes, service or maintenance contracts, handling, administration, late fees, repairs, or other charges. To keep the rental excise tax itself out of the sales-tax base, the lessor had to state it separately.

Short-term rental businesses registered separately and filed the vehicle rental excise tax on its own return, not the retailers' sales-tax return.

Vehicles subject to the rental excise tax could qualify for exemption from motor-vehicle personal property tax. The claimant provided its rental-excise registration correspondence and a vehicle list to the county treasurer when registering the vehicles.

Rentals directly to the federal government, Kansas, Kansas political subdivisions, public or private elementary and secondary schools, and other educational institutions were exempt.

What this means for you

A short-term rental company needed separate registration, a separately stated excise line, and vehicle-level records supporting any property-tax exemption. Moving a vehicle into a lease longer than 28 days could make it subject to personal property tax.

Common questions

Q: Did the 3.5% tax replace sales tax?
A: No. It was imposed in addition to state and local sales tax.

Q: Could the excise tax itself be excluded from sales tax?
A: Yes, but only when separately stated on the customer's billing document.

Q: Were long-term leases subject to this excise tax?
A: No. The notice limits it to 28 days or less.

Citations and references

• 1991 Senate Bill 14.
• K.S.A. 79-5101 et seq.

Subject

Vehicle Rental Excise Tax

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 91-0524

Original ruling text

Notice
Notice Number: Vehicle Rental Excise Tax
Tax Type: Vehicles Rental Excise Tax
Brief Description: Vehicle Rental Excise Tax
Keywords:
Effective Date: 05/24/1991

Body:
NOTICE

TO: Motor Vehicle Rental Companies

FROM: Kansas Department of Revenue
Business Tax Bureau

SUBJECT: Vehicle Rental Excise Tax (Senate Bill No. 14)

DATE: May 24, 1991
PLEASE DISREGARD THIS NOTICE IF YOU ARE NOT ENGAGED IN THE BUSINESS OF
RENTING OR LEASING MOTOR VEHICLES

Senate Bill No. 14, enacted by the 1991 Kansas Legislature, changes the taxation of transactions involving the rental of motor
vehicles. The new law contains two significant changes for businesses. First, the bill imposes an excise tax at the rate of 3.5% on the
gross receipts received from the rental or lease of motor vehicles rented or leased for a period of time not exceeding 28 days. Second,
the bill provides that motor vehicles that are subject to the vehicle rental excise tax shall be exempt from personal property taxes
imposed on motor vehicles pursuant to K.S.A. 79-5101 et seq.

This bill does not affect businesses engaged in the long term leasing of motor vehicles. It is limited to businesses engaged in renting
of motor vehicles for periods of 28 days or less. The legislation requires those persons to collect the vehicle excise tax from the
consumer and remit it to the Kansas Department of Revenue. The new tax is imposed in addition to Kansas retailers' sales tax and
local retailers' sales tax.

The new tax is effective on July 1, 1991.

All persons, partnerships and corporations engaged in the business of renting motor vehicles for 28 days or less are required to
register with the Kansas Department of Revenue to report the vehicle rental excise tax. If your business includes such rental of motor
vehicles, you must complete the enclosed vehicle rental excise tax registration form. The completed form should be sent to the Tax
Registration Section, Business Tax Bureau, Kansas Department of Revenue, Topeka, Kansas 66625-0001. The form must be
mailed by June 3, 1991.

The Business Tax Bureau will process your application and notify you of your vehicle rental excise tax registration number. You will
be mailed returns on which to report the vehicle rental excise tax. The due date and the filing frequency of the returns will be the
same as for Kansas retailers' sales tax returns.

DO NOT USE YOUR RETAILERS' SALES TAX RETURN TO REPORT THE VEHICLE RENTAL EXCISE TAX.

The vehicle rental excise tax generally applies to the gross receipts received from renting or leasing of automobiles, busses, trucks,
truck tractors, recreational vehicles and motorcycles. The tax does not apply to the renting or leasing of farm machinery and
equipment, trailers, road rollers, fork lifts, mining equipment and non-highway construction equipment.

The vehicle rental excise tax is imposed on the same tax base as the Kansas retailers' sales tax. Accordingly, the tax should be
calculated on the total amount of the rental fee with no deduction or exclusion from the fee for insurance, taxes, service or
maintenance contracts, handling charges, administrative charges, late fees, repair service charges or any other charges. For the excise
tax to be exempt from Kansas retailers' sales tax, the vehicle rental excise tax must be separately stated on the invoice, sales ticket or
billing document. Vehicle rental excise taxes that are absorbed or included in the retailer's selling price and not separately identified
on the billing document will be subject to the Kansas retailers' sales tax.

In order to exempt qualifying motor vehicles from personal property taxes, the person claiming exemption must furnish to the county
treasurer: (1) the correspondence from the Department granting their registration number for the vehicle rental excise tax, and (2) a
list that identifies each vehicle by plate number, vehicle identification number, year, make and model. The person will be required to

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sign an exemption certificate provided by the county treasurer. The claim for exemption from personal property tax can only be
made when registering the vehicles.

Vehicles previously held for rental for periods of time not exceeding 28 days that are subsequently leased to the same user for a
period longer than 28 days become subject to personal property taxes. Failure to pay the property tax in a timely manner will result
in the assessment of penalty and interest.

The gross receipts received from renting or leasing motor vehicles directly to the federal government, the state of Kansas, political
subdivisions of the state of Kansas, public or private elementary and secondary schools and other educational institutions are exempt
from the vehicle rental excise tax.

If you have any questions regarding the vehicle rental excise tax, please write the Business Tax Bureau, Kansas Department of
Revenue, Topeka, Kansas 66625-0001, or call (913) 296-2461.

Enclosure: Motor vehicle rental excise tax registration form and return envelope
Director of Vehicles Notice

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

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